Document:

exv4w2

 

Exhibit 4.2

FINAL

VOLCANO CORPORATION

FOURTH AMENDED AND RESTATED

INVESTOR RIGHTS AGREEMENT

          THIS
FOURTH AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT (the
“Agreement”) is entered into
as of February 18, 2005 by Volcano Corporation, a Delaware
corporation (the “Company”), the
existing stockholders of the Company listed on the signature pages
hereto (the “Existing Holders”),
and the investors listed on the signature pages hereto (each
individually an “Investor” and
collectively, the “Investors”) and amends and restates in its entirety the Third Amended and
Restated Investor Rights Agreement, dated as of December 9, 2003, among the Company, the Existing
Holders and the Investors signatory thereto (the “Original
Agreement”).

     WHEREAS, as a condition to the purchase of Series C Preferred Stock pursuant to a Series C
Preferred Stock Purchase Agreement of even date herewith by and among the Company and certain
parties named therein (the “Stock Purchase Agreement”), the Investors have required that the
Company and the Existing Holders enter into this Agreement, and the Company and the Existing
Holders desire to do so; and

          WHEREAS, Section 6.7 of the Original Agreement provides that the Original Agreement may be
amended by the written agreement of the holders of at least 66-2/3% of the outstanding Registrable
Securities (as defined therein); and the holders of at least 66-2/3% of the outstanding Registrable
Securities (as defined therein) have executed and delivered this Agreement.

          NOW, THEREFORE, in consideration of the mutual promises and covenants hereinafter set forth,
all parties agree as follows:

ARTICLE 1

REGISTRATION RIGHTS;

RESTRICTIONS ON TRANSFERABILITY

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

          “Commission” shall mean the Securities and Exchange Commission or any other federal agency
at the time administering the Securities Act.

          “Conversion Shares” shall mean the Common Stock issued or issuable upon
conversion of the Shares.

          “Convertible Securities” shall mean any evidence of indebtedness, shares or other
securities convertible into or exchangeable for Common Stock.

          “FFC Shares” shall mean any shares of Common Stock issued or issuable to FFC upon exercise of
the Warrants, whether held by FFC or by any direct or indirect successors and assigns thereof.

 

 

          “Holder” shall mean any person entering into this Agreement with the Company
(including by joinder) or holding Registrable Securities to whom the rights under this Agreement
have been transferred in accordance with Section 1.14 hereof.

          “Initial Public Offering” shall mean the Company’s first firmly underwritten public
offering on Registration Statement Form S-l or Form SB-2 (or successor form(s)) with aggregate
gross proceeds to the Company of no less than fifty million dollars ($50,000,000) and a per share
price of no less than eight dollars ($8.00) (as adjusted for combinations, stock dividends or
splits).

          “Initiating Holders” shall mean the Holders of not less than thirty percent (30%) of
the Registrable Securities.

          “Major Holder” shall mean the Holders of not less than 250,000 shares of the outstanding
Registrable Securities (as adjusted for combinations, stock dividends or splits) and FFC.

          The
terms “register,” “registered” and “registration” refer to a registration effected by
preparing and filing a registration statement in compliance with the Securities Act, and the
declaration or ordering of the effectiveness of such registration statement.

          “Registrable Securities” means (a) the Conversion Shares, (b) all Common Stock which
(i) constitutes New Securities (as defined in Section 2.2 below) or (ii) is issued or issuable upon
conversion of New Securities, purchased by a Holder pursuant to the preemptive right set forth in
Section 2 below (the “Investor New Securities”), (c) the FFC Shares and (d) any Common Stock of the
Company issued or issuable in respect of the Shares, Conversion Shares, the Investor New Securities
or the FFC Shares or other securities issued or issuable with respect to the Shares, Conversion
Shares, the Investor New Securities or the FFC Shares upon any stock split, stock dividend,
recapitalization, or similar event, or any Common Stock otherwise issued or issuable with respect
to the Shares, Conversion Shares, the Investor New Securities or the
FFC Shares; provided, however, that shares of Common Stock or other securities shall only be treated as Registrable
Securities if and so long as they have not been (x) sold to or through a broker or dealer or
underwriter in a public distribution or a public securities transaction, or (y) sold in a
transaction exempt from the registration and prospectus delivery requirements of the Securities Act
so that all transfer restrictions and restrictive legends with respect thereto are removed upon the
consummation of such sale. Additionally, solely for purposes of Sections 1.5, 1.6 and 1.7 hereof,
the term Registrable Securities shall be deemed to also mean shares of Common Stock of the Company
issued or issuable to Silicon Valley Bank (“SVB”) and its assignees upon exercise of that certain
Warrant to Purchase Stock, dated August 27, 2001, by and between the Company and SVB, that certain
Warrant to Purchase Stock, dated July 18, 2003, by and between the Company and SVB and/or that
certain Warrant to Purchase Stock, dated July 18, 2004, by and between the Company and SVB and,
solely for purposes of Section 1.6 hereof, SVB shall be deemed a Major Holder; provided, however,
that SVB shall have no right to initiate a request for registration pursuant to Section 1.5(a) or
1.7(a).

          “Registration Expenses” shall mean all reasonable expenses incurred by the Company in
complying with Sections 1.5, 1.6 and 1.7 hereof, including, without limitation, all

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registration, qualification and filing fees, printing expenses, escrow fees, fees and
disbursements of counsel for the Company, blue sky fees and expenses, the expense of any special
audits incident to or required by any such registration (but excluding the compensation of regular
employees of the Company which shall be paid in any event by the Company) and all reasonable fees
and disbursements of one special counsel for all of the Holders who elect to include their
Registrable Securities in any such registration.

          “Restricted Securities” shall mean the securities of the Company required to bear the
legend set forth in Section 1.3 hereof.

          “Securities Act” shall mean the Securities Act of 1933, as amended, or any similar or
successor federal statute and the rules and regulations of the Commission thereunder, all as the
same shall be in effect at the time.

          “Selling Expenses” shall mean all underwriting discounts, selling commissions and
stock transfer taxes applicable to the securities registered by the Holders.

          “Shares” shall mean shares of the Company’s Series A Preferred Stock, Series B Preferred Stock
and Series C Preferred Stock.

          “Warrants” shall mean those certain warrants, dated as of December 9, 2003, to purchase shares
of Common Stock that are held by FFC Partners II, L.P. and FFC Executive Partners II, L.P.
(collectively, “FFC”) and were issued by the Company pursuant to that certain Note and Warrant
Purchase Agreement, dated as of December 9, 2003, by and among the Company, certain investors and
FFC.

     1.2
Restrictions. The Shares, the FFC Shares, the Conversion Shares and any Investor
New Securities shall not be sold, assigned, transferred or pledged except upon the conditions
specified in this Agreement, which conditions are intended to ensure compliance with the provisions
of the Securities Act. The Investors will cause any proposed purchaser, assignee, transferee or
pledgee of the Shares, the FFC Shares, the Conversion Shares and any Investor New Securities to
agree to take and hold such securities subject to the provisions and upon the conditions specified
in this Agreement.

     1.3
Restrictive Legend. Each certificate representing (a) the Shares, (b) the FFC
Shares, (c) the Conversion Shares, (d) the Investor New Securities and the Common Stock issued or
issuable upon conversion of such shares and (d) any other securities issued in respect of the
securities referenced in clauses (a), (b), (c) and (d) upon any stock split, stock dividend,
recapitalization, merger, consolidation or similar event, shall (unless otherwise permitted by the
provisions of Section 1.4 below) be stamped or otherwise imprinted with a legend in substantially
the following form (in addition to any legend required under applicable state securities laws):

     “THE SHARES REPRESENTED BY THIS CERTIFICATE MAY BE TRANSFERRED ONLY IN ACCORDANCE
WITH THE TERMS OF AGREEMENTS BETWEEN THE COMPANY AND CERTAIN STOCKHOLDERS OF THE
COMPANY, COPIES OF WHICH ARE ON FILE WITH THE SECRETARY OF THE COMPANY.”

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          Each Holder consents to the Company making a notation on its records and giving
stop transfer instructions to any transfer agent of the Restricted Securities in order to implement
the restrictions on transfer established in this Section 1.

     1.4
Notice of Proposed Transfers. The holder of each certificate representing
Restricted Securities, by acceptance thereof, agrees to comply in all respects with the provisions
of this Section 1. Prior to any proposed sale, assignment, transfer or pledge of any Restricted
Securities, unless there is in effect a registration statement under the Securities Act covering
the proposed transfer, the holder thereof shall give written notice to the Company of such holder’s
intention to effect such transfer, sale, assignment or pledge. Each such notice shall describe the
manner and circumstances of the proposed transfer, sale, assignment or pledge in sufficient detail,
and shall be accompanied at such holder’s expense by either (a) a written opinion of legal counsel
who shall, and whose legal opinion shall be, reasonably satisfactory to the Company, addressed to
the Company, to the effect that the proposed transfer of the Restricted Securities may be effected
without registration under the Securities Act, or (b) a “no action” letter from the Commission to
the effect that the transfer of such securities without registration will not result in a
recommendation by the staff of the Commission that action be taken with respect thereto, or (c) any
other evidence reasonably satisfactory to counsel to the Company, whereupon the holder of such
Restricted Securities shall be entitled to transfer such Restricted Securities in accordance with
the terms of the notice delivered by the holder to the Company. The Company will not require such a
legal opinion or “no action” letter in any transaction (v) in compliance with Rule 144, (w) in
which an Investor which is a corporation distributes Restricted Securities solely to its majority
owned subsidiaries or affiliates for no consideration, (x) in which an Investor which is a
partnership distributes Restricted Securities solely to partners thereof for no consideration, (y)
in which an Investor which is a limited liability company distributes Restricted Securities to its
members or former members in accordance with their interest in the limited liability company, or
(z) in which a corporation, partnership, limited partnership or limited liability company transfers
Restricted Securities to its affiliated entities; provided that each transferee agrees in
writing to be subject to the terms of this Section 1. Each certificate evidencing the Restricted
Securities transferred as above provided shall bear, except if such transfer is made pursuant to
Rule 144, the appropriate restrictive legends set forth in this Section 1, except that such
certificate shall not bear such restrictive legend if, in the opinion of counsel for such holder
and the Company, such legend is not required in order to establish compliance with any provisions
of the Securities Act or this Agreement.

