Document:

Exhibit 10.1

 

SECOND AMENDMENT

TO

LOAN AND SECURITY AGREEMENT

 

THIS SECOND AMENDMENT to Loan and Security Agreement (this “Amendment”) is entered into this 22nd day of September, 2005, by and between Silicon Valley Bank (“Bank”) and Castelle, a California corporation (“Borrower”) whose address is 855 Jarvis Drive, Suite 100, Morgan Hill, CA 95037.

RECITALS

A.        Bank and Borrower have entered into that certain Loan and Security Agreement dated as of August 2, 2004, as amended by that certain First Amendment to Loan and Security Agreement by and between Bank and Borrower dated as of August 1, 2005 (as the same may from time to time be further amended, modified, supplemented or restated, the “Loan Agreement”).  

B.        Bank has extended credit to Borrower for the purposes permitted in the Loan Agreement.  

C.         Borrower has requested that Bank amend the Loan Agreement to increase the amount available to be borrowed under the Committed Revolving Line. 

D.         Bank has agreed to so amend certain provision of the Loan Agreement, but only to the extent, in accordance with the terms, subject to the conditions and in reliance upon the representations and warranties set forth below.

AGREEMENT

NOW, THEREFORE, in consideration of the foregoing recitals and other good and valuable consideration, the receipt and adequacy of which is hereby acknowledged, and intending to be legally bound, the parties hereto agree as follows:

1.          Definitions.  Capitalized terms used but not defined in this Amendment shall have the meanings given to them in the Loan Agreement.

	
            2.
 	
            Amendment to Loan Agreement.
 

2.1        Section 13 (Definitions).  The following term and its respective definition set forth in Section 13.1 is amended in its entirety and replaced with the following: 

“Committed Revolving Line” is an Advance of up to $6,000,000.

 

	
            3.
 	
            Limitation of Amendment.
 

3.1        The amendment set forth in Section 2, above, are effective for the purposes set forth herein and shall be limited precisely as written and shall not be deemed 

 

E-1

 

Exhibit 10.1

 

to (a) be a consent to any amendment, waiver or modification of any other term or condition of any Loan Document, or (b) otherwise prejudice any right or remedy which Bank may now have or may have in the future under or in connection with any Loan Document.

3.2        This Amendment shall be construed in connection with and as part of the Loan Documents and all terms, conditions, representations, warranties, covenants and agreements set forth in the Loan Documents, except as herein amended, are hereby ratified and confirmed and shall remain in full force and effect.

4.          Representations and Warranties.  To induce Bank to enter into this Amendment, Borrower hereby represents and warrants to Bank as follows:

4.1        Immediately after giving effect to this Amendment (a) the representations and warranties contained in the Loan Documents are true, accurate and complete in all material respects as of the date hereof (except to the extent such representations and warranties relate to an earlier date, in which case they are true and correct as of such date), and (b) no Event of Default has occurred and is continuing;

4.2        Borrower has the power and authority to execute and deliver this Amendment and to perform its obligations under the Loan Agreement, as amended by this Amendment;

4.3        The organizational documents of Borrower delivered to Bank on the Effective Date remain true, accurate and complete and have not been amended, supplemented or restated and are and continue to be in full force and effect;

4.4        The execution and delivery by Borrower of this Amendment and the performance by Borrower of its obligations under the Loan Agreement, as amended by this Amendment, have been duly authorized; 

4.5        The execution and delivery by Borrower of this Amendment and the performance by Borrower of its obligations under the Loan Agreement, as amended by this Amendment, do not and will not contravene (a) any law or regulation binding on or affecting Borrower, (b) any contractual restriction with a Person binding on Borrower, (c) any order, judgment or decree of any court or other governmental or public body or authority, or subdivision thereof, binding on Borrower, or (d) the organizational documents of Borrower; 

4.6        The execution and delivery by Borrower of this Amendment and the performance by Borrower of its obligations under the Loan Agreement, as amended by this Amendment, do not require any order, consent, approval, license, authorization or validation of, or filing, recording or registration with, or exemption by any governmental or public body or authority, or subdivision thereof, binding on either Borrower, except as already has been obtained or made; and

4.7        This Amendment has been duly executed and delivered by Borrower and is the binding obligation of Borrower, enforceable against Borrower in 

 

E-2

 

Exhibit 10.1

 

accordance with its terms, except as such enforceability may be limited by bankruptcy, insolvency, reorganization, liquidation, moratorium or other similar laws of general application and equitable principles relating to or affecting creditors’ rights.

