Document:

exv10w2

 

Exhibit 10.2

Cardica, Inc.

2005 Equity Incentive Plan

Adopted by the Board of Directors: October 13, 2005

Approved By the Stockholders: December 27, 2005

Termination Date: October 12, 2015

1. General.

     (a) Eligible Stock Award Recipients. The persons eligible to receive Stock Awards are
Employees, Directors and Consultants.

     (b) Available Stock Awards. The Plan provides for the grant of the following Stock Awards:
(i) Incentive Stock Options, (ii) Nonstatutory Stock Options, (iii) Stock Purchase Awards, (iv)
Stock Bonus Awards, (v) Stock Appreciation Rights, (vi) Stock Unit Awards, and (vii) Other Stock
Awards.

     (c) Purpose. The Company, by means of the Plan, seeks to secure and retain the services of
the group of persons eligible to receive Stock Awards as set forth in Section 1(a), to provide
incentives for such persons to exert maximum efforts for the success of the Company and any
Affiliate and to provide a means by which such eligible recipients may be given an opportunity to
benefit from increases in value of the Common Stock through the granting of Stock Awards.

2. Definitions.

     As used in the Plan, the following definitions shall apply to the capitalized terms indicated
below:

     (a) “Affiliate” means (i) any corporation (other than the Company) in an unbroken chain of
corporations ending with the Company, provided each corporation in the unbroken chain (other than
the Company) owns, at the time of the determination, stock possessing fifty percent (50%) or more
of the total combined voting power of all classes of stock in one of the other corporations in such
chain, and (ii) any corporation (other than the Company) in an unbroken chain of corporations
beginning with the Company, provided each corporation (other than the last corporation) in the
unbroken chain owns, at the time of the determination, stock possessing fifty percent (50%) or more
of the total combined voting power of all classes of stock in one of the other corporations in such
chain. The Board shall have the authority to determine (i) the time or times at which the
ownership tests are applied, and (ii) whether “Affiliate” includes entities other than corporations
within the foregoing definition.

     (b) “Board” means the Board of Directors of the Company.

     (c) “Capitalization Adjustment” has the meaning ascribed to that term in Section 10(a).

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     (d) “Cause” means, with respect to a Participant, the occurrence of any of the following: (i)
such Participant’s commission of any felony or any crime involving fraud, dishonesty or moral
turpitude under the laws of the United States or any state thereof; (ii) such Participant’s
attempted commission of, or participation in, a fraud or act of dishonesty against the Company;
(iii) such Participant’s intentional, material violation of any material contract or agreement
between the Participant and the Company or any statutory duty owed to the Company; (iv) such
Participant’s unauthorized use or disclosure of the Company’s confidential information or trade
secrets; or (v) such Participant’s gross misconduct. The determination that a termination is for
Cause shall be made by the Company in its sole discretion. Any determination by the Company that
the Continuous Service of a Participant was terminated with or without Cause for the purposes of
outstanding Stock Awards held by such Participant shall have no effect upon any determination of
the rights or obligations of the Company or such Participant for any other purpose.

     (e) “Change in Control” means the occurrence, in a single transaction or in a series of
related transactions, of any one or more of the following events:

          (i) any Exchange Act Person becomes the Owner, directly or indirectly, of securities of the
Company representing more than fifty percent (50%) of the combined voting power of the Company’s
then outstanding securities other than by virtue of a merger, consolidation or similar transaction.
Notwithstanding the foregoing, a Change in Control shall not be deemed to occur (A) on account of
the acquisition of securities of the Company by an investor, any affiliate thereof or any other
Exchange Act Person from the Company in a transaction or series of related transactions the primary
purpose of which is to obtain financing for the Company through the issuance of equity securities
or (B) solely because the level of Ownership held by any Exchange Act Person (the “Subject Person”)
exceeds the designated percentage threshold of the outstanding voting securities as a result of a
repurchase or other acquisition of voting securities by the Company reducing the number of shares
outstanding, provided that if a Change in Control would occur (but for the operation of this
sentence) as a result of the acquisition of voting securities by the Company, and after such share
acquisition, the Subject Person becomes the Owner of any additional voting securities that,
assuming the repurchase or other acquisition had not occurred, increases the percentage of the then
outstanding voting securities Owned by the Subject Person over the designated percentage threshold,
then a Change in Control shall be deemed to occur;

          (ii) there is consummated a merger, consolidation or similar transaction involving (directly
or indirectly) the Company and, immediately after the consummation of such merger, consolidation or
similar transaction, the stockholders of the Company immediately prior thereto do not Own, directly
or indirectly, either (A) outstanding voting securities representing more than fifty percent (50%)
of the combined outstanding voting power of the surviving Entity in such merger, consolidation or
similar transaction or (B) more than fifty percent (50%) of the combined outstanding voting power
of the parent of the surviving Entity in such merger, consolidation or similar transaction, in each
case in substantially the same proportions as their Ownership of the outstanding voting securities
of the Company immediately prior to such transaction;

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          (iii) the stockholders of the Company approve or the Board approves a plan of complete
dissolution or liquidation of the Company, or a complete dissolution or liquidation of the Company
shall otherwise occur;

          (iv) there is consummated a sale, lease, exclusive license or other disposition of all or
substantially all of the consolidated assets of the Company and its Subsidiaries, other than a
sale, lease, license or other disposition of all or substantially all of the consolidated assets of
the Company and its Subsidiaries to an Entity, more than fifty percent (50%) of the combined voting
power of the voting securities of which are Owned by stockholders of the Company in substantially
the same proportions as their Ownership of the outstanding voting securities of the Company
immediately prior to such sale, lease, license or other disposition; or

          (v) individuals who, on the date this Plan is adopted by the Board, are members of the Board
(the “Incumbent Board”) cease for any reason to constitute at least a majority of the members of
the Board; provided, however, that if the appointment or election (or nomination for election) of
any new Board member was approved or recommended by a majority vote of the members of the Incumbent
Board then still in office, such new member shall, for purposes of this Plan, be considered as a
member of the Incumbent Board.

     The term Change in Control shall not include a sale of assets, merger or other transaction
effected exclusively for the purpose of changing the domicile of the Company.

     Notwithstanding the foregoing or any other provision of this Plan, the definition of Change in
Control (or any analogous term) in an individual written agreement between the Company or any
Affiliate and the Participant shall supersede the foregoing definition with respect to Stock Awards
subject to such agreement; provided, however, that if no definition of Change in Control or any
analogous term is set forth in such an individual written agreement, the foregoing definition shall
apply.

     (f) “Code” means the Internal Revenue Code of 1986, as amended.

     (g) “Committee” means a committee of one (1) or more members of the Board to whom authority
has been delegated by the Board in accordance with Section 3(c).

     (h) “Common Stock” means the common stock of the Company.

     (i) “Company” means Cardica, Inc., a Delaware corporation.

     (j) “Consultant” means any person, including an advisor, who is (i) engaged by the Company or
an Affiliate to render consulting or advisory services and is compensated for such services, or
(ii) serving as a member of the Board of Directors of an Affiliate and is compensated for such
services. However, service solely as a Director, or payment of a fee for such service, shall not
cause a Director to be considered a “Consultant” for purposes of the Plan.

     (k) “Continuous Service” means that the Participant’s service with the Company or an
Affiliate, whether as an Employee, Director or Consultant, is not interrupted or terminated. A
change in the capacity in which the Participant renders service to the Company or an Affiliate as
an Employee, Consultant or Director or a change in the entity for which the Participant renders

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such service, provided that there is no interruption or termination of the Participant’s
service with the Company or an Affiliate, shall not terminate a Participant’s Continuous Service;
provided, however, if the corporation for which a Participant is rendering service ceases to
qualify as an Affiliate, as determined by the Board in its sole discretion, such Participant’s
Continuous Service shall be considered to have terminated on the date such corporation ceases to
qualify as an Affiliate. For example, a change in status from an employee of the Company to a
consultant of an Affiliate or to a Director shall not constitute an interruption of Continuous
Service. To the extent permitted by law, the Board or the chief executive officer of the Company,
in that party’s sole discretion, may determine whether Continuous Service shall be considered
interrupted in the case of any leave of absence approved by that party, including sick leave,
military leave or any other personal leave. Notwithstanding the foregoing, a leave of absence
shall be treated as Continuous Service for purposes of vesting in a Stock Award only to such extent
as may be provided in the Company’s leave of absence policy or in the written terms of the
Participant’s leave of absence.

     (l) “Corporate Transaction” means the occurrence, in a single transaction or in a series of
related transactions, of any one or more of the following events:

          (i) a sale or other disposition of all or substantially all, as determined by the Board in its
sole discretion, of the consolidated assets of the Company and its Subsidiaries;

          (ii) a sale or other disposition of at least ninety percent (90%) of the outstanding
securities of the Company;

          (iii) the consummation of a merger, consolidation or similar transaction following which the
Company is not the surviving corporation; or

          (iv) the consummation of a merger, consolidation or similar transaction following which the
Company is the surviving corporation but the shares of Common Stock outstanding immediately
preceding the merger, consolidation or similar transaction are converted or exchanged by virtue of
the merger, consolidation or similar transaction into other property, whether in the form of
securities, cash or otherwise.

     (m) “Covered Employee” means the chief executive officer and the four (4) other highest
compensated officers of the Company for whom total compensation is required to be reported to
stockholders under the Exchange Act, as determined for purposes of Section 162(m) of the Code.

     (n) “Director” means a member of the Board.

     (o) “Disability” means the permanent and total disability of a person within the meaning of
Section 22(e)(3) of the Code.

     (p) “Employee” means any person employed by the Company or an Affiliate. However, service
solely as a Director, or payment of a fee for such services, shall not cause a Director to be
considered an “Employee” for purposes of the Plan.

     (q) “Entity” means a corporation, partnership or other entity.

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     (r) “Exchange Act” means the Securities Exchange Act of 1934, as amended.

     (s) “Exchange Act Person” means any natural person, Entity or “group” (within the meaning of
Section 13(d) or 14(d) of the Exchange Act), except that “Exchange Act Person” shall not include
(i) the Company or any Subsidiary of the Company, (ii) any employee benefit plan of the Company or
any Subsidiary of the Company or any trustee or other fiduciary holding securities under an
employee benefit plan of the Company or any Subsidiary of the Company, (iii) an underwriter
temporarily holding securities pursuant to an offering of such securities, (iv) an Entity Owned,
directly or indirectly, by the stockholders of the Company in substantially the same proportions as
their Ownership of stock of the Company; or (v) any natural person, Entity or “group” (within the
meaning of Section 13(d) or 14(d) of the Exchange Act) that, as of the effective date of the Plan
as set forth in Section 13, is the Owner, directly or indirectly, of securities of the Company
representing more than fifty percent (50%) of the combined voting power of the Company’s then
outstanding securities.

     (t) “Fair Market Value” means, as of any date, the value of the Common Stock determined as
follows:

          (i) If the Common Stock is listed on any established stock exchange or traded on the Nasdaq
National Market or the Nasdaq SmallCap Market, the Fair Market Value of a share of Common Stock
shall be the closing sales price for such stock (or the closing bid, if no sales were reported) as
quoted on such exchange or market (or the exchange or market with the greatest volume of trading in
the Common Stock) on the date in question, as reported in The Wall Street Journal or such other
source as the Board deems reliable. Unless otherwise provided by the Board, if there is no closing
sales price (or closing bid if no sales were reported) for the Common Stock on the date in
question, then the Fair Market Value shall be the closing sales price (or closing bid if no sales
were reported) on the last preceding date for which such quotation exists.

          (ii) In the absence of such markets for the Common Stock, the Fair Market Value shall be
determined by the Board in good faith.

     (u) “Incentive Stock Option” means an Option intended to qualify as an incentive stock option
within the meaning of Section 422 of the Code and the regulations promulgated thereunder.

     (v) “IPO Date” means the date of the underwriting agreement between the Company and the
underwriter(s) managing the initial public offering of the Common Stock, pursuant to which the
Common Stock is priced for the initial public offering.

     (w) “Non-Employee Director” means a Director who either (i) is not a current employee or
officer of the Company or an Affiliate, does not receive compensation, either directly or
indirectly, from the Company or an Affiliate for services rendered as a consultant or in any
capacity other than as a Director (except for an amount as to which disclosure would not be
required under Item 404(a) of Regulation S-K promulgated pursuant to the Securities Act
(“Regulation S-K”)), does not possess an interest in any other transaction for which disclosure
would be required under Item 404(a) of Regulation S-K, and is not engaged in a business

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relationship for which disclosure would be required pursuant to Item 404(b) of Regulation S-K;
or (ii) is otherwise considered a “non-employee director” for purposes of Rule 16b-3.

     (x) “Nonstatutory Stock Option” means an Option not intended to qualify as an Incentive Stock
Option.

     (y) “Officer” means a person who is an officer of the Company within the meaning of Section 16
of the Exchange Act and the rules and regulations promulgated thereunder.

     (z) “Option” means an Incentive Stock Option or a Nonstatutory Stock Option to purchase shares
of Common Stock granted pursuant to the Plan.

     (aa) “Option Agreement” means a written agreement between the Company and an Optionholder
evidencing the terms and conditions of an Option grant. Each Option Agreement shall be subject to
the terms and conditions of the Plan.

     (bb) “Optionholder” means a person to whom an Option is granted pursuant to the Plan or, if
applicable, such other person who holds an outstanding Option.

     (cc) “Other Stock Award” means an award based in whole or in part by reference to the Common
Stock which is granted pursuant to the terms and conditions of Section 7(f).

     (dd) “Other Stock Award Agreement” means a written agreement between the Company and a holder
of an Other Stock Award evidencing the terms and conditions of an Other Stock Award grant. Each
Other Stock Award Agreement shall be subject to the terms and conditions of the Plan.

     (ee) “Outside Director” means a Director who either (i) is not a current employee of the
Company or an “affiliated corporation” (within the meaning of Treasury Regulations promulgated
under Section 162(m) of the Code), is not a former employee of the Company or an “affiliated
corporation” who receives compensation for prior services (other than benefits under a
tax-qualified retirement plan) during the taxable year, has not been an officer of the Company or
an “affiliated corporation,” and does not receive remuneration from the Company or an “affiliated
corporation,” either directly or indirectly, in any capacity other than as a Director, or (ii) is
otherwise considered an “outside director” for purposes of Section 162(m) of the Code.

     (ff) “Own,” “Owned,” “Owner,” “Ownership” A person or Entity shall be deemed to “Own,” to
have “Owned,” to be the “Owner” of, or to have acquired “Ownership” of securities if such person or
Entity, directly or indirectly, through any contract, arrangement, understanding, relationship or
otherwise, has or shares voting power, which includes the power to vote or to direct the voting,
with respect to such securities.

     (gg) “Participant” means a person to whom a Stock Award is granted pursuant to the Plan or, if
applicable, such other person who holds an outstanding Stock Award.

     (hh) “Performance Criteria” means the one or more criteria that the Board shall select for
purposes of establishing the Performance Goals for a Performance Period. The Performance Criteria
that shall be used to establish such Performance Goals may be based on any one of, or

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combination of, the following: (i) earnings per share; (ii) earnings before interest, taxes
and depreciation; (iii) earnings before interest, taxes, depreciation and amortization (EBITDA);
(iv) net earnings; (v) return on equity; (vi) return on assets, investment, or capital employed;
(vii) operating margin; (viii) gross margin; (ix) operating income; (x) net income (before or after
taxes); (xi) net operating income; (xii) net operating income after tax; (xiii) pre- and after-tax
income; (xiv) pre-tax profit; (xv) operating cash flow; (xvi) sales or revenue targets; (xvii)
increases in revenue or product revenue; (xviii) expenses and cost reduction goals; (xix)
improvement in or attainment of expense levels; (xx) improvement in or attainment of working
capital levels; (xxi) economic value added; (xxii) market share; (xxiii) cash flow; (xxiv) cash
flow per share; (xxv) share price performance; (xxvi) debt reduction; (xxvii) implementation or
completion of projects or processes; (xxviii) customer satisfaction; (xxix) total stockholder
return; (xxx) stockholders’ equity; and (xxxi) other measures of performance selected by the Board.
Partial achievement of the specified criteria may result in the payment or vesting corresponding
to the degree of achievement as specified in the Stock Award Agreement. The Board shall, in its
sole discretion, define the manner of calculating the Performance Criteria it selects to use for
such Performance Period.

     (ii) “Performance Goals” means, for a Performance Period, the one or more goals established by
the Board for the Performance Period based upon the Performance Criteria. Performance Goals may be
based on a Company-wide basis, with respect to one or more business units, divisions, Affiliates,
or business segments, and in either absolute terms or relative to the performance of one or more
comparable companies or a relevant index. The Board is authorized to make adjustments in the
method of calculating the attainment of Performance Goals for a Performance Period as follows: (i)
to exclude restructuring and/or other nonrecurring charges; (ii) to exclude exchange rate effects,
as applicable, for non-U.S. dollar denominated net sales and operating earnings; (iii) to exclude
the effects of changes to generally accepted accounting standards required by the Financial
Accounting Standards Board; (iv) to exclude the effects of any statutory adjustments to corporate
tax rates; and (v) to exclude the effects of any “extraordinary items” as determined under
generally accepted accounting principles. The Board also retains the discretion to reduce or
eliminate the compensation or economic benefit due upon attainment of Performance Goals.