     1.5
Requested Registration.

               (a) In case the Company shall receive from Initiating Holders a written request that the
Company effect any registration, qualification or compliance with respect to the Registrable
Securities, the Company will:

                    (i)  promptly give written notice of the proposed registration, qualification or
compliance to all other Holders; and

                    (ii) as soon as practicable and in any event within sixty (60)
days after receipt of such written request, use its commercially reasonable best efforts to
effect such registration, qualification or compliance (including, without limitation, the execution
of an

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undertaking to file post-effective amendments, appropriate qualification under
applicable blue sky or other state securities laws and appropriate compliance with applicable
regulations issued under the Securities Act and any other governmental requirements or regulations)
as may be so requested and as would permit or facilitate the sale and distribution of all or such
portion of such Registrable Securities as are specified in such request, together with all or such
portion of the Registrable Securities of any Holder or Holders joining in such request as are
specified in a written request received by the Company within twenty (20) days after receipt of the
written notice from the Company; provided, however, that the Company shall not be obligated
to take any action to effect any such registration, qualification or compliance pursuant to this
Section 1.5:

                    (1) In any particular jurisdiction in which the Company
would be required to execute a general consent to service of process in effecting such
registration, qualification or compliance unless the Company is already subject to service in such
jurisdiction and except as may be required by the Securities Act;

                    (2) Prior to the earlier of January 1, 2008 or six (6) months after the effective date of the
Company’s Initial Public Offering;

                    (3) In the event that (i) the Registrable Securities to be
included in such registration shall be sold to the public at a per share price equal to or less
than $8.00 and (ii) the valuation of the Company immediately prior to the effectiveness of such
registration does not exceed $150,000,000;

                    (4) In the event that the Registrable Securities to be
included in such registration do not represent at least either (A) twenty-five percent (25%) of the
Registrable Securities then outstanding, or (B) aggregate offering proceeds of at least
$25,000,000;

                    (5) After the Company has effected two (2) such
registrations pursuant to this subparagraph 1.5(a) that includes Registrable Securities held by the
Investors, such registrations have been declared or ordered effective and the securities offered
pursuant to each such registration have been sold; provided that all Registrable Securities
requested for inclusion were in fact included in such registration; or

                    (6) Within one year from the date of the first
registration requested under this Section 1.5(a) provided such registration has been declared or
ordered effective and the securities offered pursuant to such registration have been sold; or

                    (7) During the period starting with the date sixty (60)
days prior to the Company’s good faith estimate of the date of filing of, and ending on a date one
hundred eighty (180) days after the effective date of, a registration initiated by the Company;
provided that the Company is actively and in good faith using all commercially reasonable best
efforts to cause such registration statement to become effective and provided further that the
rights of the Initiating Holders to include Registrable Securities for registration in the
Company’s registration shall be governed by Section 1.6 hereof.

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          Subject to the foregoing clauses (1) through (7), the Company shall file a registration
statement covering the Registrable Securities so requested to be registered as soon as practicable
after receipt of the request or requests of the Initiating Holders; provided, however, that if (i)
in the good faith judgment of the Board of Directors of the Company, such registration would be
seriously detrimental to the Company and the Board of Directors of the Company concludes, as a
result, that it is essential to defer the filing of such registration statement at such time, and
(ii) the Company shall furnish to such Holders a certificate signed by the President of the Company
stating that in the good faith judgment of the Board of Directors of the Company, it would be
seriously detrimental to the Company for such registration statement to be filed in the near future
and that it is, therefore, essential to defer the filing of such registration statement, then the
Company shall have the right to defer such filing (except as provided in clause (7) above) for a
period of not more than one hundred eighty (180) days after receipt of the request of the
Initiating Holders, and provided further, that the Company shall not defer its obligation in this
manner more than once in any twelve-month period.

               (b) Underwriting. In the event that a registration pursuant to Section 1.5 is for
a registered public offering involving an underwriting, the Company shall so advise the Holders as
part of the notice given pursuant to Section 1.5(a)(i). The right of any Holder to registration
pursuant to Section 1.5 shall be conditioned upon such Holder’s participation in the underwriting
arrangements required by this Section 1.5 and the inclusion of such Holder’s Registrable Securities
in the underwriting, to the extent requested and provided herein.

          The Company shall (together with all Holders proposing to distribute their securities through
such underwriting) enter into an underwriting agreement in customary form with the managing
underwriter selected for such underwriting by a majority in interest of the Initiating Holders
(which managing underwriter shall be reasonably acceptable to the Company). Notwithstanding any
other provision of this Section 1.5, if the managing underwriter advises the Initiating Holders in
writing that marketing factors require a limitation of the number of shares to be underwritten,
then the Company shall so advise all Holders of Registrable Securities and the number of shares of
Registrable Securities that may be included in the registration and underwriting shall be allocated
among all participating Holders thereof in proportion, as nearly as practicable, to the respective
amounts of Registrable Securities held by such participating Holders at the time of filing the
registration statement. No Registrable Securities excluded from the underwriting by reason of the
underwriter’s marketing limitation shall be included in such registration. To facilitate the
allocation of shares in accordance with the above provisions, the Company or the underwriters may
round the number of shares allocated to any Holder to the nearest 100 shares.

          If any Holder of Registrable Securities disapproves of the terms of the underwriting, such
person may elect to withdraw therefrom by written notice to the Company, the managing underwriter
and the Initiating Holders. The Registrable Securities or other securities so withdrawn shall also
be withdrawn from registration, and such Registrable Securities shall not be transferred in a
public distribution prior to ninety (90) days (one hundred eighty (180) days in the case of the
Company’s Initial Public Offering) after the date of the final prospectus used in such public
offering.

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     1.6 Company Registration.

               (a) Notice
of Registration. If at any time or from time to time, the Company shall
determine to register any of its securities, either for its own
account or the account of a Major
Holder other than (i) a registration relating solely to employee
benefit plans, or (ii) a
registration relating solely to a merger, acquisition or exchange, or
(iii) a registration relating
solely to convertible debt transaction, the Company will:

                    (i) promptly give to each Major Holder written notice thereof; and

                    (ii) include in such registration (and any related qualification under blue sky laws or
other compliance), and in any underwriting involved therein, all the Registrable Securities
specified in a written request or requests made within twenty (20) days after receipt of such
written notice from the Company by any Major Holder, but only to the extent that such inclusion
will not diminish the number of securities included by the Company or by Major Holders of the
Company’s securities who have demanded such registration and further subject to the underwriter’s
right to limit the number of securities included in the registration as set forth in Section 1.6(b)
below.

               (b) Underwriting. If the registration of which the Company gives
notice is for a registered public offering involving an underwriting, the Company shall so advise
the Major Holders as apart of the written notice given pursuant to Section 1.6(a)(i). In such
event, the right of any Major Holder to registration pursuant to Section 1.6 shall be conditioned
upon such Major Holder’s participation in such underwriting and the inclusion of Registrable
Securities in the underwriting to the extent provided herein. All Major Holders proposing to
distribute their securities through such underwriting shall (together with the Company and the
other Holders distributing their securities through such underwriting) enter into an underwriting
agreement in customary form with the managing underwriter selected for such underwriting by the
Company (or by the Holders who have demanded such registration, as the case may be).
Notwithstanding any other provision of this Section 1.6, if the managing underwriter determines in
its sole discretion that marketing factors require a limitation of the number of shares to be
underwritten, the managing underwriter may limit the number of Registrable Securities to be
included in the registration and underwriting, on a pro rata basis based on the total number of
securities (including, without limitation, Registrable Securities owned by each participating Major
Holder) entitled to be included in such registration; but in no event shall the amount of
securities of the participating Major Holders included in the offering be reduced below 30% of the
total amount of securities included in such offering, unless such offering is the Initial Public
Offering of the Company’s securities, in which case the participating Major Holders may be entirely
excluded if the managing underwriter makes the determination described above and no other
stockholder’s securities are included. To facilitate the allocation of shares in accordance with
the above provisions, the Company or the underwriters may round the number of shares allocated to
any Major Holder or other holder to the nearest 100 shares. If any Major Holder or other holder
disapproves of the terms of any such underwriting, he or she may elect to withdraw therefrom by
written notice to the Company and the managing underwriter. Any securities excluded or withdrawn
from such underwriting shall be withdrawn from such registration, and shall not be transferred in a
public distribution prior to ninety (90) days (one hundred eighty

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(180) days in the case of the Company’s Initial Public Offering) after the date of the final
prospectus included in the registration statement relating thereto.

               (c) Right to Terminate Registration. The Company shall have the right to
terminate or withdraw any registration initiated by it under this Section 1.6 prior to the
effectiveness of such registration, whether or not any Major Holder has elected to include
securities in such registration.

     1.7 Registration on Form S-3

               (a) If
any Holder or Holders of Registrable Securities requests that the Company file a
registration statement on Form S-3 (or any successor form to Form
S-3) for a public offering of
shares of the Registrable Securities, the reasonably anticipated
aggregate price to the public of
which, net of underwriting discounts and commissions, would exceed $5,000,000, and the Company is a
registrant entitled to use Form S-3 to register the Registrable Securities for such an offering, the
Company shall use its commercially reasonable best efforts to cause such Registrable Securities to
be registered for the offering on such form. The Company will (i) promptly give written notice of
the proposed registration to all other Holders, and (ii) as soon as practicable, but in no event
later than sixty (60) days following the request, use its commercially reasonable best efforts to
effect such registration (including, without limitation, the execution of an undertaking to file
post-effective amendments, appropriate qualification under applicable blue sky or other state
securities laws and appropriate compliance with applicable regulations issued under the Securities
Act and any other governmental requirements or regulations) as may be so requested and as would
permit or facilitate the sale and distribution of all or such portion of such Registrable Securities
as are specified in such request, together with all or such portion of the Registrable Securities of
any Holder or Holders joining in such request as are specified in a written request received by the
Company within twenty (20) days after receipt of written notice from the Company. The substantive
provisions of Section 1.5(b) shall be applicable to each registration initiated under this Section
1.7 that is an under written offering.