5.          Counterparts.  This Amendment may be executed in any number of counterparts and all of such counterparts taken together shall be deemed to constitute one and the same instrument.

6.          Effectiveness.  This Amendment shall be deemed effective upon (a) the due execution and delivery to Bank of this Amendment by each party hereto and (b) Borrower’s payment of an amendment fee in an amount equal to $2,000. 

IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed and delivered as of the date first written above.

 

 

	
            BANK
 	
            BORROWER
 
	
             

Silicon Valley Bank

 

 

By:                              /s/ Rachel Phillips

Name:   Rachel Phillips

Title:                     Customer Relations Manager
 	
             

Castelle

 

 

By:                              /s/ Paul Cheng

Name:  Paul Cheng

Title:                     Chief Financial Officer

 
 

 

 

 

E-3EX-4.1

Exhibit 4.1 

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

WARRANT TO PURCHASE 

36,810 SHARES OF SERIES
B PREFERRED STOCK OF 

VASCULAR INNOVATIONS,
INC. 

(Void after March 17,
2010) 

This certifies that VENTURE LENDING & LEASING
II, INC., a Maryland corporation. or assigns (the “Holder”), for value
received, is entitled to purchase from VASCULAR INNOVATIONS, INC., a Delaware corporation
(the “Company”), 36,810 fully paid and nonassessable shares of the Company’s
Series B Preferred Stock (“Preferred Stock”) for cash at a price of $1.63 per
share (the “Stock Purchase Price”) at any time or from time to time up to and
including the earlier of (i) 5:00 p.m. (Pacific time) on March 17, 2010 (the “Expiration
Date”), or (ii) the date of a Qualified Corporate Event as described in Section 4.3,
upon surrender to the Company at its principal office at 171 Jefferson Drive, Menlo Park,
California 94025, (or at such other location as the Company may advise Holder in writing)
of this Warrant properly endorsed with the Form of Subscription attached hereto duly
filled in and signed and upon payment in cash or by check of the aggregate Stock Purchase
Price for the number of shares for which this Warrant is being exercised determined in
accordance with the provisions hereof. The Stock Purchase Price and the number of shares
purchasable hereunder are subject to adjustment as provided in Section 4 of this Warrant. 

This Warrant is subject to the
following terms and conditions: 

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

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

 

 

(20) day period immediately prior to
the closing of the Company’s Initial Public Offering of the Company’s Common
Stock. 

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

         
         (c)
For purposes of clause (b) of this Section 1, “Per Share Price” means the
product of: (i) the greater of (A) the closing price of the Company’s Common Stock
as quoted by NASDAQ or listed on any exchange, whichever is applicable, as published in
the Western Edition of The Wall Street Journal for the trading day immediately prior to
the date of the Holder’s election hereunder or, (B) if applicable at the time of or
in connection with the exercise under clause (b) of this Section 1, the gross sales price
of one share of the Company’s Common Stock pursuant to a registered public offering
or that amount which shareholders of the Company will receive for each share of Common
Stock pursuant to a merger, reorganization or sale of assets; and (ii) that number of
shares of Common Stock into which each share of Preferred Stock is convertible. If the
Company’s Common Stock is not quoted by NASDAQ or listed on an exchange, the Per
Share Price of the Preferred Stock (or the equivalent number of shares of Common Stock
into which such Preferred Stock is convertible) shall be the price per share which the
Company would obtain from a willing buyer for shares sold by the Company from authorized
but unissued shares as such price shall be set by the Board of Directors that in its
reasonable good faith judgement has determined to be the fair market value of the
Preferred Stock.  

         2.
Limitation on Transfer.  

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

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

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

         
         (c)
The Holder of this Warrant and each person to whom this Warrant is subsequently
transferred represents and warrants to the Company (by acceptance of such transfer) that
it will not transfer the Warrant (or securities issuable upon exercise hereof unless a
registration statement under the Securities Act was in effect with respect to such
securities at the time of issuance thereof) except pursuant to (i) an effective
registration statement under the Securities Act, (ii) Rule 144 under the Securities Act
(or any other rule under the Securities Act 

2 

 

relating to the disposition of
securities), or (iii) an opinion of counsel. reasonably satisfactory to counsel for the
Company, that an exemption from such registration is available. 