     (jj) “Performance Period” means the one or more periods of time, which may be of varying and
overlapping durations, as the Committee may select, over which the attainment of one or more
Performance Goals will be measured for the purpose of determining a Participant’s right to and the
payment of a Stock Award.

     (kk) “Performance Stock Award” means an award of shares of Common Stock which is granted
pursuant to the terms and conditions of Section 7(e).

     (ll) “Plan” means this Cardica, Inc. 2005 Equity Incentive Plan.

     (mm) “Prior Plan” means the Company’s 1997 Equity Incentive Plan in effect immediately prior
to the effective date of the Plan as set forth in Section 13.

     (nn) “Rule 16b-3” means Rule 16b-3 promulgated under the Exchange Act or any successor to Rule
16b-3, as in effect from time to time.

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     (oo) “Securities Act” means the Securities Act of 1933, as amended.

     (pp) “Stock Appreciation Right” means a right to receive the appreciation on Common Stock that
is granted pursuant to the terms and conditions of Section 7(d).

     (qq) “Stock Appreciation Right Agreement” means a written agreement between the Company and a
holder of a Stock Appreciation Right evidencing the terms and conditions of a Stock Appreciation
Right grant. Each Stock Appreciation Right Agreement shall be subject to the terms and conditions
of the Plan.

     (rr) “Stock Award” means any right granted under the Plan, including an Option, a Stock
Purchase Award, Stock Bonus Award, a Stock Appreciation Right, a Stock Unit Award, Performance
Stock Award, or any Other Stock Award.

     (ss) “Stock Award Agreement” means a written agreement between the Company and a Participant
evidencing the terms and conditions of a Stock Award grant. Each Stock Award Agreement shall be
subject to the terms and conditions of the Plan.

     (tt) “Stock Bonus Award” means an award of shares of Common Stock which is granted pursuant to
the terms and conditions of Section 7(b).

     (uu) “Stock Bonus Award Agreement” means a written agreement between the Company and a holder
of a Stock Bonus Award evidencing the terms and conditions of a Stock Bonus Award grant. Each
Stock Bonus Award Agreement shall be subject to the terms and conditions of the Plan.

     (vv) “Stock Purchase Award” means an award of shares of Common Stock which is granted pursuant
to the terms and conditions of Section 7(a).

     (ww) “Stock Purchase Award Agreement” means a written agreement between the Company and a
holder of a Stock Purchase Award evidencing the terms and conditions of a Stock Purchase Award
grant. Each Stock Purchase Award Agreement shall be subject to the terms and conditions of the
Plan.

     (xx) “Stock Unit Award” means a right to receive shares of Common Stock which is granted
pursuant to the terms and conditions of Section 7(c).

     (yy) “Stock Unit Award Agreement” means a written agreement between the Company and a holder
of a Stock Unit Award evidencing the terms and conditions of a Stock Unit Award grant. Each Stock
Unit Award Agreement shall be subject to the terms and conditions of the Plan.

     (zz) “Subsidiary” means, with respect to the Company, (i) any corporation of which more than
fifty percent (50%) of the outstanding capital stock having ordinary voting power to elect a
majority of the board of directors of such corporation (irrespective of whether, at the time, stock
of any other class or classes of such corporation shall have or might have voting power by reason
of the happening of any contingency) is at the time, directly or indirectly, Owned by the Company,
and (ii) any partnership in which the Company has a direct or indirect interest

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(whether in the form of voting or participation in profits or capital contribution) of more
than fifty percent (50%).

     (aaa) “Ten Percent Stockholder” means a person who Owns (or is deemed to Own pursuant to
Section 424(d) of the Code) stock possessing more than ten percent (10%) of the total combined
voting power of all classes of stock of the Company or any Affiliate.

3. Administration.

     (a) Administration by Board. The Board shall administer the Plan unless and until the Board
delegates administration of the Plan to a Committee, as provided in Section 3(c).

     (b) Powers of Board. The Board shall have the power, subject to, and within the limitations
of, the express provisions of the Plan:

          (i) To construe and interpret the Plan and Stock Awards granted under it, and to establish,
amend and revoke rules and regulations for its administration. The Board, in the exercise of this
power, may correct any defect, omission or inconsistency in the Plan or in any Stock Award
Agreement, in a manner and to the extent it shall deem necessary or expedient to make the Plan
fully effective.

          (ii) To determine from time to time (1) which of the persons eligible under the Plan shall be
granted Stock Awards; (2) when and how each Stock Award shall be granted; (3) what type or
combination of types of Stock Award shall be granted; (4) the provisions of each Stock Award
granted (which need not be identical), including the time or times when a person shall be permitted
to receive cash or Common Stock pursuant to a Stock Award; and (5) the number of shares of Common
Stock with respect to which a Stock Award shall be granted to each such person.

          (iii) To accelerate the time at which a Stock Award may first be exercised or the time during
which a Stock Award or any part thereof will vest in accordance with the Plan, notwithstanding the
provisions in the Stock Award stating the time at which it may first be exercised or the time
during which it will vest.

          (iv) To effect, at any time and from time to time, with the consent of any adversely affected
Optionholder, (1) the reduction of the exercise price of any outstanding Option under the Plan; (2)
the cancellation of any outstanding Option under the Plan and the grant in substitution therefor of
(a) a new Option under the Plan or another equity plan of the Company covering the same or a
different number of shares of Common Stock, (b) a Stock Purchase Award, (c) a Stock Bonus Award,
(d) a Stock Appreciation Right, (e) a Stock Unit Award, (f) an Other Stock Award, (g) cash, and/or
(h) other valuable consideration (as determined by the Board, in its sole discretion); or (3) any
other action that is treated as a repricing under generally accepted accounting principles.

          (v) To amend the Plan or a Stock Award as provided in Section 11.

          (vi) To terminate or suspend the Plan as provided in Section 12.

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          (vii) Generally, to exercise such powers and to perform such acts as the Board deems necessary
or expedient to promote the best interests of the Company which are not in conflict with the
provisions of the Plan.

          (viii) To adopt such procedures and sub-plans as are necessary or appropriate to permit
participation in the Plan by Employees who are foreign nationals or employed outside the United
States.

(c) Delegation to Committee.

          (i) General. The Board may delegate some or all of the administration of the Plan to a
Committee or Committees. If administration is delegated to a Committee, the Committee shall have,
in connection with the administration of the Plan, the powers theretofore possessed by the Board
that have been delegated to the Committee, including the power to delegate to a subcommittee any of
the administrative powers the Committee is authorized to exercise (and references in this Plan to
the Board shall thereafter be to the Committee or subcommittee), subject, however, to such
resolutions, not inconsistent with the provisions of the Plan, as may be adopted from time to time
by the Board. The Board may retain the authority to concurrently administer the Plan with the
Committee and may, at any time, revest in the Board some or all of the powers previously delegated.

          (ii) Section 162(m) and Rule 16b-3 Compliance. In the sole discretion of the Board, the
Committee may consist solely of two (2) or more Outside Directors, in accordance with Section
162(m) of the Code, and/or solely of two or more Non-Employee Directors, in accordance with Rule
16b-3. In addition, the Board or the Committee, in its sole discretion, may (1) delegate to a
committee of one or more members of the Board who need not be Outside Directors the authority to
grant Stock Awards to eligible persons who are either (a) not then Covered Employees and are not
expected to be Covered Employees at the time of recognition of income resulting from such Stock
Award, or (b) not persons with respect to whom the Company wishes to comply with Section 162(m) of
the Code, and/or (2) delegate to a committee of one or more members of the Board who need not be
Non-Employee Directors the authority to grant Stock Awards to eligible persons who are not then
subject to Section 16 of the Exchange Act.

     (d) Delegation to an Officer. The Board may delegate to one or more Officers of the Company
the authority to do one or both of the following (i) designate Officers and Employees of the
Company or any of its Subsidiaries to be recipients of Stock Awards and the terms thereof, and (ii)
determine the number of shares of Common Stock to be subject to such Stock Awards granted to such
Officers and Employees; provided, however, that the Board resolutions regarding such delegation
shall specify the total number of shares of Common Stock that may be subject to the Stock Awards
granted by such Officer and that such Officer may not grant a Stock Award to himself or herself.
Notwithstanding anything to the contrary in this Section 3(d), the Board may not delegate to an
Officer authority to determine the Fair Market Value of the Common Stock pursuant to Section
2(t)(ii) above.

     (e) Effect of Board’s Decision. All determinations, interpretations and constructions made by
the Board in good faith shall not be subject to review by any person and shall be final, binding
and conclusive on all persons.

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4. Shares Subject to the Plan.

     (a) Share Reserve. Subject to the provisions of Section 10(a) relating to Capitalization
Adjustments, the number of shares of Common Stock that may be issued pursuant to Stock Awards shall
not exceed, in the aggregate, [___] (___) shares of Common Stock. Such share reserve consists
of the number of shares remaining available for future issuance under the Prior Plan as of
immediately prior to the termination of the Prior Plan, plus an additional 400,000 shares of Common
Stock. In addition, the share reserve shall be increased from time to time by the number of shares
of Common Stock that (i) are issuable pursuant to stock awards outstanding under the Company’s
Prior Plan as of the effective date of the Plan (as set forth in Section 13), and (ii) but for the
termination of the Prior Plan as of the effective date of the Plan, would otherwise have reverted
to the share reserve of the Prior Plan.

     (b) Reversion of Shares to the Share Reserve. If any Stock Award shall for any reason expire
or otherwise terminate, in whole or in part, without having been exercised in full, if any shares
of Common Stock issued to a Participant pursuant to a Stock Award are forfeited to or repurchased
by the Company, including, but not limited to, any repurchase or forfeiture caused by the failure
to meet a contingency or condition required for the vesting of such shares, or if any shares of
Common Stock are cancelled in accordance with the cancellation and regrant provisions of Section
3(b)(iv), then the shares of Common Stock not issued under such Stock Award, or forfeited to or
repurchased by the Company, shall revert to and again become available for issuance under the Plan.
If any shares subject to a Stock Award are not delivered to a Participant because such shares are
withheld for the payment of taxes or the Stock Award is exercised through a reduction of shares
subject to the Stock Award (i.e., “net exercised”), the number of shares that are not delivered to
the Participant shall remain available for issuance under the Plan. If the exercise price of any
Stock Award is satisfied by tendering shares of Common Stock held by the Participant (either by
actual delivery or attestation), then the number of shares so tendered shall remain available for
issuance under the Plan. Notwithstanding anything to the contrary in this Section 4(b), subject to
the provisions of Section 10(a) relating to Capitalization Adjustments the aggregate maximum number
of shares of Common Stock that may be issued pursuant to the exercise of Incentive Stock Options
shall be [___] (___) shares of Common Stock plus the amount of any increase in the number
of shares that may be available for issuance pursuant to Stock Awards pursuant to Section 4(a).

     (c) Source of Shares. The stock issuable under the Plan shall be shares of authorized but
unissued or reacquired Common Stock, including shares repurchased by the Company on the open
market.

5. Eligibility.

     (a) Eligibility for Specific Stock Awards. Incentive Stock Options may be granted only to
Employees. Stock Awards other than Incentive Stock Options may be granted to Employees, Directors
and Consultants.

     (b) Ten Percent Stockholders. A Ten Percent Stockholder shall not be granted an Incentive
Stock Option unless the exercise price of such Option is at least one hundred ten

11.

 

percent (110%) of the Fair Market Value of the Common Stock on the date of grant and the
Option is not exercisable after the expiration of five (5) years from the date of grant.

     (c) Section 162(m) Limitation on Annual Grants. Subject to the provisions of Section 10(a)
relating to Capitalization Adjustments, at such time as the Company may be subject to the
applicable provisions of Section 162(m) of the Code, no Employee shall be eligible to be granted
Stock Awards whose value is determined by reference to an increase over an exercise or strike price
of at least one hundred percent (100%) of the Fair Market Value of the Common Stock on the date the
Stock Award is granted covering more than two hundred thousand (200,000) shares of Common Stock
during any calendar year.

     (d) Consultants. A Consultant shall not be eligible for the grant of a Stock Award if, at the
time of grant, a Form S-8 Registration Statement under the Securities Act (“Form S-8”) is not
available to register either the offer or the sale of the Company’s securities to such Consultant
because of the nature of the services that the Consultant is providing to the Company, because the
Consultant is not a natural person, or because of any other rule governing the use of Form S-8.

6. Option Provisions.

     Each Option shall be in such form and shall contain such terms and conditions as the Board
shall deem appropriate. All Options shall be separately designated Incentive Stock Options or
Nonstatutory Stock Options at the time of grant, and, if certificates are issued, a separate
certificate or certificates shall be issued for shares of Common Stock purchased on exercise of
each type of Option. The provisions of separate Options need not be identical; provided, however,
that each Option Agreement shall include (through incorporation of provisions hereof by reference
in the Option or otherwise) the substance of each of the following provisions:

     (a) Term. The Board shall determine the term of an Option; provided, however, that subject
to the provisions of Section 5(b) regarding Ten Percent Stockholders, no Incentive Stock Option
shall be exercisable after the expiration of ten (10) years from the date of grant.

     (b) Exercise Price of an Incentive Stock Option. Subject to the provisions of Section 5(b)
regarding Ten Percent Stockholders, the exercise price of each Incentive Stock Option shall be not
less than one hundred percent (100%) of the Fair Market Value of the Common Stock subject to the
Option on the date the Option is granted. Notwithstanding the foregoing, an Incentive Stock Option
may be granted with an exercise price lower than that set forth in the preceding sentence if such
Option is granted pursuant to an assumption or substitution for another option in a manner
consistent with the provisions of Section 424(a) of the Code.

     (c) Exercise Price of a Nonstatutory Stock Option. The exercise price of each Nonstatutory
Stock Option shall be not less than one hundred percent (100%) of the Fair Market Value of the
Common Stock subject to the Option on the date the Option is granted. Notwithstanding the
foregoing, a Nonstatutory Stock Option may be granted with an exercise price lower than that set
forth in the preceding sentence if such Option is granted pursuant to an

12.

 

assumption or substitution for another option in a manner consistent with the provisions of
Section 424(a) of the Code.

     (d) Consideration. The purchase price of Common Stock acquired pursuant to the exercise of an
Option shall be paid, to the extent permitted by applicable law and as determined by the Board in
its sole discretion, by any combination of the methods of payment set forth below. The Board shall
have the authority to grant Options that do not permit all of the following methods of payment (or
otherwise restrict the ability to use certain methods) and to grant Options that require the
consent of the Company to utilize a particular method of payment. The methods of payment permitted
by this Section 6(d) are:

          (i) by cash or check;

          (ii) pursuant to a program developed under Regulation T as promulgated by the Federal Reserve
Board that, prior to the issuance of Common Stock, results in either the receipt of cash (or check)
by the Company or the receipt of irrevocable instructions to pay the aggregate exercise price to
the Company from the sales proceeds; provided, however, that such program is not in violation of
the prohibition on the extension of credit to the Company’s executive officers and Directors under
Section 402 of the Sarbanes-Oxley Act of 2002, in the opinion of counsel acceptable to the Company;

          (iii) by delivery to the Company (either by actual delivery or attestation) of shares of
Common Stock;

          (iv) by a “net exercise” arrangement pursuant to which the Company will reduce the number of
shares of Common Stock issued upon exercise by the largest whole number of shares with a Fair
Market Value that does not exceed the aggregate exercise price; provided, however, the Company
shall accept a cash or other payment from the Participant to the extent of any remaining balance of
the aggregate exercise price not satisfied by such reduction in the number of whole shares to be
issued; provided, however, shares of Common Stock will no longer be outstanding under an Option and
will not be exercisable thereafter to the extent that (i) shares are used to pay the exercise price
pursuant to the “net exercise,” (ii) shares are delivered to the Participant as a result of such
exercise, and (iii) shares are withheld to satisfy tax withholding obligations; or

          (v) according to a deferred payment or similar arrangement with the Optionholder; provided,
however, that interest shall compound at least annually and shall be charged at the minimum rate of
interest necessary to avoid (i) the imputation of interest income to the Company and compensation
income to the Optionholder under any applicable provisions of the Code, and (ii) the treatment of
the Option as a variable award for financial accounting purposes.

     (e) Transferability of Options. The Board may, in its sole discretion, impose such
limitations on the transferability of Options as the Board shall determine. In the absence of such
a determination by the Board to the contrary, the following restrictions on the transferability of
Options shall apply:

13.

 

          (i) Restrictions on Transfer. An Option shall not be transferable except by will or by the
laws of descent and distribution and shall be exercisable during the lifetime of the Optionholder
only by the Optionholder.

          (ii) Domestic Relations Orders. Notwithstanding the foregoing, an Option may be transferred
pursuant to a domestic relations order.

          (iii) Beneficiary Designation. Notwithstanding the foregoing, the Optionholder may, by
delivering written notice to the Company, in a form provided by or otherwise satisfactory to the
Company, designate a third party who, in the event of the death of the Optionholder, shall
thereafter be entitled to exercise the Option.