               (b) Notwithstanding
the foregoing, the Company shall not be obligated to take any action
pursuant to this Section 1.7: (i) in any particular
jurisdiction in which the Company would be
required to execute a general consent to service of process in
effecting such registration,
qualification or compliance unless the Company is already subject to
service in such jurisdiction
and except as may be required by the Securities Act; (ii) in a
given twelve month period, after the
Company has effected two (2) such registrations pursuant to subparagraph
1.7(a); or (iii) if the Company shall furnish to such Holders a certificate signed by the President
of the Company stating that, in the good faith judgment of the Board of Directors, it would be
seriously detrimental to the Company or its stockholders for registration statements to be filed in
the near future, then the Company’s obligation to use its commercially reasonable best efforts to
file a registration statement shall be deferred for a period not to exceed one hundred eighty (180)
days from the receipt of the request to file such registration by such Holder or Holders and
provided further, that the Company shall not defer its obligation in this manner more than once in
any twelve-month period.

     1.8
Limitations on Subsequent “Piggyback” Registration Rights. From and after the date
hereof, the Company shall not, without the consent of 66.67% in interest of the Holders,

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enter into any agreement granting any holder or prospective holder of any securities of the Company
registration rights with respect to such securities unless such new registration rights, including
market stand-off obligations, are subordinate to the registration rights granted Holders in
Sections 1.5, 1.6 and 1.7 hereof.

     1.9 Expenses of Registration. All Registration Expenses (exclusive of
underwriting discounts and commissions) incurred in connection with registrations pursuant to
Sections 1.5, 1.6 and 1.7 shall be borne by the Company, provided that the Company shall not be
required to pay the Registration Expenses of any registration proceeding begun pursuant to Section
1.5, the request of which has been subsequently withdrawn by the Initiating Holders unless the
Holders of a majority of the Registrable Securities agree to forfeit their right to one registration under Section 1.5(a). In the case where such Holders do not agree to forfeit their right to one
such registration, (i) the Holders of Registrable Securities to have been registered shall bear all
such Registration Expenses pro rata on the basis of the number of shares to have been registered
and (ii) the Company shall be deemed not to have effected a registration pursuant to
subparagraph 1.5(a) of this Agreement. Notwithstanding the foregoing, however, if at the time of
the withdrawal, the Holders have learned of a material adverse change in the condition, business
or prospects of the Company from that known to the Holders at the time of their request, then
the Holders shall not be required to give up any right to a registration under Section 1.5(a) or to
pay any of such Registration Expenses, all of which shall be borne by the Company. In such case, the
Company shall be deemed not to have effected a registration pursuant to subparagraph 1.5(a) of this
Agreement. Unless otherwise stated, all Selling Expenses relating to securities registered on behalf
of the Holders shall be borne by the Holders of the registered securities included in such
registration pro rata on the basis of the number of shares so registered.

     1.10 Registration Procedures. In the case of each registration, qualification
or compliance effected by the Company pursuant to this Section 1, the Company will keep each Holder
advised in writing as to the initiation of each registration, qualification and compliance and as to
the completion thereof. The Company will:

               (a) Prepare (in consultation with one legal counsel for the participating Holders) and
file with the Commission a registration statement with respect to the Registrable Securities and
use its commercially reasonable efforts to cause such registration statement to become and remain
effective for at least one-hundred twenty (120) days or until the distribution described in the
registration statement has been completed; provided, however, that (i) such 120 day period shall be
extended for a period of time equal to the period that the Holder refrains from selling any
securities included in such registration at the request of the Company or an underwriter of the
Common Stock (or any other securities) of the Company and (ii) in the case of any registration on
Form S-3 which is intended to be offered on a continuous or delayed basis, such 120 day period
shall be extended, if necessary, to keep the registration statement effective until all such
Registrable Securities are sold, provided that Rule 415, or any successor rule under the Securities
Act, permits an offering on a continuous or delayed basis, and provided further that applicable
rules under the Securities Act governing the obligation to file a post-effective amendment permit,
in lieu of filing a post-effective amendment which includes (A) any prospectus required by Section
10(a)(3) of the Securities Act or (B) reflects facts or events representing a material or
fundamental change in the information set forth in the registration statement, the incorporation by
reference of information required to be included in (a) and (b)

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above to be contained in periodic reports filed pursuant to Section 13 or 15(d) of the Exchange
Act in the registration statement;

               (b) Furnish to the Holders participating in such registration and to the underwriters of the
securities being registered such reasonable number of copies of the registration statement and
amendments and supplements thereto, preliminary prospectus, final prospectus and such other
documents as such underwriters may reasonably request in order to facilitate the public offering of
such securities;

               (c) Cause all such Registrable Securities registered hereunder to be listed on each securities
exchange on which similar securities issued by the Company are then listed;

               (d) Notify each Holder of Registrable Securities covered by such registration statement at any
time when a prospectus relating thereto is required to be delivered under the Securities Act of the
happening of any event as a result of which the prospectus included in such registration statement,
as then in effect, includes an untrue statement of material fact or omits to state a material fact
required to be stated therein or necessary to make the statements therein not misleading in light of
the circumstances then existing;

               (e) Provide transfer agent and registrar for all Registrable Securities registered pursuant to
such registration statement and a CUSIP number for all such Registrable Securities, in each case not
later than effective date of such registration; and

               (f) Prepare (in consultation with one legal counsel for the participating Holders) and file
amendments of or supplements to the registration statement or prospectus necessary to comply with
1933 Securities Act with respect to disposition of the Registrable Securities covered by such
registration statement.

     1.11 Indemnification.

               (a) The Company will indemnify each Holder, each of its officers and directors and
partners, and each person controlling such Holder within the meaning of Section 15 of the
Securities Act, with respect to which registration, qualification or compliance has been effected
pursuant to this Section 1, and each underwriter, if any, and each person who controls any
underwriter within the meaning of Section 15 of the Securities Act, against all expenses, claims,
losses, damages or liabilities (or actions in respect thereof), including any of the foregoing
incurred in settlement of any litigation, commenced or threatened, arising out of or based on any
untrue statement (or alleged untrue statement) of a material fact contained in any registration
statement, prospectus, offering circular or other document, or any amendment or supplement thereto,
incident to any such registration, qualification or compliance, or based on any omission (or
alleged omission) to state therein a material fact required to be stated therein or necessary to
make the statements therein not misleading, or any violation by the Company of any rule or
regulation promulgated under the Securities Act, the Securities Exchange Act of 1934, as amended
(the “Exchange Act”) or any state securities laws applicable to the Company in connection with any
such registration, qualification or compliance, and the Company will reimburse each such Holder,
each of its officers and directors, and each person controlling such

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Holder, each such underwriter and each person who controls any such underwriter, for any legal and
any other expenses reasonably incurred in connection with investigating, preparing or defending any
such claim, loss, damage, liability or action, as such expenses are incurred, provided that
the Company will not be liable in any such case to the extent that any such claim, loss, damage,
liability or expense arises out of or is based on any untrue statement or omission or alleged
untrue statement or omission, made in reliance upon and in conformity with written information
furnished to the Company by an instrument duly executed by such Holder, controlling person or
underwriter or their representative and stated to be specifically for use therein.

               (b) Each Holder will, if Registrable Securities held by such Holder are included in the
securities as to which such registration, qualification or compliance is being effected, indemnify
the Company, each of its directors and officers, each underwriter, if any, of the Company’s
securities covered by such a registration statement, each person who controls the Company or such
underwriter within the meaning of Section 15 of the Securities Act, and each other such Holder, each
of its officers and directors and each person controlling such Holder within the meaning of Section
15 of the Securities Act, against all claims, losses, damages and liabilities (or actions in respect
thereof) arising out of or based on any untrue statement (or alleged untrue statement) of a material
fact contained in any such registration statement, prospectus, offering circular or other document,
or any omission (or alleged omission) to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading, and will reimburse the Company, such
Holders, such directors, officers, persons, underwriters or control persons for any legal or any
other expenses reasonably incurred in connection with investigating or defending any such claim,
loss, damage, liability or action, as such expenses are incurred, in each case to the extent, but
only to the extent, that such untrue statement (or alleged untrue statement) or omission (or alleged
omission) is made in such registration statement, prospectus, offering circular or other document in
reliance upon and in conformity with written information furnished to the Company by an instrument
duly executed by such Holder and stated to be specifically for use therein; provided
however that in no event shall any indemnity under this Section 1.11(b) exceed the net
proceeds from the offering received by such Holder.

               (c) If the indemnification provided for in this Section 1.11 is held by a court of competent
jurisdiction to be unavailable to a party entitled to indemnification under this Section 1.11 (the
“Indemnified Party”) with respect to any loss, liability, claim, damage or expense referred
to herein, then the party required to provide indemnification (the “Indemnifying Party”), in
lieu of indemnifying such Indemnified Party hereunder, instead shall contribute to the amount paid
or payable by such Indemnified Party as a result of such loss, liability, claim, damage or expense
in such proportion as is appropriate to reflect the relative fault of the Indemnifying Party on the
one hand and of the Indemnified Party on the other in connection with the statements or omissions
that resulted in such loss, liability, claim, damage or expense, as well as any other relevant
equitable considerations provided however that in no event shall any contribution
under this Section 1.1l(c) by a Holder who is an Indemnifying Party exceed the net proceeds from
the offering received by such Holder. The relative fault of the Indemnifying Party and of the
Indemnified Party shall be determined by reference to, among other things, whether the untrue or
alleged untrue statement of a material fact or the omission to state a material fact relates to
information supplied by the Indemnifying Party or by the Indemnified Party and the

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parties’ relative intent, knowledge, access to information, and opportunity to correct or prevent
such statement or omission. No person guilty of fraudulent misrepresentations (within the meaning
of Section 1l(f) of the Securities Act), shall be entitled to contribution from any person who is
not guilty of such fraudulent misrepresentation.

