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[LOGO]  Bank of America                                            Amended and
        Restated                    
                    Business Loan Agreement

National Trust and Savings Association
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This Amended and Restated  Business  Loan  Agreement  ("Agreement")  dated as of
August  21,  1997,  is  between  Bank of  America  National  Trust  and  Savings
Association  (the  "Bank")  and  Arterial   Vascular   Engineering,   Inc.  (the
"Borrower").  This  Agreement  amends,  and as  amended,  restates  in full that
certain  Business Loan Agreement  dated as of August 20, 1997,  between the Bank
and the Borrower.

1.       LINE OF CREDIT AMOUNT AND TERMS

1.1      Line of Credit Amount.

(a)      During the availability period described below, the Bank will provide a
         line of credit to the  Borrower.  The amount of the line of credit (the
         "Commitment") is the lesser of:

         (i)      Twenty Million Dollars ($20,000,000) or

         (ii)     the loan  value of the  marketable  securities  pledged to the
                  Bank.  The  loan  value  of a  marketable  security  will be a
                  percentage  of its fair market  value.  The fair market  value
                  will be  determined  by the Bank from time to time in its sole
                  discretion.  The percentage applied to a particular marketable
                  security  will be the  percentage  listed on Attachment A. The
                  percentage  can  be  changed  by the  Bank  at  any  time  for
                  reasonable   cause.  The  Bank's  records  of  the  applicable
                  percentage will be controlling.

         If at any time the total amount of principal outstanding under the line
         of credit  exceeds this limit,  the Borrower  will  immediately  either
         increase the loan value of marketable  securities  or other  acceptable
         collateral  pledged to the Bank, or reduce the total amount outstanding
         in order to comply  with this limit.  If any of the pledged  assets are
         margin  stock,  the  Borrower  will provide the Bank a Form U-1 Purpose
         Statement,  and  the  Bank  and  the  Borrower  will  comply  with  the
         restrictions imposed by Regulation U of the Federal Reserve,  which may
         require a reduction  in the loan value of the margin  stock  pledged to
         the Bank.

         The Bank is prohibited from accepting as collateral  certain Ineligible
         Securities  while they are being  underwritten  or privately  placed by
         BancAmerica  Securities,  Inc. The Bank and the  Borrower  shall comply
         with these restrictions. BancAmerica Securities, Inc. is a wholly-owned
         subsidiary   of   BankAmerica   Corporation,   and   is  a   registered
         broker-dealer  which is  permitted  to  underwrite  and deal in certain
         Ineligible Securities.  "Ineligible  Securities" means securities which
         may not be  underwritten  or dealt in by  member  banks of the  Federal
         Reserve  System under  Section 16 of the Banking Act of 1933 (12 U.S.C.
         s.s. 24, Seventh), as amended.

(b)      This is a revolving line of credit providing for cash advances.  During
         the availability  period,  the Borrower may repay principal amounts and
         reborrow them.

1.2      Availability  Period.  The line of credit is available between the date
of this  Agreement  and  August  31,  1998 (the  "Expiration  Date")  unless the
Borrower is in default.

1.3      Interest Rate.

(a)      Unless the  Borrower  elects an  optional  interest  rate as  described
         below, the interest rate is the Bank's Reference Rate.

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(b)      The Reference Rate is the rate of interest publicly announced from time
         to time by the  Bank in San  Francisco,  California,  as its  Reference
         Rate. The Reference  Rate is set by the Bank based on various  factors,
         including  the  Bank's  costs  and  desired  return,  general  economic
         conditions  and other  factors,  and is used as a  reference  point for
         pricing  some  loans.  The Bank may price  loans to its  customers  at,
         above,  or below the Reference  Rate.  Any change in the Reference Rate
         shall take effect at the opening of  business on the day  specified  in
         the public announcement of a change in the Bank's Reference Rate.

1.4      Repayment Terms.

(a)      The Borrower  will pay interest on September 1, 1997,  and then monthly
         thereafter  until  payment in full of any principal  outstanding  under
         this line of credit.

(b)      The Borrower will repay in full all  principal and any unpaid  interest
         or other  charges  outstanding  under this line of credit no later than
         the Expiration Date.

(c)      Any interest period for any optional interest rate (as described below)
         shall expire no later than the Expiration Date.