     (f) Vesting Generally. The total number of shares of Common Stock subject to an Option may
vest and therefore become exercisable in periodic installments that may or may not be equal. The
Option may be subject to such other terms and conditions on the time or times when it may or may
not be exercised (which may be based on performance or other criteria) as the Board may deem
appropriate. The vesting provisions of individual Options may vary. The provisions of this
Section 6(f) are subject to any Option provisions governing the minimum number of shares of Common
Stock as to which an Option may be exercised.

     (g) Termination of Continuous Service. In the event that an Optionholder’s Continuous Service
terminates (other than for Cause or upon the Optionholder’s death or Disability), the Optionholder
may exercise his or her Option (to the extent that the Optionholder was entitled to exercise such
Option as of the date of termination of Continuous Service) but only within such period of time
ending on the earlier of (i) the date three (3) months following the termination of the
Optionholder’s Continuous Service (or such longer or shorter period specified in the Option
Agreement), or (ii) the expiration of the term of the Option as set forth in the Option Agreement.
If, after termination of Continuous Service, the Optionholder does not exercise his or her Option
within the time specified herein or in the Option Agreement (as applicable), the Option shall
terminate.

     (h) Extension of Termination Date. An Optionholder’s Option Agreement may provide that if the
exercise of the Option following the termination of the Optionholder’s Continuous Service (other
than upon the Optionholder’s death or Disability) would be prohibited at any time solely because
the issuance of shares of Common Stock would violate the registration requirements under the
Securities Act, then the Option shall terminate on the earlier of (i) the expiration of a period of
three (3) months after the termination of the Optionholder’s Continuous Service during which the
exercise of the Option would not be in violation of such registration requirements, or (ii) the
expiration of the term of the Option as set forth in the Option Agreement.

     (i) Disability of Optionholder. In the event that an Optionholder’s Continuous Service
terminates as a result of the Optionholder’s Disability, the Optionholder may exercise his or her
Option (to the extent that the Optionholder was entitled to exercise such Option as of the date of
termination of Continuous Service), but only within such period of time ending on the earlier of
(i) the date twelve (12) months following such termination of Continuous Service (or such longer or
shorter period specified in the Option Agreement), or (ii) the expiration of the

14.

 

term of the Option as set forth in the Option Agreement. If, after termination of Continuous
Service, the Optionholder does not exercise his or her Option within the time specified herein or
in the Option Agreement (as applicable), the Option shall terminate.

     (j) Death of Optionholder. In the event that (i) an Optionholder’s Continuous Service
terminates as a result of the Optionholder’s death, or (ii) the Optionholder dies within the period
(if any) specified in the Option Agreement after the termination of the Optionholder’s Continuous
Service for a reason other than death, then the Option may be exercised (to the extent the
Optionholder was entitled to exercise such Option as of the date of death) by the Optionholder’s
estate, by a person who acquired the right to exercise the Option by bequest or inheritance or by a
person designated to exercise the option upon the Optionholder’s death, but only within the period
ending on the earlier of (i) the date eighteen (18) months following the date of death (or such
longer or shorter period specified in the Option Agreement), or (ii) the expiration of the term of
such Option as set forth in the Option Agreement. If, after the Optionholder’s death, the Option
is not exercised within the time specified herein or in the Option Agreement (as applicable), the
Option shall terminate.

     (k) Termination for Cause. In the event that an Optionholder’s Continuous Service is
terminated for Cause, the Option shall terminate immediately and cease to remain outstanding.

7. Provisions of Stock Awards other than Options.

     (a) Stock Purchase Awards. Each Stock Purchase Award Agreement shall be in such form and
shall contain such terms and conditions as the Board shall deem appropriate. At the Board’s
election, shares of Common Stock may be (i) held in book entry form subject to the Company’s
instructions until any restrictions relating to the Stock Purchase Award lapse; or (ii) evidenced
by a certificate, which certificate shall be held in such form and manner as determined by the
Board. The terms and conditions of Stock Purchase Award Agreements may change from time to time,
and the terms and conditions of separate Stock Purchase Award Agreements need not be identical;
provided, however, that each Stock Purchase Award Agreement shall include (through incorporation of
the provisions hereof by reference in the agreement or otherwise) the substance of each of the
following provisions:

          (i) Purchase Price. At the time of the grant of a Stock Purchase Award, the Board will
determine the price to be paid by the Participant for each share subject to the Stock Purchase
Award. To the extent required by applicable law, the price to be paid by the Participant for each
share of the Stock Purchase Award will not be less than the par value of a share of Common Stock.

          (ii) Consideration. At the time of the grant of a Stock Purchase Award, the Board will
determine the consideration permissible for the payment of the purchase price of the Stock Purchase
Award. The purchase price of Common Stock acquired pursuant to the Stock Purchase Award shall be
paid either: (i) in cash or by check at the time of purchase, (ii) at the discretion of the Board,
according to a deferred payment or other similar arrangement with the Participant, (iii) by past or
future services rendered to the Company or an Affiliate, or (iv) in any other form of legal
consideration that may be acceptable to the Board in its sole discretion and permissible under
applicable law.

15.

 

          (iii) Vesting. Shares of Common Stock acquired under a Stock Purchase Award may be subject to
a share repurchase right or option in favor of the Company in accordance with a vesting schedule to
be determined by the Board.

          (iv) Termination of Participant’s Continuous Service. In the event that a Participant’s
Continuous Service terminates, the Company shall have the right, but not the obligation, to
repurchase or otherwise reacquire, any or all of the shares of Common Stock held by the Participant
that have not vested as of the date of termination under the terms of the Stock Purchase Award
Agreement. At the Board’s election, the price paid for all shares of Common Stock so repurchased
or reacquired by the Company may be at the lesser of: (i) the Fair Market Value on the relevant
date, or (ii) the Participant’s original cost for such shares. The Company shall not be required
to exercise its repurchase or reacquisition option until at least six (6) months (or such longer or
shorter period of time necessary to avoid a charge to earnings for financial accounting purposes)
have elapsed following the Participant’s purchase of the shares of stock acquired pursuant to the
Stock Purchase Award unless otherwise determined by the Board or provided in the Stock Purchase
Award Agreement.

          (v) Transferability. Rights to purchase or receive shares of Common Stock granted under a
Stock Purchase Award shall be transferable by the Participant only upon such terms and conditions
as are set forth in the Stock Purchase Award Agreement, as the Board shall determine in its sole
discretion, and so long as Common Stock awarded under the Stock Purchase Award remains subject to
the terms of the Stock Purchase Award Agreement.

     (b) Stock Bonus Awards. Each Stock Bonus Award Agreement shall be in such form and shall
contain such terms and conditions as the Board shall deem appropriate. At the Board’s election,
shares of Common Stock may be (i) held in book entry form subject to the Company’s instructions
until any restrictions relating to the Stock Bonus Award lapse; or (ii) evidenced by a certificate,
which certificate shall be held in such form and manner as determined by the Board. The terms and
conditions of Stock Bonus Award Agreements may change from time to time, and the terms and
conditions of separate Stock Bonus Award Agreements need not be identical, provided, however, that
each Stock Bonus Award Agreement shall include (through incorporation of provisions hereof by
reference in the agreement or otherwise) the substance of each of the following provisions:

          (i) Consideration. A Stock Bonus Award may be awarded in consideration for (i) past or future
services rendered to the Company or an Affiliate, or (ii) any other form of legal consideration
that may be acceptable to the Board in its sole discretion and permissible under applicable law.

          (ii) Vesting. Shares of Common Stock awarded under the Stock Bonus Award Agreement may be
subject to forfeiture to the Company in accordance with a vesting schedule to be determined by the
Board.

          (iii) Termination of Participant’s Continuous Service. In the event a Participant’s
Continuous Service terminates, the Company may receive via a forfeiture condition, any or all of
the shares of Common Stock held by the Participant which have not

16.

 

vested as of the date of termination of Continuous Service under the terms of the Stock Bonus
Award Agreement.

          (iv) Transferability. Rights to acquire shares of Common Stock under the Stock Bonus Award
Agreement shall be transferable by the Participant only upon such terms and conditions as are set
forth in the Stock Bonus Award Agreement, as the Board shall determine in its sole discretion, so
long as Common Stock awarded under the Stock Bonus Award Agreement remains subject to the terms of
the Stock Bonus Award Agreement.

     (c) Stock Unit Awards. Each Stock Unit Award Agreement shall be in such form and shall
contain such terms and conditions as the Board shall deem appropriate. The terms and conditions of
Stock Unit Award Agreements may change from time to time, and the terms and conditions of separate
Stock Unit Award Agreements need not be identical, provided, however, that each Stock Unit Award
Agreement shall include (through incorporation of the provisions hereof by reference in the
agreement or otherwise) the substance of each of the following provisions:

          (i) Consideration. At the time of grant of a Stock Unit Award, the Board will determine the
consideration, if any, to be paid by the Participant upon delivery of each share of Common Stock
subject to the Stock Unit Award. The consideration to be paid (if any) by the Participant for each
share of Common Stock subject to a Stock Unit Award may be paid in any form of legal consideration
that may be acceptable to the Board in its sole discretion and permissible under applicable law.

          (ii) Vesting. At the time of the grant of a Stock Unit Award, the Board may impose such
restrictions or conditions to the vesting of the Stock Unit Award as it, in its sole discretion,
deems appropriate.

          (iii) Payment. A Stock Unit Award may be settled by the delivery of shares of Common Stock,
their cash equivalent, any combination thereof or in any other form of consideration, as determined
by the Board and contained in the Stock Unit Award Agreement.

          (iv) Additional Restrictions. At the time of the grant of a Stock Unit Award, the Board, as
it deems appropriate, may impose such restrictions or conditions that delay the delivery of the
shares of Common Stock (or their cash equivalent) subject to a Stock Unit Award after the vesting
of such Stock Unit Award.

          (v) Dividend Equivalents. Dividend equivalents may be credited in respect of shares of Common
Stock covered by a Stock Unit Award, as determined by the Board and contained in the Stock Unit
Award Agreement. At the sole discretion of the Board, such dividend equivalents may be converted
into additional shares of Common Stock covered by the Stock Unit Award in such manner as determined
by the Board. Any additional shares covered by the Stock Unit Award credited by reason of such
dividend equivalents will be subject to all the terms and conditions of the underlying Stock Unit
Award Agreement to which they relate.

          (vi) Termination of Participant’s Continuous Service. Except as otherwise provided in the
applicable Stock Unit Award Agreement, such portion of the Stock Unit Award that has not vested
will be forfeited upon the Participant’s termination of Continuous Service.

17.

 

     (d) Stock Appreciation Rights. Each Stock Appreciation Right Agreement shall be in such form
and shall contain such terms and conditions as the Board shall deem appropriate. The terms and
conditions of Stock Appreciation Right Agreements may change from time to time, and the terms and
conditions of separate Stock Appreciation Right Agreements need not be identical; provided,
however, that each Stock Appreciation Right Agreement shall include (through incorporation of the
provisions hereof by reference in the agreement or otherwise) the substance of each of the
following provisions:

          (i) Strike Price and Calculation of Appreciation. Each Stock Appreciation Right will be
denominated in shares of Common Stock equivalents. The appreciation distribution payable on the
exercise of a Stock Appreciation Right will be not greater than an amount equal to the excess of
(i) the aggregate Fair Market Value (on the date of the exercise of the Stock Appreciation Right)
of a number of shares of Common Stock equal to the number of share of Common Stock equivalents in
which the Participant is vested under such Stock Appreciation Right, and with respect to which the
Participant is exercising the Stock Appreciation Right on such date, over (ii) an amount (the
strike price) that will be determined by the Board at the time of grant of the Stock Appreciation
Right.

          (ii) Vesting. At the time of the grant of a Stock Appreciation Right, the Board may impose
such restrictions or conditions to the vesting of such Stock Appreciation Right as it, in its sole
discretion, deems appropriate.

          (iii) Exercise. To exercise any outstanding Stock Appreciation Right, the Participant must
provide written notice of exercise to the Company in compliance with the provisions of the Stock
Appreciation Right Agreement evidencing such Stock Appreciation Right.

          (iv) Payment. The appreciation distribution in respect to a Stock Appreciation Right may be
paid in Common Stock, in cash, in any combination of the two or in any other form of consideration,
as determined by the Board and contained in the Stock Appreciation Right Agreement evidencing such
Stock Appreciation Right.

          (v) Termination of Continuous Service. In the event that a Participant’s Continuous Service
terminates, the Participant may exercise his or her Stock Appreciation Right (to the extent that
the Participant was entitled to exercise such Stock Appreciation Right as of the date of
termination) but only within such period of time ending on the earlier of (i) the date three (3)
months following the termination of the Participant’s Continuous Service (or such longer or shorter
period specified in the Stock Appreciation Right Agreement), or (ii) the expiration of the term of
the Stock Appreciation Right as set forth in the Stock Appreciation Right Agreement. If, after
termination, the Participant does not exercise his or her Stock Appreciation Right within the time
specified herein or in the Stock Appreciation Right Agreement (as applicable), the Stock
Appreciation Right shall terminate.

     (e) Performance Stock Awards. A Performance Stock Award is any Stock Award that may be
granted, may vest, or may be exercised based upon service conditions, upon the attainment during a
Performance Period of certain Performance Goals, or both. The length of any Performance Period,
the Performance Goals to be achieved during the Performance Period,

18.

 

and the measure of whether and to what degree such Performance Goals have been attained shall
be conclusively determined by the Board in its sole discretion. The maximum benefit to be received
by any individual in any calendar year attributable to Performance Stock Awards shall not exceed
the value of two hundred thousand (200,000) shares of Common Stock.

     (f) Other Stock Awards. Other forms of Stock Awards valued in whole or in part by reference
to, or otherwise based on, Common Stock may be granted either alone or in addition to Stock Awards
provided for under Section 6 and the preceding provisions of this Section 7. Subject to the
provisions of the Plan, the Board shall have sole and complete authority to determine the persons
to whom and the time or times at which such Other Stock Awards will be granted, the number of
shares of Common Stock (or the cash equivalent thereof) to be granted pursuant to such Other Stock
Awards and all other terms and conditions of such Other Stock Awards.

8. Covenants of the Company.

     (a) Availability of Shares. During the terms of the Stock Awards, the Company shall keep
available at all times the number of shares of Common Stock required to satisfy such Stock Awards.

     (b) Securities Law Compliance. The Company shall seek to obtain from each regulatory
commission or agency having jurisdiction over the Plan such authority as may be required to grant
Stock Awards and to issue and sell shares of Common Stock upon exercise of the Stock Awards;
provided, however, that this undertaking shall not require the Company to register under the
Securities Act the Plan, any Stock Award or any Common Stock issued or issuable pursuant to any
such Stock Award. If, after reasonable efforts, the Company is unable to obtain from any such
regulatory commission or agency the authority that counsel for the Company deems necessary for the
lawful issuance and sale of Common Stock under the Plan, the Company shall be relieved from any
liability for failure to issue and sell Common Stock upon exercise of such Stock Awards unless and
until such authority is obtained.

9. Miscellaneous.

     (a) Use of Proceeds. Proceeds from the sale of shares of Common Stock pursuant to Stock
Awards shall constitute general funds of the Company.

     (b) Stockholder Rights. No Participant shall be deemed to be the holder of, or to have any of
the rights of a holder with respect to, any shares of Common Stock subject to such Stock Award
unless and until such Participant has satisfied all requirements for exercise of the Stock Award
pursuant to its terms.

     (c) No Employment or Other Service Rights. Nothing in the Plan, any Stock Award Agreement or
other instrument executed thereunder or any Stock Award granted pursuant thereto shall confer upon
any Participant any right to continue to serve the Company or an Affiliate in the capacity in
effect at the time the Stock Award was granted or shall affect the right of the Company or an
Affiliate to terminate (i) the employment of an Employee with or without notice and with or without
cause, (ii) the service of a Consultant pursuant to the terms of such Consultant’s agreement with
the Company or an Affiliate, or (iii) the service of a Director

19.

 

pursuant to the Bylaws of the Company or an Affiliate, and any applicable provisions of the
corporate law of the state in which the Company or the Affiliate is incorporated, as the case may
be.

     (d) Incentive Stock Option $100,000 Limitation. To the extent that the aggregate Fair Market
Value (determined at the time of grant) of Common Stock with respect to which Incentive Stock
Options are exercisable for the first time by any Optionholder during any calendar year (under all
plans of the Company and any Affiliates) exceeds one hundred thousand dollars ($100,000), the
Options or portions thereof that exceed such limit (according to the order in which they were
granted) shall be treated as Nonstatutory Stock Options, notwithstanding any contrary provision of
the applicable Option Agreement(s).

     (e) Investment Assurances. The Company may require a Participant, as a condition of
exercising or acquiring Common Stock under any Stock Award, (i) to give written assurances
satisfactory to the Company as to the Participant’s knowledge and experience in financial and
business matters and/or to employ a purchaser representative reasonably satisfactory to the Company
who is knowledgeable and experienced in financial and business matters and that he or she is
capable of evaluating, alone or together with the purchaser representative, the merits and risks of
exercising the Stock Award; and (ii) to give written assurances satisfactory to the Company stating
that the Participant is acquiring Common Stock subject to the Stock Award for the Participant’s own
account and not with any present intention of selling or otherwise distributing the Common Stock.
The foregoing requirements, and any assurances given pursuant to such requirements, shall be
inoperative if (i) the issuance of the shares upon the exercise or acquisition of Common Stock
under the Stock Award has been registered under a then currently effective registration statement
under the Securities Act, or (ii) as to any particular requirement, a determination is made by
counsel for the Company that such requirement need not be met in the circumstances under the then
applicable securities laws. The Company may, upon advice of counsel to the Company, place legends
on stock certificates issued under the Plan as such counsel deems necessary or appropriate in order
to comply with applicable securities laws, including, but not limited to, legends restricting the
transfer of the Common Stock.