               (d) Each Indemnified Party shall give notice to the Indemnifying Party promptly after
such Indemnified Party has actual knowledge of any claim as to which indemnity may be sought, and
shall permit the Indemnifying Party to assume the defense of any such claim or any litigation
resulting therefrom, provided that counsel for the Indemnifying Party, who shall conduct the
defense of such claim or litigation, shall be approved by the Indemnified Party (whose approval
shall not unreasonably be withheld), and the Indemnified Party may participate in such defense at
such party’s expense; provided, however, that an Indemnified Party (together with
all other Indemnified Parties which may be represented without conflict by one counsel) shall have
the right to retain its own separate counsel with the reasonable fees and expenses to be paid by
the Indemnifying Party if the Indemnified Party reasonably determines that representation of such
Indemnified Party would be appropriate due to actual or potential differing interests between such
Indemnified Party and any other party represented by such counsel in such proceeding. The failure
of any Indemnified Party to give notice as provided herein shall not relieve the Indemnifying Party
of its obligations under this Section 1 unless the failure to give such notice is materially
prejudicial to an Indemnifying Party’s ability to defend such action. No Indemnifying Party, in the
defense of any such claim or litigation, shall, except with the consent of each Indemnified Party,
consent to entry of any judgment or enter into any settlement which does not include as an
unconditional term thereof the giving by the claimant or plaintiff to such Indemnified Party of a
release from all liability in respect of such claim or litigation.

     1.12 Information by Holder. The Holder or Holders of Registrable Securities included in
any registration shall furnish to the Company such information regarding such Holder or Holders, the
Registrable Securities held by them and the distribution proposed by such Holder or Holders as the
Company may reasonably request in writing and as shall be required in connection with any
registration, qualification or compliance referred to in this Section 1.

     1.13 Rule 144 Reporting. With a view to making available the benefits of certain
rules and regulations of the Commission which may at any time permit the sale of the
Restricted Securities to the public without registration, after such time as a public market exists
for the Common Stock of the Company, the Company agrees to use its commercially reasonable
best efforts to:

               (a) Make and keep adequate current public information available, as those terms are understood
and defined in Rule 144 under the Securities Act, at all times after the effective date that the
Company becomes subject to the reporting requirements of the Exchange Act;

               (b) File with the Commission in a timely manner all reports and other documents required of the
Company under the Securities Act and the Exchange Act (at any time after it has become subject to
such reporting requirements); and

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               (c) So long as an Investor owns any Restricted Securities, to furnish to the Investor
forthwith upon request a written statement by the Company as to its compliance with the reporting
requirements of said Rule 144 (at any time after ninety (90) days after the effective date of the
first registration statement filed by the Company for an offering of its securities to the general
public) and of the Securities Act and the Exchange Act (at any time after it has become subject to
such reporting requirements), a copy of the most recent annual or quarterly report of the Company,
and such other reports and documents of the Company and other information in the possession of or
reasonably obtainable by the Company as an Investor may reasonably request in availing itself of
any rule or regulation of the Commission allowing an Investor to sell any such securities without
registration.

     1.14 Transfer of Registration Rights. The rights to cause the Company to
register securities granted Investors under Sections 1.5, 1.6 and 1.7 may only be assigned to (i)
a transferee or assignee who acquires all of a Holder’s Registrable Securities, (ii) another
Holder possessing registration rights under this Section 1, (iii) a transferee or assignee acquiring
ten percent (10%) or more of the outstanding stock of the Company (including any shares of Common
Stock issuable upon conversion of the Preferred Stock of the Company or upon exercise of the
Warrants) or (iv) a subsidiary, parent, general partner, limited partner, retired partner, member or
retired member of a Holder; provided that written notice of such assignment is given to the Company
and such assignee agrees to be bound by the provisions of this Section 1.

     1.15 Market Stand-off Agreement. Each Holder agrees in connection with the
initial public offering of the Company’s securities (other than a registration of securities in a
Rule 145 transaction or with respect to an employee benefit plan) that, upon request of the Company
or the underwriters managing any underwritten offering of the Company’s securities, (a) not to
sell, make any short sale of, loan, grant any option for the purchase of, pledge, hypothecate,
limit such Holder’s market risk regarding or otherwise directly or indirectly dispose of any
Registrable Securities (other than those included in the registration) or other capital stock of the
Company or securities exchangeable or convertible into capital stock of the Company without the
prior written consent of the Company or such underwriters, as the case may be, for such period of
time (not to exceed one hundred eighty (180) days from the effective date of such registration) as
may be requested by the Company or such managing underwriters, and (b) to enter into a
lock-up agreement in customary form with such underwriters providing for restrictions approved by
the Company’s board of directors; in each case provided that all officers and directors of
the Company and holders of at least one percent (1%) of the Company’s voting securities are similarly
bound and have also entered into similar agreements. The certificates
for the (a) Shares, (b)
Conversion Shares, (c) any Investor New Securities, (d) FFC Shares and (e) any other securities
issued in respect of the securities referenced in clauses (a), (b), (c) and (d) upon any stock
split, stock dividend, recapitalization, merger, consolidation or similar event shall contain, for
so long as such market stand-off provision remains in place, a legend in substantially the following
form:

          THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN RESTRICTIONS ON TRANSFER
INCLUDING A MARKET STAND-OFF AGREEMENT BETWEEN THE COMPANY AND THE ORIGINAL STOCKHOLDER THAT
PROHIBITS SALE OR TRANSFER OF SUCH SHARES FOR A PERIOD OF UP TO 180

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DAYS FOLLOWING THE EFFECTIVE DATE OF THE REGISTRATION OF THE ISSUER’S COMMON STOCK. THIS AGREEMENT
IS BINDING UPON TRANSFEREES. A COPY OF THE AGREEMENT IS ON FILE WITH THE SECRETARY OF THE ISSUER.

     1.16 Termination of Rights. The rights of any particular Holder to cause the
Company to register securities under Sections 1.5, 1.6 and 1.7 shall terminate with respect to such
Holder on the date when (i) such Holder can sell all of its Registrable Securities pursuant to Rule
144(k) or similar or successor Rule; (ii) such Holder can sell all of its Registrable Securities
pursuant to Rule 144 in any single 90-day period; or (iii) six (6) years after the Company’s
Initial Public Offering.

ARTICLE 2

PREEMPTIVE RIGHT

     2.1 Preemptive Right. Subject to the terms and conditions contained in this Section
2, the Company hereby grants to each Holder of Preferred Stock and each holder of FFC Shares (each a
“Preemptive Right Holder”) a preemptive right (the “Preemptive Right”) to purchase
its Pro Rata Portion (as defined below) of any New Securities (as defined in Section 2.2) which
the Company may, from time to time, propose to sell and issue. A Preemptive Right Holder’s
“Pro Rata Portion” for purposes of this Section 2 is the ratio that (x) the sum of the
number of shares of the Company’s Common Stock then held by such Preemptive Right Holder and with
respect to each Holder of Shares or Warrants, the number of shares of the Company’s Common
Stock issuable upon conversion of the Shares or upon exercise of the Warrants then held by
such Preemptive Right Holder bears to (y) the sum of the total number of shares of the
Company’s Common Stock then outstanding and the number of shares of the Company’s Common
Stock issuable upon conversion of the then outstanding Preferred Stock of the Company and
upon exercise of the Warrants.

     2.2 Definition of New Securities. Except as set forth below, “New Securities”
shall mean any shares of capital stock of the Company, including Common Stock and Preferred
Stock, whether authorized or not, and rights, options or warrants to purchase said shares of
Common Stock or Preferred Stock, and securities of any type whatsoever that are, or may
become, convertible into said shares of Common Stock or Preferred Stock. Notwithstanding
the foregoing, “New Securities” does not include:

               (a) the Conversion Shares;

               (b) securities offered to the public generally pursuant to a registration statement under the
Securities Act;

               (c) securities issued to an entity in connection with a research and development partnership,
licensing or other collaborative arrangement approved by at least 66.67% of the Company’s Board of
Directors;

               (d) securities
issued pursuant to the bona fide acquisition of another business entity by the
Company by merger, purchase of substantially all of the assets or shares, or other reorganization
whereby the Company or its stockholders own not less than a majority of

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the voting power of the surviving or successor corporation or the entity that controls
such surviving or successor corporation;

               (e) securities issued to acquire technology or other intellectual
property of another business entity or a person approved by at least 66.67% of the Company’s
Board of Directors;

               (f) shares of the Company’s Common Stock or related options convertible into or
exercisable for such Common Stock issued to employees, officers and directors of, advisors,
consultants, customers, or vendors to the Company, pursuant to any arrangement approved by
at least 66.67% of the Company’s Board of Directors;

               (g) shares of the Company’s Common Stock or related options
convertible into or exercisable for such Common Stock issued to any bank, equipment or real
property lessor or other similar institution or business counterpart if and to the extent that
the transaction in which such sale or grant is to be made is approved by at least 66.67% of the
Company’s Board of Directors, provided that such issuance shall not be primarily for
capital-raising purposes;

               (h) stock issued pursuant to any rights or agreements, including,
without limitation, convertible securities, options and warrants, provided that the Company
shall have complied with the Preemptive Right established by this Section 2 with respect to
the bona fide initial sale or grant by the Company of such rights or agreements;

               (i) stock issued in connection with any stock split, stock dividend or
recapitalization by the Company; and

               (j) stock issued in any transaction similar to (a) through (i) above that is approved
by at least 66.67% of the Company’s Board of Directors, provided that such issuance shall not be
primarily for capital raising purposes.

     2.3 Notice of Right. In the event the Company proposes to undertake an issuance
of New Securities, it shall give each Preemptive Right Holder written notice of its intention,
describing the type of New Securities and the price and terms upon which the Company proposes to
issue the same. The Preemptive Right Holders shall have fifteen (15) days from the date of
receipt of any such notice to agree to purchase shares of such New Securities (up to the amount
referred to in Section 2.1), for the price and upon the terms specified in the notice, by giving
written notice to the Company and stating therein the quantity of New Securities to be purchased.
If the Preemptive Right Holder elects to purchase such Holder’s full pro rata share (an
“Electing Holder”), then such Electing Holder shall have a right of over-allotment such
that if any other Preemptive Right Holder fails to purchase such Preemptive Right Holder’s full
pro rata share of the New Securities, the Electing Holder may purchase, on a pro rata basis with
any other Electing Holder, that portion of the New Securities (the “Remaining
Securities”) which such other Preemptive Right Holder elected not to purchase. Each such
Electing Holder shall specify in its notification to the Company whether it also elects to
purchase its pro rata portion of the Remaining Securities, if any.