1.5      Optional  Interest  Rates.  Instead of the  interest  rate based on the
Bank's Reference Rate, the Borrower may elect the optional interest rates listed
below  during  interest  periods  agreed  to by the Bank and the  Borrower.  The
optional  interest rates shall be subject to the terms and conditions  described
later in this Agreement.  Any principal  amount bearing  interest at an optional
rate under this Agreement is referred to as a "Portion." The following  optional
interest rates are available:

(a)      the LIBOR Rate plus 0.50 percentage point.

(b)      the Cayman Rate plus .50 percentage point.

2.       OPTIONAL INTEREST RATES

2.1      Optional  Rates.  Each  optional  interest  rate  is a rate  per  year.
Interest will be paid on the last day of each interest period,  and on the first
day each month during the interest  period.  At the end of any interest  period,
the interest  rate will revert to the rate based on the Reference  Rate,  unless
the Borrower has designated  another optional interest rate for the Portion.  No
Portion  will be converted to a different  interest  rate during the  applicable
interest  period.  Upon  the  occurrence  of an  event  of  default  under  this
Agreement,  the Bank may terminate the  availability of optional  interest rates
for interest periods commencing after the default occurs.

2.2      LIBOR  Rate.  The  election  of LIBOR  Rates  shall be  subject  to the
following terms and requirements:

(a)      The interest  period during which the LIBOR Rate will be in effect will
         be one, two, three, or six months. The first day of the interest period
         must be a day other  than a  Saturday  or a Sunday on which the Bank is
         open for  business  in  California,  New York and London and dealing in
         offshore  dollars (a "LIBOR Banking Day"). The last day of the interest
         period and the actual number of days during the interest period will be
         determined  by the Bank using the  practices  of the London  inter-bank
         market.

(b)      Each  LIBOR  Rate  Portion  will be for an  amount  not less  than Five
         Hundred Thousand Dollars ($500,000).

(c)      The "LIBOR Rate" means the interest  rate  determined  by the following
         formula,  rounded  upward to the  nearest  1/100 of one  percent.  (All
         amounts in the  calculation  will be  determined  by the Bank as of the
         first day of the interest period.)

                LIBOR Rate =    London Inter-Bank Offered Rate
                                ------------------------------
                                  (1.00 - Reserve Percentage)

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         Where,   

         (i)      "London  Inter-Bank  Offered  Rate" means the interest rate at
                  which the Bank's London Branch,  London, Great Britain,  would
                  offer U.S. dollar deposits for the applicable  interest period
                  to  other  major  banks in the  London  inter-bank  market  at
                  approximately  11:00 a.m.  London time two (2) London  Banking
                  Days before the commencement of the interest period. A "London
                  Banking  Day" is a day on which the  Bank's  London  Branch is
                  open for business and dealing in offshore dollars.

         (ii)     "Reserve  Percentage"  means the total of the maximum  reserve
                  percentages  for  determining the reserves to be maintained by
                  member banks of the Federal  Reserve  System for  Eurocurrency
                  Liabilities, as defined in Federal Reserve Board Regulation D,
                  rounded  upward  to the  nearest  1/100  of one  percent.  The
                  percentage  will be expressed as a decimal,  and will include,
                  but not be  limited  to,  marginal,  emergency,  supplemental,
                  special, and other reserve percentages.

(d)      The Borrower  shall  irrevocably  request a LIBOR Rate Portion no later
         than 12:00 noon San  Francisco  time on the LIBOR Banking Day preceding
         the day on which the London  Inter-Bank  Offered  Rate will be set,  as
         specified above.

(e)      The Borrower  may not elect a LIBOR Rate with respect to any  principal
         amount  which is  scheduled  to be  repaid  before  the last day of the
         applicable interest period.