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

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

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

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

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

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

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

3 

 

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

         
         4.3
Reorganization, Reclassification, Consolidation, Merger or Sale. If any capital
reorganization of the capital stock of the Company, or any consolidation or merger of the
Company with another corporation, or the sale of all or substantially all of its assets
to another corporation shall be effected in such a way that holders of Preferred Stock
shall be entitled to receive stock, securities or assets with respect to or in exchange
for Preferred Stock (Corporate Event), then, as a condition of such reorganization,
reclassification, consolidation, merger or sale, lawful and adequate provisions shall be
made whereby the holder hereof shall thereafter have the right to purchase and receive
(in lieu of the shares of the Preferred Stock of the Company immediately theretofore
purchasable and receivable upon the exercise of the rights represented hereby) such
shares of stock, securities or assets as may be issued or payable with respect to or in
exchange for a number of outstanding shares of such Preferred Stock equal to the number
of shares of such stock immediately theretofore purchasable and receivable upon the
exercise of the rights represented hereby, provided, however, in the event that 1) the
effective price of such Corporate Event is in excess of the exercise price hereof
effective at the time of the Corporate Event, 2) the consideration received in such
Corporate Event is cash or shares that are of a publicly traded company listed on a
national market or exchange, without restrictions within 90 days of the close of such
Corporate Event, except for those of Rule 144 or 145, and 3) the Company’s
shareholders own less than 50% of the voting securities of the surviving entity
(collectively, a “Qualified Corporate Event”), then this Warrant shall be
deemed exercised in accordance with the provisions of Section l(b) upon the closing of
the Qualified Corporate Event. In any such case, appropriate provision shall be made with
respect to the rights and interests of the holder of this Warrant to the end that the
provisions hereof (including, without limitation, provisions for adjustments of the Stock
Purchase Price and of the number of shares purchasable and receivable upon the exercise
of this Warrant) shall thereafter be applicable, as nearly as may be possible, in
relation to any shares of stock, securities or assets thereafter deliverable upon the
exercise hereof. The Company will not effect any such consolidation, merger or sale
unless, prior to the consummation thereof, the successor corporation (if other than the
Company) resulting from such consolidation or the corporation purchasing such assets
shall assume by written instrument, executed and mailed or delivered to the registered
Holder hereof at the last address of such Holder appearing on the books of the Company,
the obligation to deliver to such Holder such shares of stock, securities or assets as,
in accordance with the foregoing provisions, such Holder may be entitled to purchase.  

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

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

         
         4.6
Other Notices. If at any time:  

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

4 

 

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

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

         
         
         (d)
there shall be any capital reorganization or reclassification of the capital stock of the
Company, or consolidation or merger of the Company with, or sale of all or substantially
all of its assets to, another corporation, including, without limitation, any Corporate
Event; 

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

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

then, in any one or more of said
cases, the Company shall give, by first class mail, postage prepaid, addressed to the
holder of this Warrant at the address of such holder as shown on the books of the
company, (i) at least 20 day’s prior written notice of the date on which the books
of the Company shall close or a record shall be taken for such dividend, distribution or
subscription rights or for determining rights to vote in respect of any such
reorganization, reclassification, consolidation, merger, sale, dissolution, liquidation
or winding-up, or other action and (ii) in the case of any such reorganization,
reclassification, consolidation, merger, sale, dissolution, liquidation or winding-up, or
other action, at least 20 day’s written notice of the date when the same shall take
place. Any notice given in accordance with the foregoing clause (i) shall also specify,
in the case of any such dividend, distribution or subscription rights, the date on which
the holders of Preferred Stock shall be entitled thereto. Any notice given in accordance
with the foregoing clause (ii) shall also specify the date on which the holders of
Preferred Stock shall be entitled to exchange their Preferred Stock for securities or
other property deliverable upon such reorganization, reclassification, consolidation,
merger, sale, dissolution, liquidation or winding-up, or other action as the case may be. 