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     2.4 Exercise of Right. If any Holder exercises its Preemptive Right hereunder, the
closing of the purchase of the New Securities with respect to which such right has been
exercised shall take place as soon as practicable after the Preemptive Right Holder gives notice of
such exercise.

     2.5 Lapse and Reinstatement of Right. In the event a Preemptive Right Holder fails to
exercise the right of first offer provided in this Section 2 within said fifteen (15) day
period, the Company shall have ninety (90) days thereafter to sell or enter into an agreement
(pursuant to which the sale of New Securities covered thereby shall be closed, if at all, within
sixty (60) days from the date of said agreement) to sell the New Securities not elected to be
purchased by such Preemptive Right Holder at the price and upon the terms no more favorable to the
purchasers of such securities than specified in the Company’s notice. In the event the Company has
not sold the New Securities or entered into an agreement to sell the New Securities within said
ninety (90) day period (or sold and issued New Securities in accordance with the foregoing within
sixty (60) days from the date of said agreement), the Company shall not thereafter issue or sell
any New Securities without first offering such securities to the Preemptive Right Holder in
the manner provided above.

     2.6 Transfer of Preemptive Right. The Preemptive Right granted under Section 2 of this
Agreement may be assigned to a transferee or assignee reasonably acceptable to the Company in
connection with any transfer of shares of the Company capital stock held by a Preemptive Right
Holder; provided that (a) such transfer may otherwise be effected in accordance with applicable
securities laws; (b) written notice of such assignment is given to the Company; and (c) the
transferee executes a written agreement to be bound by the terms of this Agreement.

     2.7 Termination of Preemptive Right. The Preemptive Right granted under
this Section 2 of this Agreement shall terminate on and be of no further force or effect upon
the effective date of the Company’s Initial Public Offering.

ARTICLE 3

[INTENTIONALLY OMITTED]

ARTICLE 4

DRAG-ALONG RIGHT

     4.1 Drag-Along Right. Subject to the terms and conditions specified in this
Section 4.1, in the event that Holders representing 90% of the aggregate of the then-outstanding
Shares and the then outstanding FFC Shares (the “Approving Holders”) approve a sale of the
Company or all or substantially all of the Company’s assets whether by means of a merger, or
consolidation, or sale of stock or assets or the disposal or transfer of more than 50% of the
voting power of the Company to a non-affiliated third party, or otherwise (each, an “Approved
Sale”), all of the non-Approving Holders shall consent to, vote for and raise no objections to
the Approved Sale, and (i) if the Approved Sale is structured as a merger or consolidation of the

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Company, or a sale of all or substantially all of the Company’s assets, the non-Approving Holders
shall waive any dissenters rights, appraisal rights or similar rights in connection with such
merger, consolidation or asset sale, or (ii) if the Approved Sale is structured as a sale of the
stock of the Company, the non-Approving Holders shall agree to sell all of their stock on the terms
and conditions approved by the Approving Holders, provided such terms do not provide that the
non-Approving Holders would receive less than the amount that would be distributed to such
non-Approving Holders in the event the proceeds of the sale of the Company were distributed in
accordance with the terms of the Company’s Amended and Restated Certificate of Incorporation of the
Company, as the same may be amended from time to time. The non-Approving Holders shall take all
necessary and desirable actions approved by the Approving Holders, in connection with the
consummation of the Approved Sale, including the execution of such agreements and such instruments
as the Approving Holders reasonably request, it being understood that in connection with a transfer
of its shares of stock as herein provided the non-Approving Holders shall only be required to make
those representations and warranties relating to the non-Approving Holder’s title to the shares of
stock being sold and their authority to sell such shares of stock. In addition, (i) the
non-Approving Holders shall not be required to agree to provide indemnification in favor of any
other party and (ii) non-Approving Holders shall not bear any disproportionate cost, obligation or
liability with respect to a transfer as contemplated by this Section 4.1.

     4.2 Termination of Drag-Along Right. The Drag-Along Right granted under this
Section 4 of this Agreement shall terminate on and be of no further force or effect upon the
effective date of the Company’s Initial Public Offering.

ARTICLE 5

AFFIRMATIVE COVENANTS OF THE COMPANY

          The Company hereby covenants and agrees as follows:

     5.1 Financial Information.

               (a) The Company will furnish to each Investor or transferee of the Investor under Section 1.14
the following report:

                    (i) As soon as practicable after the end of each fiscal year, and
in any event within ninety (90) days thereafter, consolidated balance sheets of the Company and its
subsidiaries, if any, as of the end of such fiscal year, and consolidated statements of income and
cash flows of the Company and its subsidiaries, if any, for such year, prepared in accordance with
generally accepted accounting principles applied on a consistent basis and setting forth in each
case in comparative form the figures for the previous fiscal year, all in reasonable detail and
audited by independent public accountants of national standing selected by the Company.

               (b) So long as an Investor is a holder of not less than an aggregate of (i) Warrants
representing the right to acquire at least 250,000 shares of Common Stock (as adjusted for any stock
splits, consolidations and the like) and/or 250,000: (ii) Shares;

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(iii) Conversion Shares; and/or (iv) shares of Common Stock issued upon the exercise of the
Warrants (as adjusted for any stock splits, consolidations and the like), which aggregate shall be
determined based on any combination of (i), (ii), (iii) and/or (iv) (a “250,000 Share
Investor”), the Company will furnish to such 250,000 Share Investor the following reports:

                    (i) Within sixty (60) days prior to the beginning of each fiscal
year, an annual operating plan for the Company, forecasting the Company’s revenues, expenses and
cash position on a month-to-month basis for the upcoming fiscal year; and

                    (ii) As soon as practicable after the end of each month, and in any event within thirty
(30) days thereafter (other than the last calendar month of each fiscal year), unaudited
consolidated balance sheets of the Company and its subsidiaries, if any, as of the end of the
month, and unaudited consolidated statements of income and cash flows of the Company and its
subsidiaries, if any, for such month, prepared in accordance with generally accepted accounting
principles applied on a consistent basis and setting forth in each case in comparative form the
figures for the same month one year earlier; provided that footnotes and schedule disclosure
appearing in audited financial statements shall not be required, all in reasonable detail and
signed by the principal financial or accounting officer of the Company.

     5.2 Confidentiality. Each 250,000 Share Investor agrees and will cause
any representative of the 250,000 Share Investor to hold in confidence and trust and not use
or disclose any information provided to or learned by it in connection with its rights under
this Section 4, except that such 250,000 Share Investor may disclose such information to any
partner, member, subsidiary or parent of such 250,000 Share Investor for the purpose of evaluating
its investment in the Company as long as (a) such partner, member, subsidiary or parent is advised of
the confidentiality provisions of this Section 5.2 and (b) such 250,000 Share Investor uses
its commercially reasonable best efforts to ensure that such partner, member, subsidiary or
parent holds such information in confidence and trust and will not use or disclose any
information provided to or learned by it except as required by law.

     5.3 Proprietary Information and Inventions Agreements. The Company agrees to require
each employee of the Company to execute a proprietary information and inventions agreement and each
consultant and advisor of the Company to execute an agreement that provides for assignment of
inventions and confidential treatment of the Company’s proprietary information as a condition of
employment or continued employment or engagement, as the case may be, unless otherwise approved by
the board of directors of the Company.

     5.4 Vesting. Unless otherwise approved by the board of directors of the Company, the
Company agrees that all Common Stock issued to employees, consultants, advisors, directors and
officers in the future (i) shall be subject to a repurchase option which provides that
upon termination of the employment of such individual, with or without cause, the Company has
the option to repurchase at cost any unvested shares held by the individual, which repurchase
option shall lapse 25% per year over a four year period and (ii) shall be issued subject to the
condition that the holder thereof make timely elections under Section 83(b) of the Internal Revenue
Code. Notwithstanding the above, this Section 5.4 shall not apply to Founders (as defined in
the Amended and Restated Right of First Refusal and Co-Sale Agreement, dated the date hereof, by and
among the Company, certain existing shareholders of the Company, the Investors, and the

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Founders). Unless otherwise approved by the Board of Directors of the Company, the Company also
agrees that all stock options issued to employees, consultants, advisors, directors and officers in
the future shall vest no more quickly than 25% per year over a four year period and shall provide
that any unvested options shall be forfeited upon termination of the holder, with or without cause.
Any and all options or shares of Common Stock issued to any non-employee director of the Company
shall be issued under a plan that is applicable to all non-employee directors.

     5.5
Restriction on Sales by Employees. The Company and the Founders agree that, until
the time of an Initial Public Offering, first, the Company, and
second, the Investors will have a
right of first refusal on all transfers of Common Stock by employees
of the Company, subject to
transfers to family members or trusts for the benefit of family
members and other limited exceptions
as determined by the board of directors of the Company. The Company agrees to include appropriate
language to this effect in all future employment agreements, stock option and/or restricted stock
grants, or other similar agreements with employees.

     5.6 Board of Directors. All non-employee directors will be reimbursed for
their reasonable out-of-pocket and travel expenses of the directors incurred (i) in attending
meetings of the Board of Directors of the Company (or meetings of committees thereof), (ii) in
attending other functions on behalf of the Company, or (iii) in connection with the performance of
their duties as directors. All non-employee directors shall be compensated uniformly.

     5.7
Senior Securities. The Company will not permit the authorization or issuance of any
class or series of stock (or any debt that is directly or indirectly convertible into any series
of stock) that has a liquidation preference that is senior to the liquidation preference of the
Series C Preferred Stock (a “Senior Security”), unless upon the closing of the sale or issuance of
the Senior Security, the liquidation preference of the Series C Preferred Stock is senior to
the liquidation of the Series B Preferred Stock.