     (f) Withholding Obligations. To the extent provided by the terms of a Stock Award Agreement,
the Company may, in its sole discretion, satisfy any federal, state or local tax withholding
obligation relating to a Stock Award by any of the following means (in addition to the Company’s
right to withhold from any compensation paid to the Participant by the Company) or by a combination
of such means: (i) causing the Participant to tender a cash payment; (ii) withholding shares of
Common Stock from the shares of Common Stock issued or otherwise issuable to the Participant in
connection with the Stock Award; provided, however, that no shares of Common Stock are withheld
with a value exceeding the minimum amount of tax required to be withheld by law (or such lower
amount as may be necessary to avoid variable award accounting); or (iii) by such other method as
may be set forth in the Stock Award Agreement.

     (g) Electronic Delivery. Any reference herein to a “written” agreement or document shall
include any agreement or document delivered electronically or posted on the Company’s intranet.

20.

 

10. Adjustments upon Changes in Common Stock; Corporate Transactions.

     (a) Capitalization Adjustments. If any change is made in, or other events occur with respect
to, the Common Stock subject to the Plan or subject to any Stock Award after the effective date of
the Plan set forth in Section 13 without the receipt of consideration by the Company (through
merger, consolidation, reorganization, recapitalization, reincorporation, stock dividend, dividend
in property other than cash, stock split, liquidating dividend, combination of shares, exchange of
shares, change in corporate structure or other transaction not involving the receipt of
consideration by the Company (each a “Capitalization Adjustment”)), the Board shall appropriately
adjust: (i) the class(es) and maximum number of securities subject to the Plan pursuant to Section
4(a), (ii) the class(es) and number of securities subject to each outstanding stock award under the
Prior Plan that are added from time to time to the share reserve under the Plan pursuant to Section
4(a), (iii) the class(es) and maximum number of securities that may be issued pursuant to the
exercise of Incentive Stock Options pursuant to Section 4(b), (iv) the class(es) and maximum number
of securities that may be awarded to any person pursuant to Sections 5(c) and 7(e), and (v) the
class(es) and number of securities and price per share of stock subject to outstanding Stock
Awards. The Board shall make such adjustments, and its determination shall be final, binding and
conclusive. (Notwithstanding the foregoing, the conversion of any convertible securities of the
Company shall not be treated as a transaction “without receipt of consideration” by the Company.)

     (b) Dissolution or Liquidation. In the event of a dissolution or liquidation of the Company,
all outstanding Stock Awards (other than Stock Awards consisting of vested and outstanding shares
of Common Stock not subject to the Company’s right of repurchase) shall terminate immediately prior
to the completion of such dissolution or liquidation, and the shares of Common Stock subject to the
Company’s repurchase option may be repurchased by the Company notwithstanding the fact that the
holder of such Stock Award is providing Continuous Service, provided, however, that the Board may,
in its sole discretion, cause some or all Stock Awards to become fully vested, exercisable and/or
no longer subject to repurchase or forfeiture (to the extent such Stock Awards have not previously
expired or terminated) before the dissolution or liquidation is completed but contingent on its
completion.

     (c) Corporate Transaction. The following provisions shall apply to Stock Awards in the event
of a Corporate Transaction unless otherwise provided in a written agreement between the Company or
any Affiliate and the holder of the Stock Award:

          (i) Stock Awards May Be Assumed. In the event of a Corporate Transaction, any surviving
corporation or acquiring corporation (or the surviving or acquiring corporation’s parent company)
may assume or continue any or all Stock Awards outstanding under the Plan or may substitute similar
stock awards for Stock Awards outstanding under the Plan (including but not limited to, awards to
acquire the same consideration paid to the stockholders of the Company pursuant to the Corporate
Transaction), and any reacquisition or repurchase rights held by the Company in respect of Common
Stock issued pursuant to Stock Awards may be assigned by the Company to the successor of the
Company (or the successor’s parent company, if any), in connection with such Corporate Transaction.
A surviving corporation or acquiring corporation may choose to assume or continue only a portion
of a Stock Award or substitute a similar stock award for only a portion of a Stock Award. The
terms of any

21.

 

assumption, continuation or substitution shall be set by the Board in accordance with the
provisions of Section 3(b).

          (ii) Stock Awards Held by Current Participants. In the event of a Corporate Transaction in
which the surviving corporation or acquiring corporation (or its parent company) does not assume or
continue such outstanding Stock Awards or substitute similar stock awards for such outstanding
Stock Awards, then with respect to Stock Awards that have not been assumed, continued or
substituted and that are held by Participants whose Continuous Service has not terminated prior to
the effective time of the Corporate Transaction (referred to as the “Current Participants”), the
vesting of such Stock Awards (and, if applicable, the time at which such Stock Awards may be
exercised) shall (contingent upon the effectiveness of the Corporate Transaction) be accelerated in
full to a date prior to the effective time of such Corporate Transaction as the Board shall
determine (or, if the Board shall not determine such a date, to the date that is five (5) days
prior to the effective time of the Corporate Transaction), and such Stock Awards shall terminate if
not exercised (if applicable) at or prior to the effective time of the Corporate Transaction, and
any reacquisition or repurchase rights held by the Company with respect to such Stock Awards shall
lapse (contingent upon the effectiveness of the Corporate Transaction). No vested Stock Unit Award
shall terminate pursuant to this Section 10(c)(ii) without being settled by delivery of shares of
Common Stock, their cash equivalent, any combination thereof, or in any other form of
consideration, as determined by the Board, prior to the effective time of the Corporate
Transaction.

          (iii) Stock Awards Held by Former Participants. In the event of a Corporate Transaction in
which the surviving corporation or acquiring corporation (or its parent company) does not assume or
continue such outstanding Stock Awards or substitute similar stock awards for such outstanding
Stock Awards, then with respect to Stock Awards that have not been assumed, continued or
substituted and that are held by persons other than Current Participants, the vesting of such Stock
Awards (and, if applicable, the time at which such Stock Award may be exercised) shall not be
accelerated and such Stock Awards (other than a Stock Award consisting of vested and outstanding
shares of Common Stock not subject to the Company’s right of repurchase) shall terminate if not
exercised (if applicable) prior to the effective time of the Corporate Transaction; provided,
however, that any reacquisition or repurchase rights held by the Company with respect to such Stock
Awards shall not terminate and may continue to be exercised notwithstanding the Corporate
Transaction. No vested Stock Unit Award shall terminate pursuant to this Section 10(c)(iii)
without being settled by delivery of shares of Common Stock, their cash equivalent, any combination
thereof, or in any other form of consideration, as determined by the Board, prior to the effective
time of the Corporate Transaction.

          (iv) Payment for Stock Awards in Lieu of Exercise. Notwithstanding the foregoing, in the
event a Stock Award will terminate if not exercised prior to the effective time of a Corporate
Transaction, the Board may provide, in its sole discretion, that the holder of such Stock Award may
not exercise such Stock Award but will receive a payment, in such form as may be determined by the
Board, equal in value to the excess, if any, of (i) the value of the property the holder of the
Stock Award would have received upon the exercise of the Stock Award, over (ii) any exercise price
payable by such holder in connection with such exercise.

22.

 

     (d) Change in Control. A Stock Award may be subject to additional acceleration of vesting and
exercisability upon or after a Change in Control as may be provided in the Stock Award Agreement
for such Stock Award or as may be provided in any other written agreement between the Company or
any Affiliate and the Participant. A Stock Award may vest as to all or any portion of the shares
subject to the Stock Award (i) immediately upon the occurrence of a Change in Control, whether or
not such Stock Award is assumed, continued, or substituted by a surviving or acquiring entity in
the Change in Control, or (ii) in the event a Participant’s Continuous Service is terminated,
actually or constructively, within a designated period following the occurrence of a Change in
Control. In the absence of such provisions, no such acceleration shall occur.

11. Amendment of the Plan and Stock Awards.

     (a) Amendment of Plan. Subject to the limitations, if any, of applicable law, the Board at
any time, and from time to time, may amend the Plan. However, except as provided in Section 10(a)
relating to Capitalization Adjustments, no amendment shall be effective unless approved by the
stockholders of the Company to the extent stockholder approval is necessary to satisfy applicable
law.

     (b) Stockholder Approval. The Board, in its sole discretion, may submit any other amendment
to the Plan for stockholder approval, including, but not limited to, amendments to the Plan
intended to satisfy the requirements of Section 162(m) of the Code and the regulations thereunder
regarding the exclusion of performance-based compensation from the limit on corporate deductibility
of compensation paid to Covered Employees.

     (c) Contemplated Amendments. It is expressly contemplated that the Board may amend the Plan
in any respect the Board deems necessary or advisable to provide eligible Employees with the
maximum benefits provided or to be provided under the provisions of the Code and the regulations
promulgated thereunder relating to Incentive Stock Options and/or to bring the Plan and/or
Incentive Stock Options granted under it into compliance therewith.

     (d) No Impairment of Rights. Rights under any Stock Award granted before amendment of the
Plan shall not be impaired by any amendment of the Plan unless (i) the Company requests the consent
of the affected Participant, and (ii) such Participant consents in writing.

     (e) Amendment of Stock Awards. The Board, at any time and from time to time, may amend the
terms of any one or more Stock Awards, including, but not limited to, amendments to provide terms
more favorable than previously provided in the Stock Award Agreement, subject to any specified
limits in the Plan that are not subject to Board discretion; provided, however, that the rights
under any Stock Award shall not be impaired by any such amendment unless (i) the Company requests
the consent of the affected Participant, and (ii) such Participant consents in writing.

12. Termination or Suspension of the Plan.

     (a) Plan Term. The Board may suspend or terminate the Plan at any time. Unless sooner
terminated, the Plan shall terminate on the day before the tenth (10th) anniversary of the

23.

 

earlier of (i) the date the Plan is adopted by the Board, or (ii) the date the Plan is
approved by the stockholders of the Company. No Stock Awards may be granted under the Plan while
the Plan is suspended or after it is terminated.

     (b) No Impairment of Rights. Suspension or termination of the Plan shall not impair rights
and obligations under any Stock Award granted while the Plan is in effect except with the written
consent of the affected Participant.

13. Effective Date of Plan.

     The Plan shall become effective on the IPO Date, but no Stock Award shall be exercised (or, in
the case of a Stock Purchase Award, Stock Bonus Award, Stock Unit Award, or Other Stock Award shall
be granted) unless and until the Plan has been approved by the stockholders of the Company, which
approval shall be within twelve (12) months before or after the date the Plan is adopted by the
Board.

14. Choice of Law.

     The law of the State of Delaware shall govern all questions concerning the construction,
validity and interpretation of this Plan, without regard to that state’s conflict of laws rules.

24.

 

Cardica, Inc.

2005 Equity Incentive Plan 

Option Grant Notice

Cardica, Inc. (the “Company”), pursuant to its 2005 Equity Incentive Plan (the “Plan”), hereby
grants to Optionholder an option to purchase the number of shares of the Company’s Common Stock set
forth below. This option is subject to all of the terms and conditions as set forth herein and in
the Option Agreement, the Plan, and the Notice of Exercise, all of which are attached hereto and
incorporated herein in their entirety.

	 	 	 
	Optionholder:
	 	 
	 

	 	 
	Date of Grant:
	 	 
	 

	 	 
	Vesting Commencement Date:
	 	 
	 

	 	 
	Number of Shares Subject to Option:
	 	 
	 

	 	 
	Exercise Price (Per Share):
	 	 
	 

	 	 
	Total Exercise Price:
	 	 
	 

	 	 
	Expiration Date:
	 	 
	 

	 	 

	 	 	 
	Type of Grant:

	 	 ̈ Incentive Stock Option1             ̈ Nonstatutory Stock Option
	 
	 	 
	Exercise Schedule:

	 	[Initial Grant: 1/4th of the shares vest and become exercisable one year after the Vesting Commencement
Date; the balance of the shares vest and become exercisable in a series of thirty-six (36) successive equal monthly
installments measured from the first anniversary of the Vesting Commencement Date.]
	 
	 	 
	 

	 	[Refresher Grant: The shares vest and become exercisable in a series of
forty-eight (48) successive equal monthly installments over the four (4)-year
period measured from the Vesting Commencement Date.]
	 
	 	 
	Payment:

	 	By one or a combination of the following items (described in the Option Agreement):
	 

	 	þ    By cash or check
	 

	 	þ    Pursuant to a Regulation T Program if the Shares are publicly traded
	 

	 	þ    By delivery of already-owned shares if the Shares are publicly traded
	 

	 	þ    By net exercise

Additional Terms/Acknowledgements: The undersigned Optionholder acknowledges receipt of, and
understands and agrees to, this Option Grant Notice, the Option Agreement, and the Plan.
Optionholder further acknowledges that as of the Date of Grant, this Option Grant Notice, the
Option Agreement, and the Plan set forth the entire understanding between Optionholder and the
Company regarding the acquisition of stock in the Company and supersede all prior oral and written
agreements on that subject with the exception of (i) options previously granted and delivered to
Optionholder under the Plan, and (ii) the following agreements only:

	 	 	 
	Other Agreements:
	 	 
	 

	 	 
	 
	 	 
	 

	 	 

	 	 	 	 	 	 	 	 	 
	Cardica, Inc.	 	 	 	Optionholder:
	 
	 	 	 	 	 	 	 	 
	By:
	 	 	 	 	 	 	 	 
	 

	 	 
	 	 	 	 
	 	 
	 

	 	Signature
	 	 	 	Signature	 	 
	 
	 	 	 	 	 	 	 	 
	Title:

	 	 	 	 	 	Date:	 	 
	 

	 	 
	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	Date:
	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	 

Attachments: Option Agreement, 2005 Equity Incentive Plan, and Notice of Exercise

 

			
	1	 	If this is an Incentive Stock Option, it (plus
other outstanding Incentive Stock Options) cannot be first exercisable
for more than $100,000 in value (measured by exercise price) in any calendar
year. Any excess over $100,000 is a Nonstatutory Stock Option.

 

 

Cardica, Inc.

2005 Equity Incentive Plan

Option Agreement

(Incentive Stock Option or Nonstatutory Stock Option)

     Pursuant to your Option Grant Notice (“Grant Notice”) and this Option Agreement, Cardica, Inc.
(the “Company”) has granted you an option under its 2005 Equity Incentive Plan (the “Plan”) to
purchase the number of shares of the Company’s Common Stock indicated in your Grant Notice at the
exercise price indicated in your Grant Notice. Defined terms not explicitly defined in this Option
Agreement but defined in the Plan shall have the same definitions as in the Plan.

     The details of your option are as follows:

     1. Vesting. Subject to the limitations contained herein, your option will vest as
provided in your Grant Notice, provided that vesting will cease upon the termination of your
Continuous Service.

     2. Number of Shares and Exercise Price. The number of shares of Common Stock subject
to your option and your exercise price per share referenced in your Grant Notice may be adjusted
from time to time for Capitalization Adjustments.

     3. Exercise Restriction for Non-Exempt Employees. In the event that you are an
Employee eligible for overtime compensation under the Fair Labor Standards Act of 1938, as amended
(i.e., a “Non-Exempt Employee”), you may not exercise your option until you have completed at least
six (6) months of Continuous Service measured from the Date of Grant specified in your Grant
Notice, notwithstanding any other provision of your option.

     4. Method of Payment. Payment of the exercise price is due in full upon exercise of
all or any part of your option. You may elect to make payment of the exercise price in cash or by
check or in any other manner permitted by your Grant Notice, which may include one or more of the
following:

          a. Provided that at the time of exercise the Common Stock is publicly traded and quoted
regularly in The Wall Street Journal, pursuant to a program developed under Regulation T as
promulgated by the Federal Reserve Board that, prior to the issuance of Common Stock, results in
either the receipt of cash (or check) by the Company or the receipt of irrevocable instructions to
pay the aggregate exercise price to the Company from the sales proceeds.

          b. Provided that at the time of exercise the Common Stock is publicly traded and quoted
regularly in The Wall Street Journal, by delivery to the Company (either by actual delivery or
attestation) of already-owned shares of Common Stock either that you have held for the period
required to avoid a charge to the Company’s reported earnings (generally six (6) months) or that
you did not acquire, directly or indirectly from the Company, that are owned free

1.