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

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

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

         7.
No Voting or Dividend Rights; Limitation of Liability. Nothing contained in this Warrant
shall be construed as conferring upon the Holder hereof the right to vote or to consent
as a shareholder in respect of meetings of shareholders for the election of directors of
the Company or any other matters or any rights whatsoever as a shareholder of the
Company. No dividends or interest shall be payable or accrued in respect of this Warrant
or  

5 

 

the interest represented hereby or
the shares purchasable hereunder until, and only to the extent that, this Warrant shall
have been exercised. No provisions hereof, in the absence of affirmative action by the
holder to purchase shares of Preferred Stock, and no mere enumeration herein of the rights
or privileges of the Holder hereof, shall give rise to any liability of such Holder for
the Stock Purchase Price or as a shareholder of the Company, whether such liability is
asserted by the Company or by its creditors. 

         8.
Registration Rights. The Holder hereof shall be entitled, with respect to the shares of
Preferred Stock issued upon exercise hereof or the shares of Common Stock or other
securities issued upon conversion of such Preferred Stock as the case may be, to the
piggyback registration rights set forth in Section 2.2 of the Restated Investor Rights
Agreement dated as of December 31, 1998, and to be made a party to that agreement. The
company shall take such action as may be reasonably necessary to assure that the granting
of such registration rights to the Holder does not violate the provisions of such
agreement or any of the Company’s charter documents or rights of prior Grantees of
registration rights.  

         9.
Rights and Obligations Survive Exercise of Warrant. The rights and obligations of the
Company, of the Holder of this Warrant and of the holder of shares of Preferred Stock
issued upon exercise of this Warrant, contained in Sections 6 and 8 shall survive the
exercise of this Warrant.  

         10.
Modification and Waiver. This Warrant and any provision hereof may be changed, waived,
discharged or terminated only by an instrument in writing signed by the party against
which enforcement of the same is sought.  

         11.
Notices. Any notice, request or other document required or permitted to be given or
delivered to the holder hereof or the Company shall be deemed to have been given (i) upon
receipt if delivered personally or by courier (ii) upon confirmation of receipt if by
telecopy or (iii) three business days after deposit in the US mail, with postage prepaid
and certified or registered, to each such holder at its address as shown an the books of
the Company or to the Company at the address indicated therefor in the first paragraph of
this Warrant.  

         12.
Binding Effect on Successors. This Warrant shall be binding upon any corporation
succeeding the Company by merger, consolidation or acquisition of all or substantially
all of the Company’s assets. All of the obligations of the Company relating to the
Preferred Stock issuable upon the exercise of this Warrant shall survive the exercise and
termination of this Warrant. All of the covenants and agreements of the Company shall
inure to the benefit of the successors and assign of the holder hereof.  

         13.
Descriptive Headings and Governing Law. The descriptive headings of the several sections
and paragraphs of this Warrant are inserted for convenience only and do not constitute a
part of this Warrant. This Warrant shall be construed and enforced in accordance with,
and the rights of the parties shall be governed by, the laws of the State of California.  

         14.
Lost Warrants or Stock Certificates. The Company represents and warrants to the Holder
hereof that upon receipt of evidence reasonably satisfactory to the Company of the loss,
theft, destruction, or mutilation of any Warrant or stock certificate and, in the case of
any such loss, theft or destruction, upon receipt of an indemnity reasonably satisfactory
to the Company, or in the case of any such mutilation upon surrender and cancellation of
such Warrant or stock certificate, the Company at its expense will make and deliver a new
Warrant or stock certificate, of like tenor, in lieu of the lost, stolen, destroyed or
mutilated Warrant or stock certificate.  

         15.
Fractional Shares. No fractional shares shall be issued upon exercise of this Warrant.
The Company shall, in lieu of issuing any fractional share, pay the holder entitled to
such fraction a sum in cash equal to such fraction multiplied by the then effective Stock
Purchase Price.  

