VOLCANO CORPORATION FOURTH AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT

Exhibit 4.2

FINAL

VOLCANO CORPORATION
FOURTH AMENDED AND RESTATED
INVESTOR RIGHTS AGREEMENT

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

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

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

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

ARTICLE 1

REGISTRATION RIGHTS;
RESTRICTIONS ON TRANSFERABILITY

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

     1.5 Requested Registration .

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

     1.6 Company Registration .

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

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

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

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

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

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

     1.7 Registration on Form S-3

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

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

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

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

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

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

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

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

               (b) Furnish to the Holders participating in such registration and to the underwriters of the securities being registered such reasonable number of copies of the registration statement and amendments and supplements thereto, preliminary prospectus, final prospe