 

and clear of any liens, claims, encumbrances or security interests, and that are valued at
Fair Market Value on the date of exercise. “Delivery” for these purposes, in the sole discretion
of the Company at the time you exercise your option, shall include delivery to the Company of your
attestation of ownership of such shares of Common Stock in a form approved by the Company.
Notwithstanding the foregoing, you may not exercise your option by tender to the Company of Common
Stock to the extent such tender would violate the provisions of any law, regulation or agreement
restricting the redemption of the Company’s stock.

          c. By a “net exercise” arrangement pursuant to which the Company will reduce the number of
shares of Common Stock issued upon exercise of your option by the largest whole number of shares
with a Fair Market Value that does not exceed the aggregate exercise price; provided, however, the
Company shall accept a cash or other payment from you to the extent of any remaining balance of the
aggregate exercise price not satisfied by such reduction in the number of whole shares to be
issued; provided, however, shares of Common Stock will no longer be outstanding under your option
and will not be exercisable thereafter to the extent that (i) shares are used to pay the exercise
price pursuant to the “net exercise,” (ii) shares are delivered to you as a result of such
exercise, and (iii) shares are withheld to satisfy tax withholding obligations.

     5. Whole Shares. You may exercise your option only for whole shares of Common Stock.

     6. Securities Law Compliance. Notwithstanding anything to the contrary contained
herein, you may not exercise your option unless the shares of Common Stock issuable upon such
exercise are then registered under the Securities Act or, if such shares of Common Stock are not
then so registered, the Company has determined that such exercise and issuance would be exempt from
the registration requirements of the Securities Act. The exercise of your option also must comply
with other applicable laws and regulations governing your option, and you may not exercise your
option if the Company determines that such exercise would not be in material compliance with such
laws and regulations.

     7. Term. You may not exercise your option before the commencement or after the
expiration of its term. The term of your option commences on the Date of Grant and expires upon
the earliest of the following:

          a. three (3) months after the termination of your Continuous Service for any reason other than
your Disability or death; provided, however, that (i) if during any part of such three (3) month
period your option is not exercisable solely because of the condition set forth in Section 6, your
option shall not expire until the earlier of the Expiration Date or until it shall have been
exercisable for an aggregate period of three (3) months after the termination of your Continuous
Service, and (ii) if (x) you are a Non-Exempt Employee, (y) you terminate your Continuous Service
within six (6) months after the Date of Grant specified in your Grant Notice, and (z) you have
vested in a portion of your option at the time of your termination of Continuous Service, your
option shall not expire until the earlier of (A) the later of the date that is seven (7) months
after the Date of Grant specified in your Grant Notice or the date that is three (3) months after
the termination of your Continuous Service or (B) the Expiration Date;

2.

 

          b. twelve (12) months after the termination of your Continuous Service due to your Disability;

          c. eighteen (18) months after your death if you die either during your Continuous Service or
within three (3) months after your Continuous Service terminates;

          d. the Expiration Date indicated in your Grant Notice; or

          e. the day before the seventh (7th) anniversary of the Date of Grant.

     If your option is an Incentive Stock Option, note that to obtain the federal income tax
advantages associated with an Incentive Stock Option, the Code requires that at all times beginning
on the date of grant of your option and ending on the day three (3) months before the date of your
option’s exercise, you must be an employee of the Company or an Affiliate, except in the event of
your death or Disability. The Company has provided for extended exercisability of your option
under certain circumstances for your benefit but cannot guarantee that your option will necessarily
be treated as an Incentive Stock Option if you continue to provide services to the Company or an
Affiliate as a Consultant or Director after your employment terminates or if you otherwise exercise
your option more than three (3) months after the date your employment with the Company or an
Affiliate terminates.

     8. Exercise.

          a. You may exercise the vested portion of your option (and the unvested portion of your option
if your Grant Notice so permits) during its term by delivering a Notice of Exercise (in a form
designated by the Company) together with the exercise price to the Secretary of the Company, or to
such other person as the Company may designate, during regular business hours, together with such
additional documents as the Company may then require.

          b. By exercising your option you agree that, as a condition to any exercise of your option,
the Company may require you to enter into an arrangement providing for the payment by you to the
Company of any tax withholding obligation of the Company arising by reason of (i) the exercise of
your option, (ii) the lapse of any substantial risk of forfeiture to which the shares of Common
Stock are subject at the time of exercise, or (iii) the disposition of shares of Common Stock
acquired upon such exercise.

          c. If your option is an Incentive Stock Option, by exercising your option you agree that you
will notify the Company in writing within fifteen (15) days after the date of any disposition of
any of the shares of the Common Stock issued upon exercise of your option that occurs within two
(2) years after the date of your option grant or within one (1) year after such shares of Common
Stock are transferred upon exercise of your option.

     9. Transferability. Your option is not transferable, except by will or by the laws
of descent and distribution, and is exercisable during your life only by you. Notwithstanding the
foregoing, by delivering written notice to the Company, in a form satisfactory to the Company, you
may designate a third party who, in the event of your death, shall thereafter be entitled to
exercise your option. In addition, you may transfer your option to a trust if you are considered
to be the sole beneficial owner (determined under Section 671 of the Code and applicable state law)

3.

 

while the option is held in the trust, provided that you and the trustee enter into transfer
and other agreements required by the Company.

     10. Option not a Service Contract. Your option is not an employment or service
contract, and nothing in your option shall be deemed to create in any way whatsoever any obligation
on your part to continue in the employ of the Company or an Affiliate, or of the Company or an
Affiliate to continue your employment. In addition, nothing in your option shall obligate the
Company or an Affiliate, their respective stockholders, Boards of Directors, Officers or Employees
to continue any relationship that you might have as a Director or Consultant for the Company or an
Affiliate.

     11. Withholding Obligations.

          a. At the time you exercise your option, in whole or in part, or at any time thereafter as
requested by the Company, you hereby authorize withholding from payroll and any other amounts
payable to you, and otherwise agree to make adequate provision for (including by means of a
“cashless exercise” pursuant to a program developed under Regulation T as promulgated by the
Federal Reserve Board to the extent permitted by the Company), any sums required to satisfy the
federal, state, local and foreign tax withholding obligations of the Company or an Affiliate, if
any, which arise in connection with the exercise of your option.

          b. Upon your request and subject to approval by the Company, in its sole discretion, and
compliance with any applicable legal conditions or restrictions, the Company may withhold from
fully vested shares of Common Stock otherwise issuable to you upon the exercise of your option a
number of whole shares of Common Stock having a Fair Market Value, determined by the Company as of
the date of exercise, not in excess of the minimum amount of tax required to be withheld by law (or
such lower amount as may be necessary to avoid variable award accounting). If the date of
determination of any tax withholding obligation is deferred to a date later than the date of
exercise of your option, share withholding pursuant to the preceding sentence shall not be
permitted unless you make a proper and timely election under Section 83(b) of the Code, covering
the aggregate number of shares of Common Stock acquired upon such exercise with respect to which
such determination is otherwise deferred, to accelerate the determination of such tax withholding
obligation to the date of exercise of your option. Notwithstanding the filing of such election,
shares of Common Stock shall be withheld solely from fully vested shares of Common Stock determined
as of the date of exercise of your option that are otherwise issuable to you upon such exercise.
Any adverse consequences to you arising in connection with such share withholding procedure shall
be your sole responsibility.

          c. You may not exercise your option unless the tax withholding obligations of the Company
and/or any Affiliate are satisfied. Accordingly, you may not be able to exercise your option when
desired even though your option is vested, and the Company shall have no obligation to issue a
certificate for such shares of Common Stock or release such shares of Common Stock from any escrow
provided for herein unless such obligations are satisfied.

     12. Notices. Any notices provided for in your option or the Plan shall be given in
writing and shall be deemed effectively given upon receipt or, in the case of notices delivered by

4.

 

mail by the Company to you, five (5) days after deposit in the United States mail, postage
prepaid, addressed to you at the last address you provided to the Company.

     13. Governing Plan Document. Your option is subject to all the provisions of the
Plan, the provisions of which are hereby made a part of your option, and is further subject to all
interpretations, amendments, rules and regulations, which may from time to time be promulgated and
adopted pursuant to the Plan. In the event of any conflict between the provisions of your option
and those of the Plan, the provisions of the Plan shall control.

5.

 

Notice Of Exercise

	 	 	 
	Cardica, Inc.
	 	 
	900 Saginaw Drive
	 	 
	Redwood City, CA 94063

	 	Date of Exercise:                                         

Ladies and Gentlemen:

     This constitutes notice under my stock option that I elect to purchase the number of shares
for the price set forth below.

	 	 	 	 	 	 	 	 	 
	Type of option (check one):	 	 ̈ Incentive	 	 	 ̈ Nonstatutory	 
	Stock option dated:
	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 
	Number of shares as
to which option is
exercised:
	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 
	Certificates to be
issued in name of:
	 	 	 	 	 	 	 	 
	Total exercise price:
	 	$	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 
	Cash payment delivered
herewith:
	 	$	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 
	Value of                     shares of
Cardica, Inc. Common Stock
delivered
herewith2:
	 	$	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 

     By this exercise, I agree (i) to provide such additional documents as you may require pursuant
to the terms of the Cardica, Inc. 2005 Equity Incentive Plan, (ii) to provide for the payment by me
to you (in the manner designated by you) of your withholding obligation, if any, relating to the
exercise of this option, and (iii) if this exercise relates to an incentive stock option, to notify
you in writing within fifteen (15) days after the date of any disposition of any of the shares of
Common Stock issued upon exercise of this option that occurs within two (2) years after the date of
grant of this option or within one (1) year after such shares of Common Stock are issued upon
exercise of this option.

	 	 	 	 	 
	 

	 	Very truly yours,	 	 
	 

	 	 	 	 
	 

	 	 	 	 
	 

	 	 	 	 

 

			
	2	 	Shares must meet the public trading
requirements set forth in the option. Shares must be valued in accordance with
the terms of the option being exercised, must have been owned for the minimum
period required in the option, and must be owned free and clear of any liens,
claims, encumbrances or security interests. Certificates must be endorsed or
accompanied by an executed assignment separate from certificate.

1.exv10w13

 

[*] = CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY WITH THE
COMMISSION. WITH RESPECT TO ATTACHMENT A, SIX PAGES OF INFORMATION HAVE BEEN OMITTED AND FILED
SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE
OMITTED PORTIONS.

EXHIBIT 10.13

LICENSE, DEVELOPMENT AND COMMERCIALIZATION AGREEMENT

 

 

[*] = CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY WITH THE
COMMISSION. WITH RESPECT TO ATTACHMENT A, SIX PAGES OF INFORMATION HAVE BEEN OMITTED AND FILED
SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE
OMITTED PORTIONS.

9 December 2005

LICENSE, DEVELOPMENT AND COMMERCIALIZATION AGREEMENT

     THIS AGREEMENT (“Agreement”), made this 9th day of December, 2005 (“Effective Date”), is
entered into by and between Cook Incorporated, an Indiana corporation having a place of business at
750 Daniels Way, Bloomington, Indiana 47404, USA, and its Affiliates (“Cook”), and Cardica, Inc., a
Delaware corporation having a place of business at 900 Saginaw Drive, Redwood City, CA 94063, and
its Affiliates (“Cardica”).

RECITALS

	A.	 	Cardica is developing a medical device known as the X-Port for use in femoral access closure
procedures, among other applications.

	B.	 	Cook in engaged in the business of developing, manufacturing and selling medical devices.

	C.	 	Cook is amenable to funding certain development work to be performed by Cardica in exchange
for receiving a license under the terms and conditions set forth herein to continue to develop
and to commercialize the X-Port device worldwide for femoral access closure procedures, as
further described in this Agreement.

The parties agree as follows:

ARTICLE I

DEFINITIONS

In addition to the terms defined elsewhere in this Agreement, the following terms have the meanings
set forth below:

	1.1	 	“Affiliates” with respect to a party means any entity, existing now or in the future,
domestic or foreign, that directly or indirectly controls, is controlled by or is under common
control with such party; provided that such entity will be considered an Affiliate only for
the time during which such control exists.

	1.2	 	“Approval” means receipt from the applicable regulatory authority in a given country or
countries to market a Product in such country or countries.

	1.3	 	“Cardica Know-How” means Information that (a) is necessary or useful for the research,
development or commercialization of Products, and (b) is Controlled by Cardica. Cardica
Know-How shall exclude Cardica Patents.

	1.4	 	“Cardica Patents” means a Patent that (a) claims the Product or any component thereof, or any
other method, apparatus, material or article of manufacture useful in the development,
manufacture, use or sale of Product, and (b) is Controlled by Cardica.

1

 

	1.5	 	“Clinical Feasibility Trial” means the initial human clinical trial conducted in Europe
on Products that is expected to include between 100 and 200 subjects.

	1.6	 	“Control” means, with respect to any Information or intellectual property right, the right
and power of the relevant party to grant the right to make, use, sell, offer to sell, and
import, or to grant a license or a sublicense to, such Information or intellectual property
right as provided for herein and without violating the terms of any agreement or other
arrangement with any Third Party.

	1.7	 	“Cook Know-How” means Information that (a) is necessary or useful for the research,
development or commercialization of Products, and (b) is Controlled by Cook. Cook Know-How
shall exclude Cook Patents.

	1.8	 	“Cook Patents” means a Patent that (a) covers the Product or any component thereof, or any
other method, apparatus, material or article of manufacture useful in the development,
manufacture, use or sale of Product, (b) claiming an invention conceived by employees or
agents or independent contractors of Cook that have access to the Confidential Information of
Cardica related to the Product, and (c) is Controlled by Cook.

	1.9	 	“Field” means use of the Product in any suitable medical procedure anywhere in the body.

	1.10	 	“Invention” means any article, material, process or technology, whether or not patentable,
made or conceived in the course of developing and commercializing Products pursuant to this
Agreement, in whole or in part by a party, its employees, agents, or independent contractors,
that have access to the Confidential Information of the other party .

	1.11	 	“Information” means (a) techniques and data relating to the development, manufacture, use or
sale of Products, including, but not limited to, inventions, practices, methods, knowledge,
know-how, skill, experience, test data including pre-clinical and clinical test data,
analytical and quality control data, regulatory submissions, correspondence and
communications, marketing, pricing, distribution, cost, sales, manufacturing, patent and legal
data or descriptions, and (b) compositions of matter, devices, prototypes, articles of
manufacture, assays and biological, chemical or physical materials relating to development,
manufacture, use or sale of Products.

	1.12	 	“Net Sales” means the gross revenue actually received by Cook, its Affiliates or sublicensees
from the commercial sale of the Products during a given period of time, minus, to the extent
billed to the purchaser, the costs of (i) sales, value added and/or use taxes, (ii) duties and
similar governmental assessments paid, (iii) transportation, packing, shipping, and
insurances, (iv) discounts allowed and taken (not to exceed two percent (2%) of the gross
revenue actually received), and (v) amounts allowed or credited due to rejections and/or
returns. If the Products are sold as part of a kit, then royalties due with respect to Net
Sales of Products will be determined using the formula set forth in

[*] = CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY WITH THE
COMMISSION. WITH RESPECT TO ATTACHMENT A, SIX PAGES OF INFORMATION HAVE BEEN OMITTED AND FILED
SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE
OMITTED PORTIONS.

2

 

	 	 	Sections 5.4(C) and (D). Net Sales shall be determined in accordance with generally accepted
accounting principles, consistently applied.

	1.13	 	“Other Cardica IP” shall mean any intellectual property rights that are necessary or useful
for the research, development or commercialization of Products, and Controlled by Cardica,
other than the Cardica Patents and Cardica Know-How.

	1.14	 	“Other Cook IP” shall mean shall mean any intellectual property rights that are necessary or
useful for the research, development or commercialization of Products, and developed by Cook
employees having access to the Confidential Information of Cardica related to the Product and
Controlled by Cook, other than the Cook Patents and Cook Know-How.

	1.15	 	“Patent” means (a) unexpired United States and foreign patents, including without limitation
any substitution, extension, registration, confirmation, reissue, re-examination, renewal of
such patents and (b) pending applications for such patents, including without limitation any
continuation, divisional or continuation-in-part thereof and any provisional applications.

	1.16	 	“Product” means the product designated by Cardica as of the Effective Date of this Agreement
as the X-Port device, size [*] as illustrated in Exhibit C of this Agreement, and any
improvements thereto relating to vascular access closure developed under this Agreement,
including without limitation X-Port devices in formats other than size [*], expressly
excluding any devices not relating to vascular access closure, such as any device used in the
closure of holes made in the performance of an anastomosis.

	1.17	 	“Sunk Costs” means pro-rated amounts for any work actually performed by Cardica under the
Development Plan up to the effective date of termination and supported by documentation
provided by Cardica to Cook, including [*] overhead for such work and all expenditures for
such work and non-cancelable commitments that are consistent with the original budget and
milestones set forth in the Development Plan and incurred by Cardica in performing the
Development Plan prior to Cardica’s receipt or refusal of Cook’s notice of termination.

	1.18	 	“Territory” means worldwide.

	1.19	 	“Third Party” means any person or entity other than Cardica or Cook, or their respective
Affiliates.

	1.20	 	”Unexpectedly Low Sales” means sales in three consecutive quarters of a number of Products
less than [*] of the number forecast under Section 2.4.

	1.21	 	“Valid Claim” means an unexpired claim of an issued Patent which has not been found to be
unpatentable, invalid or unenforceable by an unreversed and unappealable decision of a court
or other authority in the subject country and that has not been disclaimed or admitted to be
invalid or unenforceable through reissue, disclaimer or otherwise.