     5.8 Insurance. The Company shall use its best efforts to obtain, within sixty (60)
days following the date hereof, a “Key Man” life insurance
policy naming the Company as beneficiary
on the life of Scott Huennekens in the amount of Two Million Dollars ($2,000,000).

     5.9
Termination of Covenants. The covenants set forth in this Section 5 shall terminate
on, and be of no further force or effect upon the effective date of
the Company’s Initial Public
Offering.

ARTICLE 6

MISCELLANEOUS

     6.1 Successors and Assigns. Except as otherwise provided herein, the terms
and conditions of this Agreement shall inure to the benefit of and be binding upon the
respective successors, assigns, heirs, executors and administrators and permitted transferees of the
parties hereto.

     6.2
Third Parties. Nothing in this Agreement, express or implied, is intended to confer
upon any party, other than the parties hereto, and their respective successors and assigns,

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any rights, remedies, obligations or liabilities under or by reason of this Agreement, except as
expressly provided herein.

     6.3
Governing Law. This Agreement shall be governed by and
construed under the laws of
the State of Delaware as applied to agreements entered into and
performed in the State of Delaware
solely by residents thereof without reference to principles of
conflicts of laws or choice of laws.

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

     6.5
Notices. Any notice required or permitted by this Agreement shall be in writing and
shall be deemed effectively given the earlier of (i) when
received, (ii) when delivered personally,
(iii) one (1) business day after being delivered by
facsimile (with receipt of appropriate
confirmation), (iv) one (1) business day after being
deposited with an overnight courier service or
(v) four (4) days after being deposited in the U.S. mail,
First Class with postage prepaid, and
addressed to the parties at the addresses provided to the Company
(which the Company agrees to
disclose to the other parties upon request) or such other address as
a party may request by
notifying the other in writing.

     6.6 Severability. If one or more provisions of this Agreement are held to
be unenforceable under applicable law, portions of such provisions, or such provisions in
their entirety, to the extent necessary, shall be severed from this Agreement, and the balance of
this Agreement shall be enforceable in accordance with its terms.

     6.7
Amendment and Waiver. Any provision of this Agreement may be
amended with the
written consent of the Company and the Holders of at least 66.67% of
the outstanding shares of the
Registrable Securities provided, however that no amendment that adversely affects
the rights of the holders of FFC Shares in a manner that is materially different than all of the
other Holders at the time of such amendment shall be effective without the consent of a majority of
the Holders of FFC Shares. Any amendment or waiver effected in
accordance with this paragraph shall
be binding upon each Holder of Registrable Securities and the Company
but in no event shall any
amendment or waiver materially increase the obligations of any
Holder, except upon the written
consent of such Holder. In addition, the Company may waive
performance of any obligation owing to
it, as to some or all of the Holders of Registrable Securities, or
agree to accept alternatives to
such performance, without obtaining the consent of any Holder of Registrable Securities. In the
event that an underwriting agreement is entered into between the Company and any Holder, and such
underwriting agreement contains terms differing from this Agreement, as to any such Holder the terms
of such underwriting agreement shall govern.

     6.8 Rights of Holders. Each Holder of Registrable Securities shall have the right
to exercise or refrain from exercising any right or rights that such Holder may have by reason
of this Agreement, including, without limitation, the right to consent to the waiver or
modification of any obligation under this Agreement, and such Holder shall not incur any liability
to any other holder of any securities of the Company as a result of exercising or refraining from
exercising any such right or rights.

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     6.9
Delays or Omissions. No delay or omission to exercise any right, power or remedy
accruing to any party to this Agreement, upon any breach or default
of the other party, shall impair
any such right, power or remedy of such non-breaching party nor shall
it be construed to be a waiver
of any such breach or default, or an acquiescence therein, or of or
in any similar breach or default
thereafter occurring; nor shall any waiver of any single breach or default be deemed a waiver of any
other breach or default theretofore or thereafter occurring. Any waiver, permit, consent or approval
of any kind or character on the part of any party of any breach or default under this Agreement, or
any waiver on the part of any party of any provisions or conditions of this Agreement, must be made
in writing and shall be effective only to the extent specifically set forth in such writing.

     6.10 Attorneys’ Fees. If any action at law or in equity is necessary to enforce
or interpret the terms of this Agreement, the prevailing party shall be entitled to
reasonable attorneys’ fees, costs and necessary disbursements in addition to any other relief to
which such party may be entitled.

     6.11 Headings. The headings and captions used in this Agreement are used
for convenience only and are not to be considered in construing or interpreting this Agreement.
All references in this Agreement to sections, paragraphs, exhibits and schedules shall,
unless otherwise provided, refer to sections and paragraphs hereof and exhibits and schedules
attached hereto, all of which are incorporated herein by this reference.

     6.12 Entire Agreement. This Agreement constitutes the entire understanding
and agreement of the parties with respect to the subject matter hereof and supersedes all
prior negotiations, correspondence, agreements, understandings, duties or obligations among
the parties with respect to the subject matter hereof.

     6.13
Further Assurances. From and after the date of this Agreement, upon the request of
a party, the other parties shall execute and deliver such
instruments, documents or other writings
as may be reasonably necessary or desirable to confirm and carry out and to effectuate fully the
intent and purposes of this Agreement.

     6.14 Investor Ownership Levels. Each of the Company, the Existing Holders, and
the Investors hereby agree that in the event that the Outstanding Securities (as defined
below) represent greater than 19.99% of the Company’s outstanding capital stock on a
fully-diluted basis (the “Threshold Level”) as a result of any adjustment to a Conversion
Price (as such term is defined in the Amended and Restated Certificate of Incorporation of the
Company, as the same may be amended from time to time) or otherwise, the Company and each Existing
Holder and Investor shall take all necessary or desirable actions within its or their control to
allow Johnson & Johnson Development Corporation (“JJDC”) to receive, in lieu of any such
Outstanding Securities which would cause JJDC’s aggregate holdings to exceed the Threshold Level or
in exchange for any such Outstanding Securities which exceed the
Threshold Level if and to the extent
that such Outstanding Securities are then beneficially owned by JJDC,
Non-voting Preferred Shares as
described below. As used herein, “Outstanding
Securities” shall mean the aggregate number of
shares of Common Stock held by JJDC on a fully-diluted basis assuming the exercise, exchange or
conversion of (i) any and all options, warrants or other rights
requiring the Company to issue to
JJDC any shares of Common Stock and (ii) any other securities held by

-21-

 

JJDC exercisable or exchangeable for, or convertible into, shares of Common Stock. In such event, a
new series of Non-voting Preferred Stock shall be created, the rights and preferences of which
shall be substantially identical to those of the shares held by JJDC, except that such shares shall
have no voting rights (the “Non-voting Preferred Shares”). The Non-voting Preferred Shares
shall be convertible upon the same terms as the other preferred stock held by JJDC into a new
series of Common Stock the rights and preferences of which shall be substantially identical to
those of the Common Stock, except that such shares shall have no voting rights (the “Non-voting
Common Stock”). Each share of Non-voting Common Stock shall convert into one share of Common
Stock upon an initial public offering by the Company of its Common Stock. It is hereby agreed and
acknowledged that the rights of JJDC and the obligations of the Company and each Existing Holder
and Investor set forth herein shall be exercisable solely at the discretion of JJDC.

[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]

-22-

 

          IN WITNESS WHEREOF, the parties have executed this Fourth Amended and Restated Investor Rights
Agreement as of the date first above written.

COMPANY:

VOLCANO CORPORATION

	 	 	 	 	 
	By:

	 	/s/ Scott Huennekens
 

	 	 
	 

	 	Scott Huennekens,	 	 
	 

	 	President and Chief Executive Officer	 	 

[SIGNATURE PAGE TO FOURTH AMENDED AND RESTATED

INVESTOR RIGHTS AGREEMENTS]

 

 

	 	 	 	 	 	 	 
	INVESTORS:	 	 	 	 
	 
	 	 	 	 	 	 
	CADUCEUS PRIVATE INVESTMENTS II, LP
	By:	 	OrbiMed Capital II LLC
	Its:	 	General Partner
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ Eric Bittleman
 

	 	 
	 

	 	 	 	Name:	 	 
	 

	 	 	 	Title:	 	 
	 
	 	 	 	 	 	 
	 	 	Address:
	 	 	767 Third Avenue, 30th Floor
	 	 	New York, NY 10017
	 	 	Attn: Chief Financial Officer
	 	 	FAX: (212) 739-6444
	 
	 	 	 	 	 	 
	CADUCEUS PRIVATE INVESTMENTS (QP) II, LP
	By:	 	OrbiMed Capital II LLC
	Its:	 	General Partner
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ Eric Bittleman
 

	 	 
	 

	 	 	 	Name:	 	 
	 

	 	 	 	Title:	 	 
	 
	 	 	 	 	 	 
	 	 	Address:
	 	 	767 Third Avenue, 30th Floor
	 	 	New York, NY 10017
	 	 	Attn: Chief Financial Officer
	 	 	FAX: (212) 739-6444
	 
	 	 	 	 	 	 
	UBS JUNIPER CROSSOVER FUND, L.L.C.
	By:	 	OrbiMed Advisors LLC
	Its:	 	Member
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ Eric Bittleman
 

	 	 
	 

	 	 	 	Name:	 	 
	 

	 	 	 	Title:	 	 
	 
	 	 	 	 	 	 
	 	 	Address:
	 	 	767 Third Avenue, 30th Floor
	 	 	New York, NY 10017
	 	 	Attn: Chief Financial Officer
	 	 	FAX: (212) 739-6444

[SIGNATURE PAGE TO FOURTH AMENDED AND RESTATED

INVESTOR RIGHTS AGREEMENTS]

 

 

	 	 	 	 	 	 	 
	Johnson & Johnson Development Corporation
	 
	 	 	 	 	 	 
	By:	 	/s/ John Onopchenko	 	 
	 	 	 	 	 
	 	 	John Onopchenko,
	 	 	Vice President
	 
	 	 	 	 	 	 
	 	 	Address:
	 
	 	 	 	 	 	 
	 	 	One Johnson & Johnson Plaza
	 	 	New Brunswick, NJ 08933

[SIGNATURE PAGE TO FOURTH AMENDED AND RESTATED

INVESTOR RIGHTS AGREEMENTS]

 

 

	 	 	 	 	 
	Mayo Foundation for Medical Education and Research
	 
	 	 	 	 
	By:

	 	/s/ Rick F. Colvin
 

	 	 
	Name:

	 	Rick F. Colvin	 	 
	Title:

	 	Assistant Treasurer	 	 
	 
	 	 	 	 
	 

	 	Address:	 	 
	 
	 	 	 	 
	 

	 	c/o Mayo Medical Ventures	 	 
	 

	 	200 First Street SW	 	 
	 

	 	Rochester, Minnesota 55905	 	 
	 
	 	 	 	 
	Medtronic International, Ltd.
	 