6 

 

         16.
Representations of Holder. With respect to this Warrant, Holder represents and warrants
to the Company as follows:  

         
         16.1
Experience. It is experienced in evaluating and investing in companies engaged in
businesses similar to that of the Company; it understands that investment in the Warrant
involves substantial risks; it has made detailed inquiries concerning the Company, its
business and services, its officers and its personnel: the officers of the Company have
made available to Holder any and all written information it has requested; the officers
of the Company have answered to Holder’s satisfaction all inquiries made by it; in
making this investment it has relied upon information made available to it by the
Company: and it has such knowledge and experience in financial and business matters that
it is capable of evaluating the merits and risks of investment in the Company and it is
able to bear the economic risk of that investment.  

         
         16.2
Investment. It is acquiring the Warrant for investment for its own account and not with a
view to, or for resale in connection with, any distribution thereof. It understands that
the Warrant, the shares of Preferred Stock issuable upon exercise thereof and the shares
of Common Stock issuable upon conversion of the Preferred Stock, have not been registered
under the Securities Act of 1933, as amended, nor qualified under applicable state
securities laws.  

         
         16.3
Rule 144. It acknowledges that the Warrant, the Preferred Stock and the Common Stock must
be held indefinitely unless they are subsequently registered under the Securities Act or
an exemption from such registration is available. It has been advised or is aware of the
provisions of Rule 144 promulgated under the Securities Act.  

         
         16.4
Access to Data. It has had an opportunity to discuss the Company’s business,
management and financial affairs with the Company’s management and has had the
opportunity to inspect the Company’s facilities.  

         
         16.5
Accredited Investor. Holder represents that it is an “accredited investor” within
the meaning of Rule 501, Regulation D of the Securities Act of 1933, as amended.  

         
         16.6
Market Standoff Agreement. It agrees that in connection with the initial registration of
the Company’s securities that, upon the request of the Company or the underwriters
managing any new written public offering of the Company’s securities, not to sell,
make any short sale of, loan, grant an option for the purchase of, or otherwise dispose
of any Registerable Securities (as defined in the Restated Investors’ Rights
Agreement) other than those included in the registration without the prior written
consent of the Company or such underwriters. as the case may be, for such period of time
as may be requested by the Company or such managing underwriters (not to exceed 180 days)
from the effective date of such registration, provided that the Company’s officers,
directors, and its shareholders who own at least five percent (5%) of the Company’s
voting equity are subject to the same restrictions. 

         17.
Additional Representations and Covenants of the Company. The Company hereby represents,
warrants and agrees as follows:  

         
         17.1
Corporate Power. The Company has all requisite corporate power and corporate authority to
issue this Warrant and to carry out and perform its obligations hereunder.  

         
         17.2
Authorization. All corporate action on the part of the Company, its directors and
shareholders necessary for the authorization, execution, delivery and performance by the
Company of this has been taken. This Warrant is a valid and binding obligation of the
Company, enforceable in accordance with its terms.  

         
         17.3
Offering. Subject in part to the truth and accuracy of Holder’s representations set
forth in Section 17 hereof, the offer, issuance and sale of the Warrant is, and the
issuance of Preferred Stock upon exercise of the Warrant and the issuance of Common Stock
upon conversion of the Preferred Stock will be exempt from the registration requirements
of the Securities Act and are exempt from the qualification requirements of any  

7 

 

applicable state securities laws;
and neither the Company nor anyone acting on its behalf will take any action hereafter
that would cause the loss of such exemptions. 

         
         17.4
Stock Issuance. Upon exercise of the Warrant, the Company will use its best efforts to
cause stock certificates representing the shares of Preferred Stock purchased pursuant to
the exercise to be issued in the individual names of Holder, its nominees or assignees,
as appropriate at the time of such exercise. Upon conversion of the shares of Preferred
Stock to shares of Common Stock, the Company will issue the Common Stock in the
individual names of Holder, its nominees or assignees, as appropriate.  

         
         17.5
Certificate and By-Laws. The Company has provided Holder with true and complete copies of
the Company’s Certificate of Incorporation, By-Laws, and each Certificate of
Determination or other charter document setting, forth any rights, preferences and
privileges of Company’s capital stock, each as amended and in effect on the date of
issuance of this Warrant.  

         
         17.6
Conversion of Preferred Stock. As of the date hereof, each share of the Preferred Stock
is convertible into one share of the Common Stock.  