[*] = CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY WITH THE
COMMISSION. WITH RESPECT TO ATTACHMENT A, SIX PAGES OF INFORMATION HAVE BEEN OMITTED AND FILED
SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE
OMITTED PORTIONS.

3

 

ARTICLE II

DEVELOPMENT AND COMMERCIALIZATION

	2.1	 	Development Committee. Each party will appoint two (2) representatives to form a development
committee that will be responsible for making day to day decisions regarding the strategy for
the development of prototypes of Products in accordance with this Agreement (“Development
Committee”). Such decisions will be made by unanimous consent of the Development Committee.
In the event unanimous consent regarding a development issue can not be reached by the
Development Committee during any meeting of the Development Committee, then a cooling off
period of at least two (2) but no more than seven (7) calendar days will follow such meeting
after which period all of the members of the Development Committee will meet again. In the
event that the Development Committee is unable to achieve unanimous consent after the cooling
off period, a senior executive from each party will meet to resolve the issue.

	2.2	 	Prototype Product Development. The respective obligations of the parties for developing
prototypes of the Product are set forth in Attachment A to this Agreement (“Development
Plan”), which may be modified from time to time to time in accordance with Section 11.9
(Integration) of this Agreement, and which is hereby incorporated by reference. Each party
will use commercially reasonable efforts to perform its obligations under the Development
Plan. In the event a conflict arises between this Agreement and the Development Plan, the
terms of this Agreement will control.

	2.3	 	Production Product Development. After the development of a prototype of a Product that the
Development Committee considers suitable and feasible for successful commercialization
(“Feasible Prototype”), Cook will use commercially reasonable efforts to develop a production
version of the Product for sale in the Field and in the Territory, at its expense, within a
specified time period to be agreed upon by the parties. Without limiting the foregoing, Cook
will use commercially reasonable efforts to apply for a CE Mark and FDA Approval within a
reasonable period of time after the development of a Feasible Prototype. It is understood
that commercially reasonable efforts to develop a production version of the Product may be
unsuccessful, and that neither party guarantees or can guarantee that commercially reasonable
efforts to implement the Development Plan will result in a production version of the Product
or in a saleable Product.

	2.4	 	Commercialization. Cook will use commercially reasonable efforts to commercialize Products
for use in the Field in each country in the Territory in which it obtains regulatory approval,
at its expense. Without limiting the foregoing, Cook will be responsible, at its cost, for
promoting, detailing and distributing Products for use in the Field in each country in the
Territory in which it obtains regulatory approval, and will book all resulting Product sales.
Following the Approval of Product, Cook will provide to Cardica on a semi-annual basis its
good faith non-binding quarterly forecast of Product sales in the Field and in the Territory
for the following eighteen (18) month period.

[*] = CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY WITH THE
COMMISSION. WITH RESPECT TO ATTACHMENT A, SIX PAGES OF INFORMATION HAVE BEEN OMITTED AND FILED
SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE
OMITTED PORTIONS.

4

 

	2.5	 	Development Costs. Except as otherwise expressly provided in this Agreement, each party will
make its resources available that it reasonably deems necessary to fulfill its obligations
under this Agreement and shall bear its own costs incurred with respect thereto.

	2.6	 	Specifications. The Development Committee will approve Product specifications for each type
of Product being developed, which specifications may be updated from time to time.

ARTICLE III

OWNERSHIP OF INTELLECTUAL PROPERTY

	3.1	 	Ownership of Inventions. Ownership by the parties of Inventions will be determined in
accordance with the rules of inventorship and ownership under US law.

	3.2	 	Joint Inventions. With respect to Inventions jointly owned by the parties, each party will
enjoy all of the rights of an owner thereof with no duty to account to the other party
regarding any economic benefit realized and no need to seek approval from the other party for
its disclosure or use of such Invention, except with respect to exclusivity provisions
expressly stated in this Agreement. Each party’s interest in such jointly owned Inventions
and intellectual property rights therein will be included in such party’s intellectual
property rights that are either licensed to the other party or the subject of covenants made
to the other party pursuant to this Agreement.

	3.3	 	Prosecution. The parties will cooperate in good faith to decide whether to seek patent
protection for any Inventions that are owned jointly by the parties. The party solely owning
an Invention will be responsible, but not obligated, for filing and prosecuting patent
applications on such Inventions, and maintaining patents issued thereon, at such party’s sole
expense. If a party responsible for filing patent applications on Inventions solely owned by
such party decides not to proceed with the filing, prosecution or maintenance of patent
applications and patents on such Invention (without first filing a continuation or
continuation in part of any such application), such party shall notify the other party in
writing in advance of relevant deadlines, and the other party shall have the right, but not
the obligation, to assume responsibility for such activities, on behalf of the sole owner but
at the assuming party’s sole expense. The parties will meet to discuss whether or not to
pursue patent protection for Inventions jointly owned by the parties. If the parties agree to
pursue such protection for such Inventions, they shall designate one party to be responsible
for filing and prosecuting patent applications on such Inventions, and for maintaining patents
issuing thereon. Unless otherwise agreed by the parties, the parties will share equally all
expenses of pursuing and maintaining patent protection on jointly owned Inventions that they
agree to pursue under this Section 3.3. Each party will have the right to review and comment
on the other party’s correspondence with any patent office with regard to patent applications
and patents on Inventions that are necessary or useful for the development and
commercialization of Products in the Field.

[*] = CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY WITH THE
COMMISSION. WITH RESPECT TO ATTACHMENT A, SIX PAGES OF INFORMATION HAVE BEEN OMITTED AND FILED
SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE
OMITTED PORTIONS.

5

 

	3.4	 	Enforcement.

	 	A.	 	Cook has the first right to enforce patents licensed to it by Cardica against
Third Parties that make, use, offer for sale, sell, or import products that are covered
by such patents and that are competitive with Products in the Field. If Cook elects
not to undertake such enforcement, then Cardica may request and Cook may, in its sole
discretion, permit Cardica to enforce such patents against such Third Parties, such
permission not to be unreasonably withheld.

	 	B.	 	Each party will cooperate with the other party when asserting patents against
Third Parties in accordance with this Section 3.4. A party enforcing a patent against a
Third Party will give the other party notice prior to bringing any enforcement action
(including, but not limited to, injunctions or restraining orders). The other party
will have the right to participate or not participate in such enforcement, at its sole
discretion. If the other party chooses to participate, it will bear its own expenses
and/or share expenses, as the parties jointly determine to be appropriate. If the other
party chooses not to participate in an enforcement action brought in accordance with
this Section 3.4, it nonetheless agrees to be named in the enforcement action, and upon
request and at the cost of the enforcing party, will make available all relevant
information in its possession or under its control.

	 	C.	 	Any money damages obtained as a result of any enforcement action under this
Section 3.4 shall first be allocated to reimburse the parties’ respective expenses of
such enforcement, and the remainder of such proceeds, if any, shall be allocated [*]
percent ([*]) to the party controlling such suit, and [*] percent ([*]) to the other
party.

	 	D.	 	If the sales volume of the Product in a calendar year is less than $[*], Cook
may offset against any payment due under Sections 5.4 or 5.5 of this Agreement up to
[*] percent ([*]) of any monies expended by Cook in defending Products against
assertions of intellectual property rights by third parties. If the sales volume of
the Product in a calendar year is at least $[*], then Cook may offset against any
payment due under Sections 5.4 or 5.5 of this Agreement an amount that is the lesser of
(i) [*] percent ([*]) of any monies expended by Cook in defending Products against
assertions of intellectual property rights by third parties or (ii) [*] percent ([*])
of the total payment due to Cardica under Sections 5.4 and 5.5.

	3.5	 	Cardica Patent Prosecution. Cardica will use reasonable efforts to obtain patents included
in the Cardica Patents in [*]. Cardica will notify Cook of Cardica’s foreign filing decisions
with respect to each of the Cardica Patents in writing in advance of relevant deadlines, and
Cook will have the right, but not the obligation, to assume responsibility at Cook’s sole
expense for pursuing and/or maintaining foreign patent protection for any of the Cardica
Patents in any country that Cardica decides not to pursue or to abandon.

[*] = CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY WITH THE
COMMISSION. WITH RESPECT TO ATTACHMENT A, SIX PAGES OF INFORMATION HAVE BEEN OMITTED AND FILED
SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE
OMITTED PORTIONS.

6

 

ARTICLE IV

LICENSE AND COMMERCIALIZATION

	4.1	 	By Cardica. Subject to the terms and conditions of this Agreement, Cardica hereby grants to
Cook and its Affiliates an exclusive license in the Territory, bearing royalties as set forth
in this Agreement, with the right to grant sublicenses, under the Cardica Patents, Cardica
Know-How and Other Cardica IP, to make, have made, use, sell, offer for sale and import
Products for use solely in the Field and in the Territory. For clarity, Cardica grants the
foregoing exclusive license to the fullest extent possible under the Cardica Patents, Cardica
Know-How and Other Cardica IP in the Field and in the Territory with respect to Products,
retaining only rights to the extent necessary or useful for Cardica to perform its
responsibilities under the Development Plan with respect to Product in the Field and in the
Territory.

	4.2	 	Cardica Representations. Cardica represents and warrants that as of the Effective Date: (a)
Cardica has the right and power to enter into this Agreement and to grant the rights it grants
to Cook under this Agreement; (b) it has not assigned, granted a license under or otherwise
transferred or encumbered any intellectual property licensed to Cook under this Agreement in a
manner inconsistent with this Agreement, other than grants of security interests disclosed
pursuant to a letter agreement of even date herewith; (c) to its knowledge, Cook’s practice of
the license granted to Cook pursuant to this Agreement under the Cardica Know-How, Cardica
Patents and Other Cardica IP will not infringe any Patents owned or controlled by a Third
Party; (d) its performance under this Agreement is not inconsistent with any obligation owed
to a third party; and (e) its employees and/or agents assigned to perform work under a
Development Plan have executed agreements that enable Cardica to grant the rights it grants to
Cook under this Agreement. Additionally, Cardica represents, warrants and covenants that it
has not employed, contracted with or retained, and shall not employ, contract with or retain,
any person or entity in connection with the development or manufacture of Products in the
Field pursuant to this Agreement who has been or is debarred by the FDA under 21 U.S.C. §
335(a) or disqualified as described in 21 C.F.R. §812.119.

	4.3	 	By Cook. Cook agrees not to sue Cardica under any Cook Patents, Cook Know-How, or Other Cook
IP solely to the extent necessary or useful for Cardica to perform its responsibilities under
the Development Plan with respect to Product in the Field and in the Territory. Subject to
the terms and conditions of this Agreement, and upon request by Cardica, the parties shall
negotiate in good faith the terms of a non-exclusive, royalty-bearing license for use by
Cardica in developing and commercializing products other than the Products under all Cook
Patents, Cook Know-How and Other Cook IP covering Inventions as defined in Section 1.10, which
license Cook in its sole discretion may elect, but is not obligated, to execute with Cardica.

	4.4	 	Cook Representations. Cook represents and warrants that as of the Effective Date: (a) Cook
has the right and power to enter into this Agreement; (b) its performance under this

[*] = CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY WITH THE
COMMISSION. WITH RESPECT TO ATTACHMENT A, SIX PAGES OF INFORMATION HAVE BEEN OMITTED AND FILED
SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE
OMITTED PORTIONS.

7

 

	 	 	Agreement is not inconsistent with any obligation owed to a third party; (c) to its
knowledge, Cardica’s practice of the covenant not to sue granted to Cardica pursuant to
Section 4.3 of this Agreement under the Cook Know-How, Cook Patents and Other Cook IP will
not infringe any Patents owned or controlled by a Third Party; and (d) its employees and/or
agents assigned to perform work under a Development Plan have executed agreements that
enable Cook to grant the rights it grants to Cardica under this Agreement. Additionally,
Cook covenants that it shall not employ, contract with or retain any person or entity in
connection with the development, manufacture and commercialization of Products in the Field
pursuant to this Agreement who has been or is debarred by the FDA under 21 U.S.C. § 335(a)
or disqualified as described in 21 C.F.R. §812.119.

	4.5	 	No Implied Licenses. Neither party grants to the other party any licenses or covenants not
to sue under such party’s intellectual property rights except as expressly provided in this
Agreement.

ARTICLE V

CONSIDERATION

	5.1	 	Signing Fee. Cook will pay Cardica a one-time payment of Five Hundred Thousand Dollars
($500,000) due after execution of this Agreement by both parties and payable within ten (10)
days after Cardica’s completion, to Cook’s satisfaction, of the tasks identified in the
paragraph entitled “Animal Testing” of the section identified as “Phase 1” of the Development
Plan attached to this Agreement as Exhibit A.

	5.2	 	Milestone Payments. Cook will pay Cardica a one-time payment of One Million Five Hundred
Thousand Dollars ($1.5 million) for the design and development of the first Feasible Prototype
of a Product in [*] format (as provided in the Development Plan) (“[*] Format”) in [*], each
due within thirty (30) days following the achievement of the relevant milestone as set forth
below:

	 	A.	 	[*] upon the date the Development Committee determines that the results of the
acute animal testing of Products in [*] Format in the Field as provided in the
Development Plan support the commencement of pre-production tooling efforts by Cardica.

	 	B.	 	[*] upon completion of verification and validation testing as set forth in the
Development Plan and confirmed by the Development Committee of Products in [*] Format
produced by Cardica using the pre-production tooling described in Section 5.2(A)
(“Pilot Product”) to support commencement by Cook of a Clinical Feasibility Trial of
such Product in the Field.

	 	C.	 	[*] upon the delivery of [*] ([*]) Pilot Products in [*] Format to
Cook for use in the first Clinical Feasibility Trial of such Products in the Field, as
provided in the Development Plan.

[*] = CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY WITH THE
COMMISSION. WITH RESPECT TO ATTACHMENT A, SIX PAGES OF INFORMATION HAVE BEEN OMITTED AND FILED
SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE
OMITTED PORTIONS.

8

 

	5.3	 	Reimbursement for Products in Other Formats. Cook will reimburse Cardica for additional
reasonable research, development and tooling costs actually incurred by Cardica for the
development of Feasible Prototypes and the production of Pilot Product in formats other than
[*] as requested by Cook and completed by Cardica in accordance with a research plan and
budget approved in advance and in writing by each member of the Development Committee. Such
reimbursements will be calculated using full time equivalent rates for engineering services
and labor and will include Cardica’s reasonable and actual out of pocket expenses for
fabrication of the pre-production tooling, fixtures and prototypes. Cardica shall add an
overhead charge of [*] percent ([*]) of the amounts to be so reimbursed, and Cook shall pay
such additional amounts, to compensate Cardica for overhead expenses. The agreed upon
research plan and budget will establish the milestones and timing to be met by Cardica in
order for such reimbursement payments to be made by Cook to Cardica.

	5.4	 	Earned Royalties.

	 	A.	 	 i) Cook will pay to Cardica (on a quarterly basis) during the Term of this Agreement a
royalty based on Net Sales by Cook,
its
    Affiliates or sublicensees (“Earned Royalty”) of
Product units in the calendar year in which such quarter occurs, as follows:

	 	 	 	 	 
	Royalty Due (% of Net Sales of	 	Portion of Aggregate Number of	 
	Product Units)	 	Product Units Sold in Calendar Year	 
	[*]
	 	[*]	 	 
	[*]
	 	[*]	 	 
	[*]
	 	[*]	 	 

	 	 	 	ii) In the event that Cook sells more than [*] units of Product per calendar year for [*]
consecutive calendar years at any time
    during
the Term of this Agreement, then instead of
the Earned Royalty set forth in subsection 5.4(A)(i) above, the
   
Earned Royalty shall be as
follows for the remainder of the Term of this Agreement: 

	 	 	 	 	 
	Royalty Due (% of Net Sales of	 	Portion of Aggregate Number of	 
	Product Units)	 	Product Units Sold in Calendar Year	 
	[*]
	 	[*]	 	 
	[*]
	 	[*]	 	 
	[*]
	 	[*]	 	 

[*] = CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY WITH THE
COMMISSION. WITH RESPECT TO ATTACHMENT A, SIX PAGES OF INFORMATION HAVE BEEN OMITTED AND FILED
SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE
OMITTED PORTIONS.

9

 

	 	iii)	 	In the event that within [*] years from the Effective Date of this Agreement no Cardica
Patent issues in the United States, or in any European Community country in which Product is
manufactured, used, or sold, that has a Valid Claim that covers Product, then instead of the
Earned Royalty set forth in either subsection 5.4(A)(i) or 5.4(A)(ii) above, Cook will pay
to Cardica Earned Royalty, as follows, until such time as a Cardica patent issues in the
United States, or in any European Community country in which Product is manufactured, used,
or sold, that has a Valid Claim that covers Product, at which time Cook will pay to Cardica
Earned Royalty under section 5.4(A)(i) or 5.4(A)(ii), as applicable:

	 	 	 	 	 
	Royalty Due	 	 	 
	(% of Net Sales of	 	Portion of Aggregate Number of	 
	Product Units)	 	Product Units Sold in Calendar Year	 
	[*]
	 	[*]	 	 
	[*]
	 	[*]	 	 
	[*]
	 	[*]	 	 

	 	 	 	The Earned Royalty is due on Net Sales of Products in any particular country in which Cook
sells Product irrespective of whether or not Cardica has obtained a Patent in the particular
country. The parties acknowledge that this Earned Royalty includes compensation to Cardica
for its research, development and technology transfer efforts relating to the Product.