	 	 	 	 
	By:
	 	/s/ Michael D. Ellwein	 	 
	Name:

	 	 
Michael
D. Ellwein
	 	 
	Title:
	 	Vice President	 	 
	 
	 	 	 	 
	 

	 	Address:	 	 
	 
	 	 	 	 
	 

	 	c/o Fredrickson & Byron, P.A.	 	 
	 

	 	1100 International Centre	 	 
	 

	 	900 Second Avenue South	 	 
	 

	 	Minneapolis, Minnesota 55402-3397	 	 
	 
	 	 	 	 
	NeoMed Innovation III L.P.
	Acting by its General Partner
	NeoMed Innovation III Ltd.
	 
	 	 	 	 
	By:

	 	/s/ Simon Young
 

	 	 
	Name:

	 	Simon Young	 	 
	Title:

	 	Director	 	 
	 
	 	 	 	 
	 

	 	Address:	 	 
	 
	 	 	 	 
	 

	 	PO Box 539, 1 Wesley Street	 	 
	 

	 	St. Helier, Jersey, JE4 5UT	 	 

[SIGNATURE PAGE TO FOURTH AMENDED AND RESTATED

INVESTOR RIGHTS AGREEMENTS]

 

 

	 	 	 	 	 
	Domain Partners V, L.P.
	By:

	 	One Palmer Square Associates V, L.L.C.	 	 
	 

	 	its General Partner	 	 
	 
	 	 	 	 
	By:

	 	/s/ Kathleen K. Schoemaker
 

	 	 
	 

	 	Kathleen K. Schoemaker,	 	 
	 

	 	Managing Member	 	 
	 
	 	 	 	 

	 	 	 	 	 
	 

	 	Address:	 	 
	 
	 	 	 	 
	 

	 	c/o Domain Associates, L.L.C.	 	 
	 

	 	One Palmer Square, Suite 515	 	 
	 

	 	Princeton, NJ 08542	 	 
	 

	 	Attn: James C. Blair	 	 
	 
	 	 	 	 
	with a copy to:
	 
	 	 	 	 
	 

	 	c/o Domain Associates, L.L.C.	 	 
	 

	 	One Palmer Square, Suite 515	 	 
	 

	 	Princeton, NJ 08542	 	 
	 

	 	Attn: Kathleen K. Schoemaker	 	 
	 
	 	 	 	 

	 	 	 	 	 
	DPV Associates, L.P.
	By:

	 	One Palmer Square Associates V, L.L.C.	 	 
	 

	 	Its General Partner	 	 
	 
	 	 	 	 
	By:

	 	/s/ Kathleen K. Schoemaker
 

	 	 
	 

	 	Kathleen K. Schoemaker,	 	 
	 

	 	Managing Member	 	 
	 
	 	 	 	 

	 	 	 	 	 
	 

	 	Address:	 	 
	 
	 	 	 	 
	 

	 	c/o Domain Associates, L.L.C.	 	 
	 

	 	One Palmer Square, Suite 515	 	 
	 

	 	Princeton, NJ 08542	 	 
	 

	 	Attn: James C. Blair	 	 
	 
	 	 	 	 
	 

	 	with a copy to:	 	 
	 
	 	 	 	 
	 

	 	c/o Domain Associates, L.L.C.	 	 
	 

	 	One Palmer Square, Suite 515	 	 
	 

	 	Princeton, NJ 08542	 	 
	 

	 	Attn: Kathleen K. Schoemaker	 	 

[SIGNATURE PAGE TO FOURTH AMENDED AND RESTATED

INVESTOR RIGHTS AGREEMENTS]

 

 

	 	 	 	 	 
	FFC Partners II, L.P.
	By:

	 	FFC GP II, LLC, its general partner	 	 

	 	 	 	 	 	 
	 	By:

Name:

	 	/s/ Carlos Ferrer
 

	 	 
	 	Title:

	 	Member	 	 
	 	 
	 	 	 	 
	 	 

	 	Address:	 	 
	 	 
	 	 	 	 
	 	 

	 	The Mill	 	 
	 	 

	 	10 Glenville Street	 	 
	 	 

	 	Greenwich, CT 06831	 	 
	 	 

	 	Attention: Thomas Clayton	 	 
	 	 

	 	Facsimile.: (203) 532-8016	 	 

	 	 	 	 	 
	FFC Executive Partners II, L.P.
	By:

	 	FFC Executive GP II, LLC, its general	 	 
	 

	 	partner	 	 
	 
	 	 	 	 

	 	 	 	 	 	 
	 	By:

Name:

	 	/s/ Carlos Ferrer
 

	 	 
	 	Title:

	 	Member	 	 
	 	 
	 	 	 	 
	 	 

	 	Address:	 	 
	 	 
	 	 	 	 
	 	 

	 	The Mill	 	 
	 	 

	 	10 Glenville Street	 	 
	 	 

	 	Greenwich, CT 06831	 	 
	 	 

	 	Attention: Thomas Clayton	 	 
	 	 

	 	Facsimile.: (203) 532-8016	 	 

[SIGNATURE PAGE TO FOURTH AMENDED AND RESTATED

INVESTOR RIGHTS AGREEMENTS]

 

 

INVESTORS AND EXISTING HOLDERS:

	 	 	 	 	 
	Domain Partners IV, L.P.	 	 
	By: 
	One Palmer Square
Associates IV, L.L.C.,
	 	 
	 

	Its General Partner	 	 
	 
	 	 	 	 
	By: 

	/s/ Kathleen K. Schoemaker	 	 
	 

	 	 	 
	 

	Kathleen K. Schoemaker,	 	 
	 

	Managing Member	 	 
	 
	 	 	 	 
	 

	 	Address:	 	 
	 
	 	 	 	 
	 

	 	c/o Domain Associates, L.L.C.	 	 
	 

	 	One Palmer Square, Suite 515	 	 
	 

	 	Princeton, NJ 08542	 	 
	 

	 	Attn: James C. Blair	 	 
	 
	 	 	 	 
	 	with a copy to:	 	 
	 
	 	 	 	 
	 

	 	c/o Domain Associates, L.L.C.	 	 
	 

	 	One Palmer Square, Suite 515	 	 
	 

	 	Princeton, NJ 08542	 	 
	 

	 	Attn: Kathleen K. Schoemaker	 	 
	 
	 	 	 	 
	EXISTING HOLDERS:	 	 
	 
	 	 	 	 
	DP IV Associates, L.P.	 	 
	By: 

	One Palmer Square
Associates IV, L.L.C.,	 	 
	 

	Its General Partner	 	 
	 
	 	 	 	 
	By: 

	/s/ Kathleen K. Schoemaker	 	 
	 

	 	 	 
	 

	Kathleen K. Schoemaker,	 	 
	 

	Managing Member	 	 
	 
	 	 	 	 
	 

	 	Address:	 	 
	 
	 	 	 	 
	 

	 	c/o Domain Associates, L.L.C.	 	 
	 

	 	One Palmer Square, Suite 515	 	 
	 

	 	Princeton, NJ 08542	 	 
	 

	 	Attn: James C. Blair	 	 

[SIGNATURE PAGE TO FOURTH AMENDED AND RESTATED

INVESTOR RIGHTS AGREEMENTS]

 

 

	 	 	 	 
	with a copy to:	
	 
	 	 	
	 

	 	c/o Domain Associates, L.L.C.	
	 

	 	One Palmer Square, Suite 515	
	 

	 	Princeton, NJ 08542	
	 

	 	Attn: Kathleen K. Schoemaker	
	 
	 	 	
	/s/ E. William Barnett	
	 	
	E. William Barnett	
	 
	 	 	
	 

	 	Address:	
	 
	 	 	
	 

	 	Baker Botts L.L.P.	
	 

	 	One Shell Plaza	
	 

	 	910 Louisiana	
	 

	 	Houston, Texas 77002	
	 
	 	 	
	/s/ E. Philip Cannon 	
	 	
	E. Philip Cannon	
	 
	 	 	
	 

	 	Address:	
	 
	 	 	
	 

	 	Cannon & Company	
	 

	 	4550 Post Oak Place, Suite 244	
	 

	 	Houston, Texas 77027	
	 
	 	 	
	/s/ Walter Driver	
	 	
	Walter Driver	
	 
	 	 	
	 

	 	Address:	
	 
	 	 	
	 

	 	King & Spalding	
	 

	 	191 Peachtree Street	
	 

	 	Atlanta, Georgia 30303-1763	
	 
	 	 	
	/s/ Durham F. Jewett	
	 	
	Durham F. Jewett	
	 
	 	 	
	 

	 	Address:	
	 
	 	 	
	 

	 	Crady, Jewett & McCulley, L.L.P.	
	 

	 	1400 Two Houston Center	
	 

	 	909 Fannin	
	 

	 	Houston, Texas 77010-1006	

[SIGNATURE PAGE TO FOURTH AMENDED AND RESTATED

INVESTOR RIGHTS AGREEMENTS]

 

 

	 	 	 	 
	/s/ Preston Moore, Jr.
	 
	Preston Moore, Jr.
	 
	 	 
	 

	 	Address:
	 
	 	 
	 

	 	One Riverway, Suite 1400
	 

	 	Houston, Texas 77056
	 
	 	 
	/s/ Scott Petty, Jr. 	
	 
	Scott Petty, Jr.
	 
	 	 
	 

	 	Address:
	 
	 	 
	 

	 	711 Navarro Street, Suite 235
	 

	 	San Antonio, Texas 78205
	 
	 	 
	/s/ Darrell Willerson, Jr. 	
	 