         
         17.7
Financial and Other Reports. From time to time up to the earlier of the Expiration Date
or the complete exercise of this Warrant, the Company shall furnish to Holder (i) within
90 days after the close of each fiscal year of the Company an audited balance sheet and
statement of changes in financial position at and as of the end of such fiscal year,
together with an audited statement of income for such fiscal year; (ii) within 45 days
after the close of each fiscal quarter of the Company, an unaudited balance sheet and
statement of cash flows at and as of the end of such quarter, together with an unaudited
statement of income for such quarter; and (iii) promptly after sending, making available,
or filing, copies of all reports, proxy statements. and financial statements that the
Company sends or makes available to its shareholders and all registration statements and
reports that the Company files with the SEC or any other governmental or regulatory
authority.  

IN WITNESS WHEREOF, the Company has
caused this Warrant to be duly executed by its officers, thereunto duly authorized this
17th day of March, 2000. 

VASCULAR INNOVATIONS, INC. 

By:    /s/ Bernard Hausen         

Title: President & CEO             

8 

 

FORM OF SUBSCRIPTION 

(To be signed only upon
exercise of Warrant) 

To:   __________________________________ 

	 	
The
undersigned, the holder of the within Warrant, hereby irrevocably elects to exercise the
purchase right represented by such Warrant for, and to purchase thereunder, (1) See Below
___________ (________) shares (the “Shares”) of Stock of _________ and herewith
makes payment of __________  Dollars ($________) therefor, and requests that the
certificates for such shares be issued in the name of, and delivered to, _________, whose
address is __________. 

	 	
The
undersigned hereby elects to convert _______ percent (__%) of the value of the Warrant
pursuant to the provisions of Section l(b) of the Warrant. 

The undersigned represents that it
is acquiring such Common Stock for its own account for investment and not with a view to
or for sale in connection with any distribution thereof (subject. however, to any
requirement of law that the disposition thereof shall at all times be within its control. 

	 	Dated    ___________________

      

      Holder:  ___________________

      

      By:         ___________________

      

      Its:         ___________________

      

      

      (Address)

      _______________________ 

      _______________________ 

	(1)  	Insert
here the number of shares called for on the face of the Warrant (or. in the case of a
partial exercise. the portion thereof as to which the Warrant is being exercised), in
either case without making any adjustment for additional Preferred Stock or any other
stock or other securities or property or cash which, pursuant to the adjustment
provisions of the Warrant, may be deliverable upon exercise.

9 

 

EXHIBIT “A”  

[On letterhead of the
Company]  

         
         Reference
is hereby made to that certain Warrant dated ______________, 199_, issued by
___________________, a ____________ corporation (the “Company”), to VENTURE
LENDING & LEASING II, INC., a Maryland corporation (the “Holder”). 

         [IF
APPLICABLE] The Warrant provides that the actual number of shares of the Company’s
capital stock issuable upon exercise of the Warrant and the initial exercise price per
share are to be determined by reference to one or more events or conditions subsequent to
the issuance of the Warrant. Such events or conditions have now occurred or lapsed, and
the Company wishes to confirm the actual number of shares issuable and the initial
exercise price. The provisions of this Supplement to Warrant are incorporated into the
Warrant by this reference, and shall control the interpretation and exercise of the
Warrant. 

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

         This
certifies that the Holder is entitled to purchase from the Company
_________________________ (_________) fully paid and nonassessable shares of the Company’s
________ Stock at a price of ______________________ Dollars ($_________) per share (the
“Stock Purchase Price”). The Stock Purchase Price and the number of shares
purchasable under the Warrant remain subject to adjustment as provided in Section 4 of
the Warrant. 

         Executed
this ____ day of _____________, 199_. 

	 	[COMPANY]
      

      

      By:      __________________________

      

      Name: __________________________

      

      Title:   __________________________

11 

 

ASSIGNMENT  

FOR VALUE RECEIVED, the undersigned,
the holder of the within Warrant, hereby sells, assigns and transfers all of the rights
of the undersigned under the within Warrant, with respect to the number of shares of
Preferred Stock covered thereby set forth hereinbelow, unto: 

	Name of
      Assignee	Address	No. of Shares
	
      

    
	  		
	  		
	  		
	  		

	 	Dated    ___________________

      

      Holder:  ___________________

      

      By:         ___________________

      

      Its:         ___________________
      

10

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