	 	B.	 	In the event that Cook must make payments to one or more Third Parties to obtain a license or
similar right within a particular country, or if Cook must make payments to one or more Third
Parties under a preexisting license within a particular country, in either case in the absence
of which Cook could not legally make, use or sell a Product in that particular country (“Third
Party Royalty”), then the Earned Royalty rate may be adjusted. Such adjusted Earned Royalty
rate shall be agreed to by both Cardica and Cook, such that both Cardica and Cook bear a
proportional burden.

	 	 	 	Cardica and Cook shall both consent to any settlement agreement relating to assertion of
intellectual property rights against the Product. Any changes to the Earned Royalty rate
associated with that settlement agreement shall be agreed to by both Cardica and Cook, such
that both Cardica and Cook bear a proportional burden.

	 	C.	 	If Cook, its affiliate or sublicensee sells a Product unit as part of a bundle or combination
of products (a “Bundle or Combination”), then the royalty due with respect to the Product
unit sold as part of such bundle or combination will be calculated by multiplying the royalty
rates set forth above by the Net Sales of the Bundle or Combination in such country during the
applicable reporting period, and then by the fraction, A/(A+B), where A is the average sale
price of the Product unit by Cook, its Affiliates or sublicensees

[*] = CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY WITH THE
COMMISSION. WITH RESPECT TO ATTACHMENT A, SIX PAGES OF INFORMATION HAVE BEEN OMITTED AND FILED
SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE
OMITTED PORTIONS.

10

 

	 	 	 	when sold separately in finished form in such country, and B is the average sale price
charged by Cook, its Affiliates or sublicensees of the other product(s) included in the
Bundle or Combination when sold separately in finished form in such country, in each case
during the applicable reporting period.

	 	D.	 	In the event either the Product unit or the other product(s) included in the Bundle or
Combination are not sold separately in finished form in such country, then the royalty due
with respect to a Product unit sold as part of a Bundle or Combination will be calculated by
multiplying the royalty rates set forth above by the Net Sales of the bundle or combination in
such country, and then by the fraction of F/(F+G) where F is the fair market value of the
Product unit and G is the fair market value of all other product(s) included in the Bundle or
Combination, as reasonably determined in good faith by Cook.

	 	E.	 	Regardless of the number of Valid Claims included in the Cardica Patents claiming a given
Product, Cook will owe only one royalty with respect to the sale of each unit of such Product,
that royalty being the Earned Royalty set forth above.

	5.5	 	Minimum Royalties.

	 	A.	 	Provided that the Product developed under this Agreement, whether in [*] Format
or any other format, for use in the Field does not have any identified or known design
defect, and that no Product performance problem (as determined based upon the Product
specifications) has arisen that affects Cook’s ability to sell such Product, Cook will
pay to Cardica during the Term of this Agreement a minimum royalty (“Minimum Royalty”)
in an amount equal to the following one-time payments under this Agreement: (i) [*]
for the first full calendar year following the earlier of FDA Approval or the grant of
a CE Mark for the Product in [*] Format for use in the Field, (ii) [*] for the first
full calendar year following the later of FDA Approval or the grant of a CE Mark for
the Product in [*] Format for use in the Field, (iii) [*] for the second full calendar
year following the later of FDA Approval or the grant of a CE Mark for Product in [*]
Format in the Field, (iv) [*] for the third full calendar year following the later of
FDA Approval or the grant of a CE Mark for the Product in [*] Format in the Field, and
(v) in each calendar year of the next ten (10) calendar years following the third
anniversary of the later of FDA Approval or the grant of a CE Mark for Products in [*]
Format in the Field, an amount equal to the sum of the minimum royalty for the previous
calendar year plus [*] of the minimum royalty for the previous calendar year. Any
amount paid by Cook in any calendar year as Earned Royalty that exceeds the minimum
royalty due for that calendar year may be applied and accumulated by Cook to satisfy
the minimum royalties for any of the subsequent calendar years provided above.

	 	B.	 	In the event that Product meets the relevant specifications, but Cook has
experienced Unexpectedly Low Sales of Product in [*] consecutive calendar quarters not
by reason of any substantial lack of diligence by Cook in

[*] = CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY WITH THE
COMMISSION. WITH RESPECT TO ATTACHMENT A, SIX PAGES OF INFORMATION HAVE BEEN OMITTED AND FILED
SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE
OMITTED PORTIONS.

11

 

	 	 	 	commercializing Products in accordance with Section 2.4, Cook shall pay only a
portion of the Minimum Royalty (“Interim Period Payment”) for a time period
(“Interim Period”) beginning upon the last day of those [*] consecutive calendar
quarters of Unexpectedly Low Sales. During the Interim Period, each Interim Period
Payment shall be spent by Cardica solely on improvements to the Product, with the
amount of each Interim Period Payment to be approved by Cook and not to exceed the
actual amount spent by Cardica in the Interim Period on improvements to the Product
plus [*] percent ([*]) overhead. Cook’s obligation to pay Minimum Royalties under
this Agreement will resume in the first full calendar year after the cessation of
the Interim Period, which occurs at the end of the first quarter in which sales are
no longer Unexpectedly Low.

	 	 	 	If sales of Product continue during the Interim Period, then Minimum Royalties do
not increase under Section 5.5(A) during the Interim Period. For example, if an
Interim Period occurs in the second year of this Agreement, and Product is sold
during the Interim Period, the Minimum Royalties due after cessation of the Interim
Period are the Minimum Royalties due in the second year under Section 5.5A,
regardless of the duration of the Interim Period. Cook is still obligated to pay
Cardica Earned Royalties during the Interim Period based on its sales
of Product.

	 	 	 	If no sales of Product are made during the Interim Period, then after the Interim
Period the Minimum Royalties revert to those set forth above in either Section
5.5A(i) or 5.5A(ii), based on the status of the relevant approvals. Further, the
determination of the Minimum Royalty due in subsequent calendar years under Section
5.5A is then calculated based on the date of cessation of the Interim Period. For
example, if an Interim Period occurs in the second year of this Agreement, and
Product is not sold during the Interim Period, and if both FDA approval and a CE
mark have been granted for the Product, then the Minimum Royalty due for the first
full calendar year after the Interim Period is as set forth in Section 5.5A(ii).
The Minimum Royalty due in the subsequent full calendar year would be as set forth
in Section 5.5A(iii), and so on.

	 	C.	 	In the event Cook pays Cardica more than zero but less than the minimum
royalties set forth above for a period of [*] years, other than during an Interim
Period, then upon Cardica’s written notice to Cook, Cardica may in its sole discretion
terminate this Agreement for breach by Cook pursuant to Section 8.3 of this Agreement.

	5.6	 	Royalty Payments and Reports. Cook shall provide a report to Cardica within twenty (20) days
after the end of each quarter that summarizes the Net Sales during such quarter in a manner
sufficient to enable Cardica to comply with its reporting requirements. Within forty-five
(45) days after the end of each quarter (or, for the last quarter in a year, sixty (60) days
after the end of such quarter), Cook shall make all royalty payments payable to Cardica under
this Agreement with respect to such quarter. Along with such

[*] = CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY WITH THE
COMMISSION. WITH RESPECT TO ATTACHMENT A, SIX PAGES OF INFORMATION HAVE BEEN OMITTED AND FILED
SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE
OMITTED PORTIONS.

12

 

	 	 	payments, Cook shall also provide detailed information regarding the calculation of Earned
Royalties due to Cardica, including allowable deductions in the calculation of Net Sales of
Product in the Territory.

	5.7	 	Taxes. Cardica shall pay any and all taxes required by law that are levied on account of
royalties or other payments it receives under this Agreement. If laws or regulations require
that taxes be withheld, Cook will (a) deduct those taxes from the remittable royalty or other
payment, (b) pay the taxes to the proper taxing authority, and (c) send to Cardica within
fifteen (15) days following such payment evidence of the obligation together with proof of
payment.

	5.8	 	Sublicenses. In the event Cook or its Affiliate grants licenses or sublicenses to others to
sell Product, Cook shall account for and report to Cardica the sales of Product by the
sublicensee on the same basis as if such sales were Net Sales by Cook, and Cook shall pay to
Cardica Earned Royalties on such sales as if such sales of the sublicensee were Net Sales of
Cook, including but not limited to the exclusions from Net Sales set forth in Section 1.12.

	5.9	 	Non-Monetary Consideration. If Cook, its Affiliate or sublicensee receives any non-monetary
consideration in connection with the commercial sale of Product, Cook’s payment obligation
under Section 5.4 shall be based on the fair market value of such other consideration

	5.10	 	Records and Audit. Cook and its Affiliates shall keep or cause to be kept for a period of
three (3) years such records as are required to determine, in a manner consistent with this
Agreement, amounts due for any calendar year to Cardica pursuant to this Article V. At the
request (and expense) of Cardica, Cook and its Affiliates shall permit an independent
certified public accountant appointed by Cardica and reasonably acceptable to Cook, at
reasonable times and upon reasonable notice, to examine only those records as may be necessary
to determine, with respect to any calendar year ending not more than three (3) years prior to
Cardica’s request, the correctness or completeness of any report or payment made under this
Article V. The foregoing right of review may be exercised only once per year and only once
with respect to each such periodic report and payment. Results of any such examination shall
be (a) limited to information relating to the Product, (b) made available to both parties and
(c) subject to Article IX. Cardica shall bear the full cost of the performance of any such
audit, unless such audit discloses a variance to the detriment of Cardica of more than five
percent (5%) from the amount of the original report, royalty or payment calculation. In such
case, Cook shall bear the full cost of the performance of such audit.

[*] = CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY WITH THE
COMMISSION. WITH RESPECT TO ATTACHMENT A, SIX PAGES OF INFORMATION HAVE BEEN OMITTED AND FILED
SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE
OMITTED PORTIONS.

13

 

ARTICLE VI

REGULATORY FILINGS AND COMMUNICATIONS

	6.1	 	Regulatory Approvals. Cook will be solely responsible for the preparation and filing of all
documents required in connection with seeking and obtaining regulatory approval of Products in
the Field in each country in the Territory, at its sole expense and discretion, including
without limitation the CE Mark, IDE applications and PMA (or equivalent) approvals, and will
solely own all rights in such documents and approvals.

	6.2	 	Regulatory Information. To enable Cook and Cardica to comply with regulatory requirements,
Cook will provide Cardica with copies of all customer complaints received by Cook that allege
any Product used in the Field is defective and any reports of adverse events experienced in
connection with Products manufactured by Cook. For any such allegedly defective Product that
is returned to Cook or its Affiliate or sublicense by its customer, Cook will provide Cardica
with copies of all failure analysis or other reports proposed by Cook, its Affiliate or
sublicensee and submitted to the FDA or any other similar regulatory authority. Cook will
provide Cardica with copies of any Inspectional Observations (FDA Form 483) issued by the FDA
in connection with Products that are manufactured by or on behalf of Cook, or its Affiliate or
sublicensee, for use in the Field (or facilities used to manufacture same) and any response
thereto submitted by Cook, its Affiliate or sublicensee. Cook will provide Cardica with copies
of all reports filed by Cook, its Affiliate or sublicensee under FDA Medical Device Reporting
(MDR) regulations in connection with Products for use in the Field. For any Products used in
the Field that are recalled by Cook, its Affiliate or sublicensee, Cook will provide Cardica
with copies of all the applicable documentation that Cook submitted to comply with U.S.,
European and International regulatory laws and requirements, including but not limited to
documentation associated with receiving and administering the recalled Product and
notification of the recall to those persons for whom Cook, its Affiliate or sublicensee
replaced the recalled Product.

ARTICLE VII

SUPPLY

	7.1	 	Initial Supply. Cardica will supply, at Cook’s request and at no additional cost, [*] units
per each version of Product for use in preclinical and initial clinical trials, including but
not limited to any European Clinical Feasibility Trial.

	7.2	 	Technology Transfer. Upon determination by the Development Committee that a Product based on
a Feasible Prototype is ready for commercialization, Cook will have the option but not the
obligation to manufacture such Product, or to have such Product manufactured by a third party.
Cardica will continue to supply to Cook, upon Cook’s request and at a cost of [*] per unit,
such additional units of the Product over the [*] units described in Section 5.2(C) above as
Cook may reasonably request for the further testing

[*] = CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY WITH THE
COMMISSION. WITH RESPECT TO ATTACHMENT A, SIX PAGES OF INFORMATION HAVE BEEN OMITTED AND FILED
SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE
OMITTED PORTIONS.

14

 

	 	 	and development of the Product. Upon the first FDA Approval of a Product in the Field that
is based on a Feasible Prototype that the Development Committee determines is ready for
commercialization, Cook will have the sole responsibility for manufacturing such Product, or
having such Product manufactured, at its sole expense. Upon Cook’s request, to enable Cook
to assume such responsibility, Cardica will transfer to Cook, at no additional cost, all
equipment, including all pre-production tooling, and Cardica Know-How, including but not
limited to, all trade secret, manufacturing and supplier information included therein,
related to the Products that is reasonably necessary for Cook to manufacture such Product
(“Transferred Product”). Upon request from Cook, Cardica will provide, at no additional
cost, reasonable technical assistance to Cook for the Transferred Product based on the
mutual availability of the parties, which assistance may include: i) training of Cook
personnel in connection with the manufacture of Transferred Product, ii) advice concerning
the manufacture of Transferred Product, and iii) testing of sample Transferred Product to
verify that such Transferred Product complies with applicable specifications established by
the Development Committee to confirm successful transfer of technology to Cook hereunder.
Additionally, on Cook’s request, the parties will negotiate the terms under which Cardica
may provide engineering services to assist Cook in the design and modification of
Transferred Product to meet customer and regulatory requirements.

	7.3	 	Production Supply. Except as provided in Section 7.2 above, Cardica will have no obligation
to supply or have supplied any Transferred Product for use in further development and
commercialization of Products in the Field and in the Territory.

ARTICLE VIII

TERM AND TERMINATION

	8.1	 	Term. This Agreement will commence on the Effective Date and continue for a period of twenty
(20) years (“Term”), unless it is earlier terminated in accordance with Section 8.2 below.
This Agreement may be renewed thereafter for additional five (5) year terms by mutual
agreement of the parties.

	8.2	 	Termination. Cook may terminate this Agreement for convenience at any time upon [*] prior
written notice to Cardica. Either party may terminate this Agreement for material breach by
the other party if such breach remains uncured for thirty (30) days after the non-breaching
party provides a notice to the breaching party specifying such breach in reasonable detail.
Upon termination of this Agreement, all licenses granted to Cook will terminate, expect as
otherwise provided in Sections 8.3(C), 8.4 and 8.5 of this Agreement, and Cook’s obligation to
pay any further royalties or payments of any kind, including but not limited to payment of any
minimum royalties set forth in Section 5.2 above that would have been due after the effective
date of termination, will also terminate, provided that any such termination will not relieve
Cook from any obligation to pay any such royalty or payment that accrued prior to the
effective date of termination.

[*] = CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY WITH THE
COMMISSION. WITH RESPECT TO ATTACHMENT A, SIX PAGES OF INFORMATION HAVE BEEN OMITTED AND FILED
SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE
OMITTED PORTIONS.

15

 

	8.3	 	Rights upon Termination by Cook for Convenience or Termination by Cardica for Material Breach
by Cook. Upon early termination of this Agreement under Section 8.2 by Cook for convenience,
or by Cardica for material breach by Cook:

	 	A.	 	Cook will pay Cardica a pro-rated payment for any work actually performed by
Cardica under the Development Plan up to the effective date of termination, to the
extent supported by documentation provided by Cardica to Cook. Such payments shall
include reimbursement for all expenditures and non-cancelable commitments that are
consistent with the original budget and milestones set forth in the Development Plan
that are incurred by Cardica in performing the Development Plan prior to the effective
date of termination; provided, however, in no event will such pro-rated payment exceed
three hundred thousand dollars ($300,000) over and above milestone payments already
made to Cardica under paragraph 5.2.

	 	B.	 	Cook will transfer to Cardica within thirty (30) days of the effective date of
termination or within a commercially reasonable period, whichever is sooner, all
documentation, and perform any actions and send any necessary notices to government
bodies and other entities (such as notified bodies to the European Union) that are
necessary to allow Cardica both to continue to develop, manufacture and commercialize
Products in the Field and to be the registered sponsor of clinical trials and related
regulatory filings for Products in the Field. Cardica within sixty (60) days of the
effective date of termination will reimburse Cook for its documented expenses relating
to the transfer not to exceed [*] Dollars ([*]). If an IDE or PMA is undertaken by Cook
for approval of the Product, then the filing fees, transfer costs and other costs
associated with the IDE and PMA (such as the costs of clinical studies) to be paid by
Cardica will not exceed a greater amount to be negotiated in good faith between the
parties. Cardica shall pay any negotiated amount in ten (10) equal installments due
semiannually based on the effective date of termination. The parties may elect to
enter into good faith negotiations with a view toward executing agreements pursuant to
which Cardica may purchase the production tooling owned by Cook for the Product and/or
pursuant to which Cook may distribute Product manufactured by or for Cardica under
terms and conditions agreeable to the parties.