	Dr. Darrell Willerson, Jr.
	 
	 	 
	 

	 	Address:
	 
	 	 
	 

	 	303 East Quincy
	 

	 	San Antonio, Texas 78215
	 
	 	 
	Venture Lending and Leasing III, LLC
	 
	 	 
	By:
	 	 
	 	 	/s/ Ronald W. Swenson 	
	 

	 	 
	 

	 	Ronald W. Swenson,
	 

	 	Chief Executive Officer
	 
	 	 
	 

	 	Address:
	 
	 	 
	 

	 	2010 North First Street, Suite 310
	 

	 	San Jose, CA 95131

[SIGNATURE PAGE TO FOURTH AMENDED AND RESTATED

INVESTOR RIGHTS AGREEMENTS]

 

 

SOLELY WITH RESPECT TO SECTIONS 1.5,1.6 and 1.7

HEREOF, AS PROVIDED HEREIN

	 	 	 
	Silicon Valley Bank
	 
	 	 

	By:

	 	/s/
Ryan Incorvaia
	 

	 	 
	 

	 	Name:
Ryan Incorvaia
	 

	 	Title:   Relationship
Manager
	 
	 	 
	 

	 	Address:
	 
	 	 
	 

	 	38 Technology Drive, Suite 150
	 

	 	Irvine, California 92618

[SIGNATURE PAGE TO FOURTH AMENDED AND RESTATED

INVESTOR RIGHTS AGREEMENTS]exv4w3

 

Exhibit 4.3

EXHIBIT D

THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR INVESTMENT AND NOT WITH
A VIEW TO, OR IN CONNECTION WITH, THE SALE AND DISTRIBUTION THEREOF, AND HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”) OR ANY STATE SECURITIES LAWS.
SUCH SECURITIES MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN OPINION
OF COUNSEL IN A FORM REASONABLY ACCEPTABLE TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED
DUE TO AN EXEMPTION THEREFROM UNDER SAID ACT AND ANY APPLICABLE STATE SECURITIES LAWS.

WARRANT TO PURCHASE

140,000 SHARES OF SERIES B PREFERRED STOCK OF

VOLCANO THERAPEUTICS, INC.

(Void
after March 31, 2011)

This certifies that VENTURE LENDING & LEASING III, LLC, a Delaware limited liability company, or
assigns (the “Holder”), for value received, is entitled to purchase from Volcano Therapeutics,
Inc., a Delaware corporation (the “Company”), 140,000 fully paid and nonassessable shares of the
Company’s Series B Preferred Stock (“Preferred Stock”) for cash at a price of $3.00 per share (the
“Stock Purchase Price”) at any time or from time to time up to and including 5:00 p.m. (Pacific
time) on December 31, 2014 (the “Expiration Date”), upon surrender to the Company at its principal
office at 2870 Kilgore Road, Rancho Cordova, California 95670, (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.

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 this Warrant would have been so converted
(and, where the context requires, reference to “Preferred Stock” shall be deemed to be or include
such Common Stock, as may be appropriate). 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 he 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 this 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.

          (b) The Holder, in lieu of exercising this Warrant by the cash 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 surrender this Warrant and 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 this 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 securities issuable upon conversion of the Preferred
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 the
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; and (ii) that number of shares of Common Stock into which each share of Preferred Stock
is convertible. If the securities issuable upon conversion of the Preferred Stock are 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)If the shares are not regularly traded in a public market, the Board of Directors of
the Company shall determine fair market value in its reasonable good faith judgment. The foregoing
notwithstanding, if Holder advises the Board of Directors in writing
that Holder disagrees with such
determination, then the Company and Holder shall promptly agree upon a
reputable investment banking
firm to undertake such valuation. If the valuation conclusion of such investment banking firm is
greater than 120% of the valuation determined by the Board of Directors, then all fees and expenses
of such investment banking firm shall be paid by the Company. In all other circumstances, such fees
and expenses shall be paid by Holder.

     2. Limitation
on Transfer.

          (a) This 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.
Notwithstanding the foregoing and any other provision of this Section 2, Holder may freely transfer
all or part of this Warrant or the shares issuable upon exercise of this Warrant (or the securities
issuable, directly or indirectly, upon conversion of the shares, if any) at any time to any lender
transferee of a portion of the loan commitment of Venture Lending & Leasing III, Inc. under the
Loan Agreement, by giving the Company notice of the portion of the Warrant being transferred
setting forth the name, address and taxpayer identification number of the transferee and
surrendering this Warrant to the Company for reissuance to the transferees(s) (and Holder, if
applicable).

          (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 sdd under Rule

2

 

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 NOT WITH A
VIEW TO, OR IN CONNECTION WITH, THE SALE AND DISTRIBUTION THEREOF, AND HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OR ANY STATE SECURITIES LAWS. SUCH SECURITIES MAY NOT BE SOLD OR
TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN OPINION OF COUNSEL IN A FORM REASONABLY
ACCEPTABLE TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED DUE TO 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 this 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.

     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 stockholder 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,
(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 Certificate of Incorporation
or (iii) if the par value per share of the Preferred Stock would exceed the Stock Purchase Price.

     4. Adjustment
of Stock Purchase Price and 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 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.

3

 

          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 spin off, 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 (“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 per share
consideration receivable for each outstanding share of Preferred Stock in such Corporate Event
is at least three (3) times the Stock Purchase Price in effect
immediately prior to such
Corporate Event, (2) any shares of stock received as part of the consideration in such
Corporate Event are of a publicly traded company listed on a national market or exchange which
may be sold without restrictions after the close of such Corporate Event, (3) the Company’s
stockholders will own less than 50% of the voting securities of the surviving entity and (4)
the surviving entity does not assume other warrants of the Company,
then this Warrant shall
automatically be deemed exercised in accordance with the provisions
of section 1(b) immediately
prior to the closing of the Corporate Event. In any such case where the Warrant is not deemed
exercised pursuant to the previous sentence, 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 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 other antidilution rights
applicable to the shares of series Preferred Stock purchasable hereunder are set forth in the
Company’s Certificate of Incorporation, as

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amended through the date hereof (the “Charter”). Such antidilution rights shall not be
restated, amended, modified or waived in any manner without the Holder’s prior written consent if
the effect of such restatement, amendment, modification or waiver on the Holder hereof would be
more adverse to the Holder hereof than, and substantially dissimilar to, its effect on the other
holders of the same series of the Company’s Preferred Stock. The Company shall promptly provide
the Holder hereof with any restatement, amendment, modification or waiver of the Charter promptly
after the same has been made.

          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 in connection with a Down Round or additional shares of stock
of any class or other rights;

               (d) there
shall be any capital reorganization or reclassification of the capital stock of the
Company, or consolidation or merger of the Company with, or sale of
all or substantially all of its
assets to, another entity;

               (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 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 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.

          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 effect the adjustments to this
Warrant in accordance with the essential intent and principles of such provisions, then the Board
of Directors of the Company shall make in good faith an adjustment in the number and

5

 

class of shares issuable under this 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 this Warrant
upon exercise for the same aggregate Stock Purchase Price the total number, class and kind of
shares as the Holder would have owned had this Warrant been exercised prior to the event and had
the Holder 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 this Warrant shall be made without charge to the Holder of this 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 this Warrant being exercised.

     6. Closing
of Books. The Company will at no time close its transfer books against the
transfer of this Warrant or of any shares of Preferred Stock issued or issuable upon the exercise of
this 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
stockholder in respect of meetings of stockholders for the election of directors of the Company or
any other matters or any rights whatsoever as a stockholder 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. 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
registration rights set forth in the Amended and Restated Investors Rights Agreement dated as of
April 23, 2002 and the Amendment to Amended and Restated Investor
Rights Agreement dated as of July
21, 2003 (the “Rights Agreements”), to the same extent and
on the same terms and conditions as
possessed by the investors thereunder with the following exceptions and clarifications: (i) the
Holder will have no demand registration rights; (ii) the Holder will be subject to the same
provisions regarding indemnification as contained in the Rights Agreements; and (iii) the
registration rights are freely assignable by the Holder of this Warrant in connection with a
permitted transfer of this Warrant or the shares issuable upon
exercise hereof. 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 the Rights Agreements or any of the
Company’s charter documents or rights of prior grantees of registration rights.

     9. 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 8 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 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.

6

 

     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. The Company will, at the time of the exercise of
this Warrant, in whole or in part, upon request of the Holder hereof
but at the Company’s expense,
acknowledge in writing its continuing obligation to the Holder hereof in respect of any rights
(including, without limitation, any right to registration of the shares of Common Stock) to which
the holder hereof shall continue to be entitled after such exercise in accordance with this Warrant;
provided, that the failure of the holder hereof to make any such
request shall not affect the
continuing obligation of the Company to the Holder hereof in respect of such rights.

     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 this 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 this 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
this 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, nor qualified under applicable state securities laws.

          17.3
Rule 144. It acknowledges that this 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. It is an “accredited investor” within the meaning of
Regulation D promulgated under the Securities Act.

     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 stockholders 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 this Warrant is, and the issuance of
Preferred Stock upon exercise of this 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 this 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 names of Holder, its nominees or assignees, as appropriate at the
time of such exercise. Upon conversion of the shares of Preferred Stock into shares of Common Stock,
the Company will issue the Common Stock in the names of Holder, its nominees or assignees, as
appropriate.

          18.5 Certificates and By-Laws. The Company has provided Holder with true and
complete copies of the Company’s Certificate of Incorporation, By-Laws, and each Certificate of
Designation 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 stockholders and all
registration statements and reports that the Company files with the SEC or any other governmental or
regulatory authority.

IN WITNESS WHEREOF, the Company has caused this Warrant to be duly executed by its officers,
thereunto duly authorized this ___ day of September, 2003.

VOLCANO THERAPEUTICS, INC.

	 	 	 	 	 
	 

	 	 	 	 
	By:
	 	 	 	 
	 

	 	 	 	 
	 
	 	 	 	 
	Title:
	 	 	 	 
	 

	 	 	 	 

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