	 	C.	 	If Cook is then manufacturing or supplying Product under the Agreement and upon
receipt of Cardica’s written request, Cook will continue to manufacture Products for
Cardica for use in the Field for a period not to exceed [*] from the effective date of
termination to allow Cardica time to engage an alternate supplier.

	 	D.	 	Cook will not sue Cardica under any Cook Patents, Cook Know-How and Other Cook
IP solely to the extent necessary to allow Cardica to continue (itself or with or
through Third Parties) making, using, selling, offering for sale and importing Products
in the Field and in the Territory. In the event that Cook terminates this

[*] = CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY WITH THE
COMMISSION. WITH RESPECT TO ATTACHMENT A, SIX PAGES OF INFORMATION HAVE BEEN OMITTED AND FILED
SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE
OMITTED PORTIONS.

16

 

	 	 	Agreement for convenience under Section 8.2 or in the event that Cardica’s
termination of this Agreement based on Cook’s breach under Section 8.2 is determined
by a court of competent jurisdiction to have been proper under this Agreement, then
Cook agrees for a period of five (5) years from the effective date of such
termination not to grant to any competitor of Cardica any right under any Cook
Patents, Cook Know-How and Other Cook IP that would facilitate such competitor in
making, using, selling, offering for sale or importing Products in the Field and in
the Territory.

	8.4	 	Rights upon Termination by Cook for Material Breach of Cardica.

	 	A.	 	Upon early termination of this Agreement under Section 8.2 by Cook for a
material breach by Cardica after full payment to Cardica of the milestone payments set
forth in Section 5.2 above, then the license granted to Cook under Section 4.1 will
survive, and subject to the payment of Earned Royalties under Section 5.4, Cardica will
transfer to Cook within thirty (30) days of the effective date of termination or a
commercially reasonable period, whichever is sooner, all documentation and equipment,
including all pre-production tooling, and perform any actions and send any necessary
notices to government bodies and other entities (such as notified bodies) that are
necessary to allow Cook to continue to develop, manufacture and commercialize Products
in the Field.

	 	B.	 	In the event that Cook terminates this Agreement for breach by Cardica based on
Cardica’s failure to meet any of the milestones set forth in Section 5.2 above, then
Cardica will return to Cook the signing fee paid by Cook under Section 5.1 of this
Agreement and any milestone payment made by Cook under Section 5.2 of this Agreement,
minus any Sunk Costs.

ARTICLE IX

CONFIDENTIALITY

	9.1	 	Confidential Information. Each party receiving Confidential Information (the “Receiving
Party”) shall maintain in confidence all such Confidential Information disclosed by the other
party pursuant to this Agreement (the “Disclosing Party”), and shall not use, disclose or
grant the use of the Confidential Information for any purpose other than those permitted
hereunder, except on a need-to-know basis to its and its Affiliates’ actual or potential
business partners or sublicensees, directors, officers, employees, agents, consultants,
clinical investigators, contractors, distributors or permitted assignees, to the extent such
disclosure is reasonably necessary in connection with such party’s activities in connection
with its performance under and exercise of rights expressly provided in this Agreement. The
foregoing obligations shall apply for five (5) years after the expiration or termination of
this Agreement. To the extent that disclosure is authorized by this Agreement, prior to
disclosure, a party hereto shall obtain agreement of any such person to hold in confidence and
not make use of the Confidential

[*] = CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY WITH THE
COMMISSION. WITH RESPECT TO ATTACHMENT A, SIX PAGES OF INFORMATION HAVE BEEN OMITTED AND FILED
SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE
OMITTED PORTIONS.

17

 

	 	 	Information of the other party for any purpose other than those permitted by this Agreement.
For purposes of this Agreement, “Confidential Information” shall mean all information and
materials, received by either party from or on behalf of the other party pursuant to this
Agreement, other than that portion of such information or materials that is publicly
disclosed by the disclosing party, either before or after it becomes known to the Receiving
Party; was known to the Receiving Party, without obligation to keep it confidential, prior
to when it was received from the Disclosing Party, as evidenced by competent written proof;
is subsequently disclosed to the Receiving Party by a Third Party lawfully in possession
thereof without obligation to keep it confidential; has been publicly disclosed other than
by the Disclosing Party and without breach of an obligation of confidentiality with respect
thereto; or has been independently developed by the Receiving Party without the aid,
application or use of Confidential Information, as evidenced by competent written proof.

	9.2	 	Permitted Disclosures. The confidentiality obligations contained in this Article IX shall
not apply to the extent that the Receiving Party is required (a) to disclose information by
law, order or regulation of a governmental agency or a court of competent jurisdiction or to
comply with the rules of a securities exchange, or (b) to disclose information to any
governmental agency for purposes of obtaining approval to test or market a product, provided
in either case that the Receiving Party shall provide written notice thereof to the other
party and reasonable opportunity to object to any such disclosure or to request confidential
treatment thereof, and shall use reasonable efforts to secure confidential treatment of or a
protective order for the information so required to be disclosed. Notwithstanding any other
provision of this Agreement, each Party may disclose Confidential Information of the other
Party as necessary to file or prosecute patent application, prosecute or defend litigation or
otherwise establish rights or enforce obligations under this Agreement, or submit regulatory
filings, but only to the extent that any such disclosure is necessary.

ARTICLE X

INDEMNIFICATION

	10.1	 	By Cook. Cook shall defend, indemnify and hold Cardica harmless from and against any and all
liability, loss, claims, suits, proceedings, expenses, recoveries and damages, including,
without limitation, legal costs and expenses (including reasonable attorney’s fees) resulting
from any claim by Third Parties arising out of Cook’s development, manufacture, use, storage,
transportation, promotion or sale of the Products in the Field and in the Territory under this
Agreement, Cook’s breach of this Agreement or any representations, warranties or covenants it
makes in this Agreement, or Cook’s gross negligence or willful misconduct; except to the
extent that such claim arises from Cardica’s design, manufacture, or use of the Products in
the Field and in the Territory, a breach by Cardica of this Agreement or any of the
representations, warranties or covenants it makes in this Agreement, or Cardica’s gross
negligence or willful misconduct.

[*] = CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY WITH THE
COMMISSION. WITH RESPECT TO ATTACHMENT A, SIX PAGES OF INFORMATION HAVE BEEN OMITTED AND FILED
SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE
OMITTED PORTIONS.

18

 

	10.2	 	By Cardica. Cardica shall defend, indemnify and hold Cook harmless from and against any and
all liability, loss, claims, suits, proceedings, expenses, recoveries and damages, including,
without limitation, legal costs and expenses (including reasonable attorney’s fees) resulting
from any claim by Third Parties arising out of Cardica’s design, manufacture, or use of the
Products in the Field and in the Territory under this Agreement (liability under the foregoing
sentence to be limited to the amount actually paid by Cook to Cardica under this Agreement),
Cardica’s breach of this Agreement or of any of the representations, warranties or covenants
it makes in this Agreement, or Cardica’s gross negligence or willful misconduct; except to the
extent that such claim arises from a breach by Cook of this Agreement or any of the
representations, warranties or covenants it makes in this Agreement, or Cook’s gross
negligence or willful misconduct.

	10.3	 	Process. If either party is seeking indemnification under Sections 10.1 or 10.2, it shall
inform the indemnifying party of the Third Party claim giving rise to the obligation to
indemnify pursuant to such Section as soon as reasonably practicable after receiving notice of
the claim. The indemnifying party shall have the right to assume the defense of any such
third-party claim for which it is obligated to indemnify the indemnified party under Section
10.1 or 10.2. The indemnified party shall cooperate with the indemnifying party (and its
insurer) as the indemnifying party may reasonably request, and at the indemnifying party’s
sole cost and expense. The indemnified party shall have the right to participate, at its own
expense and with counsel of its choice, in the defense of any claim or suit that has been
assumed by the indemnifying party. Neither party shall have any obligation to indemnify the
other party in connection with any settlement made without the indemnifying party’s written
consent, provided that the indemnifying party does not unreasonably withhold or delay any such
written consent. If the parties cannot agree as to the application of Section 10.1 or 10.2 to
any Third Party claim, the parties may conduct separate defenses of such claims, with each
party retaining the right to claim indemnification from the other in accordance with Section
10.1 or 10.2 upon resolution of the underlying claim.

	10.4	 	Limitation of Liability. NEITHER PARTY SHALL BE LIABLE TO THE OTHER PARTY FOR ANY SPECIAL,
CONSEQUENTIAL, EXEMPLARY OR INCIDENTAL DAMAGES (INCLUDING LOST OR ANTICIPATED REVENUES OR
PROFITS RELATING TO THE SAME), ARISING FROM ANY CLAIM RELATING TO THIS AGREEMENT, WHETHER SUCH
CLAIM IS BASED ON CONTRACT, TORT (INCLUDING NEGLIGENCE) OR OTHERWISE, EVEN IF AN AUTHORIZED
REPRESENTATIVE OF SUCH PARTY IS ADVISED OF THE POSSIBILITY OR LIKELIHOOD OF THE SAME. NOTHING
IN THIS SECTION 10.4 IS INTENDED TO LIMIT OR RESTRICT THE INDEMNIFICATION RIGHTS SET FORTH IN
SECTIONS 10.1 AND 10.2.

	10.5	 	No Other Representations. EXCEPT AS EXPRESSLY SET FORTH HEREIN, THE TECHNOLOGY AND
INTELLECTUAL PROPERTY RIGHTS PROVIDED BY EACH PARTY HEREUNDER ARE PROVIDED “AS IS,” AND EACH
PARTY EXPRESSLY DISCLAIMS ANY AND ALL WARRANTIES OF ANY KIND,

[*] = CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY WITH THE
COMMISSION. WITH RESPECT TO ATTACHMENT A, SIX PAGES OF INFORMATION HAVE BEEN OMITTED AND FILED
SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE
OMITTED PORTIONS.

19

 

	 	 	EXPRESS OR IMPLIED, INCLUDING, WITHOUT LIMITATION, THE WARRANTIES OF TITLE, MERCHANTABILITY,
FITNESS FOR A PARTICULAR PURPOSE, NON-INFRINGEMENT OF THE INTELLECTUAL PROPERTY RIGHTS OF
THIRD PARTIES, OR ARISING FROM A COURSE OF DEALING, USAGE OR TRADE PRACTICES, IN ALL CASES
WITH RESPECT THERETO. Without limiting the generality of the foregoing, neither party makes
any warranty of any kind related to: (i) the success of the research conducted by the
parties under the Agreement; or (ii) the safety or usefulness for any purpose of the
technology or other materials or information it provides hereunder.

ARTICLE XI

MISCELLANEOUS

	11.1	 	All notices relating to this Agreement will be given by fax, first class mail or courier
addressed as follows:

	 	 	 	 	 
	If to Cook:
	 	If to Cardica:
	Cook Incorporated
	 	Cardica, Inc.
	750 Daniels Way
	 	900 Saginaw Drive,
	Bloomington, Indiana 47404
	 	Redwood City, CA 9406
	Attn: Peter Yonkman
	 	Attn: Robert Newell
	General Counsel
	 	Chief Financial Officer
	Phone: (812) 339-2235
	 	Phone: (650) 331-7133
	Fax: (812) 339-5369
	 	Fax: (650) 364-3134

	 	 	or any other address of which either party notifies the other in writing in accordance with
this Section 11.1. Any notice provided for in this Agreement will be deemed effective on
the date of actual receipt by the party.

	11.2	 	Assignment. Neither party may assign this Agreement without the prior written consent of the
other party, which consent will not be unreasonably withheld. Notwithstanding the forgoing,
either party may, without the prior consent of the other party, assign this Agreement to its
parent or affiliate or to a successor, or to an acquiring entity in connection with a merger
or sale of substantially all of the assets of the business or product line to which this
Agreement relates. This Agreement will inure to the benefit of and be binding upon the parties
hereto and their respective successors and permitted assigns. Any purported assignment not in
accordance with this Section 11.2 shall be void and of no force and effect

	11.3	 	Relationship of the Parties. The parties are independent contractors. Neither party has any
express or implied right or authority to assume or create any obligations on behalf of the
other or to bind the other to any contract, agreement or undertaking with any Third Party.
Nothing in this Agreement is to be construed to create a partnership, joint venture,
employment or agency relationship between Cook and Cardica.

[*] = CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY WITH THE
COMMISSION. WITH RESPECT TO ATTACHMENT A, SIX PAGES OF INFORMATION HAVE BEEN OMITTED AND FILED
SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE
OMITTED PORTIONS.

20

 

	11.4	 	No Implied Waiver. No express or implied waiver, breach or default of any provision of this
Agreement is to be construed as a continuing waiver, and no waiver will prevent a party from
enforcing or acting upon any other provisions, subsequent breach or default by the other
party.

	11.5	 	Publicity. Nothing in this Agreement is to be construed as granting either party any
right under the trademarks or trade names of the other party. Neither party will make any
statement to the media regarding the relationship of the parties without the prior written
approval of the other party. Each party may, however, without the consent of the other party,
describe the scope and purpose of this Agreement to customers in marketing presentations.

	11.6	 	Force Majeure. Any delay or failure of a party to perform its obligations under this
Agreement will be excused to the extent that the delay or failure is caused by an event or
occurrence beyond the party’s reasonable control, such as, by way of example and not by way of
limitation, acts of God, actions by any governmental authority (whether valid or invalid),
terrorism, fires, floods, windstorms, explosions, riots, natural disasters, wars, sabotage,
labor problems (including lockouts, strikes and slowdowns), inability to obtain power,
material, equipment or transportation or court injunction or order, provided that such party
uses reasonable efforts to overcome such delay or failure.

	11.7	 	Governing Law. This Agreement is to be construed in accordance with the laws of the State of
Delaware, without regard to its conflict of law rules.

	11.8	 	Survival. Articles IX, X (solely to the extent relating to claims arising from activities
conducted during the Term of this Agreement or from Cardica’s practice of the covenant not to
sue granted to it pursuant to Sections 4.3) and XI, and Sections 3.1, 3.2, 3.3, 3.4(B), 3.5
(solely to the extent that the license granted to Cook under Section 4.1 survives termination
of this Agreement under Section 8.4), 4.1 (upon expiration of this Agreement as set forth in
Section 8.4), 5.6 through 5.10, 6.1 (solely to the extent that the license granted to Cook
under Section 4.1 survives termination of this Agreement under Section 8.4 ), 6.2, 8.2, 8.3,
8.4, 8.5, and 11.1, 11.2, 11.4, 11.7, 11.8 and 11.9 of this Agreement will survive its
expiration or termination. Termination or expiration of this Agreement shall not affect any
payment obligations that accrued prior to the effective date of such termination or
expiration.

	11.9	 	Integration. This Agreement, including all attachments hereto, embodies the entire
understanding between the parties relating its subject matter and supercedes all prior written
or oral agreements relating to such subject matter. There are no representations, warranties,
agreements or understandings between the parties related to the subject matter of this
Agreement that are not contained herein. This Agreement may not be amended or modified except
in a writing that is dated and signed by the party against whom enforcement is sought. This
Agreement may be executed and delivered by facsimile and in any number of counterparts, each
such counterpart deemed to be an original, but all of which together constitute one and the
same document.

[*] = CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY WITH THE
COMMISSION. WITH RESPECT TO ATTACHMENT A, SIX PAGES OF INFORMATION HAVE BEEN OMITTED AND FILED
SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE
OMITTED PORTIONS.

21

 

	 	 	 	 	 	 	 
	 

	 	COOK INCORPORATED
	 	CARDICA INC.
	 	 
	 
	 

	 	By: /s/ Brian Bates
	 	By: /s/ Bernard Hausen	 	 
	 

	 	 
	 	 	 	 
	 

	 	Name: Brian Bates
	 	Name: Bernard Hausen	 	 
	 

	 	 
	 	 	 	 
	 

	 	Title: Senior Vice President Business Development
	 	Title: Chief Executive Officer	 	 
	 

	 	 
	 	 	 	 
	 

	 	Date: 12/9/05
	 	Date: 12/12/05	 	 
	 

	 	 
	 	 	 	 

[*] = CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY WITH THE
COMMISSION. WITH RESPECT TO ATTACHMENT A, SIX PAGES OF INFORMATION HAVE BEEN OMITTED AND FILED
SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE
OMITTED PORTIONS.

22

 

ATTACHMENT A

Development Plan

     [*]

[*] = CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY WITH THE
COMMISSION. WITH RESPECT TO ATTACHMENT A, SIX PAGES OF INFORMATION HAVE BEEN OMITTED AND FILED
SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE
OMITTED PORTIONS.

23

 

ATTACHMENT B

Patent Rights

	 	 	 	 	 
	Serial No.	 	Filing Date	 	Title
	[*]

	 	[*]
	 	Vascular Closure System

24

 

ATTACHMENT C

Product Drawing

     [Attach drawing of product designated by Cardica as of the Effective Date as the X-Port device,
size [*]]

[*] = CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY WITH THE
COMMISSION. WITH RESPECT TO ATTACHMENT A, SIX PAGES OF INFORMATION HAVE BEEN OMITTED AND FILED
SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE
OMITTED PORTIONS.

25

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