(f)      Each prepayment of a LIBOR Rate Portion,  whether voluntary,  by reason
         of  acceleration  or otherwise,  will be  accompanied  by the amount of
         accrued  interest  on  the  amount  prepaid  and a  prepayment  fee  as
         described  below.  A  "prepayment"  is a payment of an amount on a date
         earlier than the scheduled  payment date for such amount as required by
         this  Agreement.  The  prepayment  fee shall be equal to the amount (if
         any) by which:

         (i)      the  additional  interest which would have been payable during
                  the  interest  period on the  amount  prepaid  had it not been
                  prepaid, exceeds

         (ii)     the interest which would have been  recoverable by the Bank by
                  placing  the  amount   prepaid  on  deposit  in  the  domestic
                  certificate of deposit market,  the eurodollar deposit market,
                  or other  appropriate money market selected by the Bank, for a
                  period starting on the date on which it was prepaid and ending
                  on the last day of the  interest  period for such  Portion (or
                  the  scheduled  payment  date  for  the  amount  prepaid,   if
                  earlier).

(g)      The Bank will have no obligation to accept an election for a LIBOR Rate
         Portion if any of the  following  described  events has occurred and is
         continuing:

         (i)      Dollar deposits in the principal amount, and for periods equal
                  to the  interest  period,  of a  LIBOR  Rate  Portion  are not
                  available in the London inter-bank market; or

         (ii)     the LIBOR Rate does not accurately reflect the cost of a LIBOR
                  Rate Portion.

2.3      Cayman  Rate.  The  election  of Cayman  Rates  shall be subject to the
following terms and requirements:

(a)      The interest period during which the Cayman Rate will be in effect will
         be one, two, three or six months.  The last day of the interest  period
         will be  determined  by the Bank using the  practices  of the  offshore
         dollar inter-bank market.

(b)      Each  Cayman  Rate  Portion  will be for an  amount  not less than Five
         Hundred Thousand Dollars ($500,000).

(c)      The Borrower may not elect a Cayman Rate with respect to any  principal
         amount  which is  scheduled  to be  repaid  before  the last day of the
         applicable interest period.

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(d)      The "Cayman Rate" means the interest  rate  determined by the following
         formula,  rounded  upward to the  nearest  1/100 of one  percent.  (All
         amounts in the  calculation  will be  determined  by the Bank as of the
         first day of the interest period.)

                   Cayman Rate  =       Cayman Base Rate
                                   ---------------------------
                                   (1.00 - Reserve Percentage)

         Where,   

         (i)      "Cayman Base Rate" means the interest rate at which the Bank's
                  Grand Cayman Branch, Grand Cayman,  British West Indies, would
                  offer U.S. dollar deposits for the applicable  interest period
                  to other major banks in the offshore dollar inter-bank market.

         (ii)     "Reserve  Percentage"  means the total of the maximum  reserve
                  percentages  for  determining the reserves to be maintained by
                  member banks of the Federal  Reserve  System for  Eurocurrency
                  Liabilities,   as  defined  in  the  Federal   Reserve   Board
                  Regulation  D,  rounded  upward  to the  nearest  1/100 of one
                  percent.  The percentage  will be expressed as a decimal,  and
                  will  include,  but not be limited  to,  marginal,  emergency,
                  supplemental, special, and other reserve percentages.

(e)      Each prepayment of a Cayman Rate Portion,  whether voluntary, by reason
         of  acceleration  or otherwise,  will be  accompanied  by the amount of
         accrued  interest  on  the  amount  prepaid,  and a  prepayment  fee as
         described  below.  A  "prepayment"  is a payment of an amount on a date
         earlier than the scheduled  payment date for such amount as required by
         this  Agreement.  The  prepayment  fee shall be equal to the amount (if
         any) by which:

         (i)      the  additional  interest which would have been payable during
                  the  interest  period on the  amount  prepaid  had it not been
                  prepaid, exceeds

         (ii)     the interest which would have been  recoverable by the Bank by
                  placing  the  amount   prepaid  on  deposit  in  the  domestic
                  certificate of deposit market,  the eurodollar deposit market,
                  or other  appropriate  money market selected by the Bank for a
                  period starting on the date on which it was prepaid and ending
                  on the last day of the  interest  period for such  Portion (or
                  the  scheduled  payment  date  for  the  amount  prepaid,   if
                  earlier).

(f)      The Bank will have no  obligation  to accept an  election  for a Cayman
         Rate Portion if any of the following  described events has occurred and
         is continuing:

         (i)      Dollar deposits in the principal amount, and for periods equal
                  to the  interest  period,  of a Cayman  Rate  Portion  are not
                  available in the offshore dollar inter-bank market; or

         (ii)     the  Cayman  Rate does not  accurately  reflect  the cost of a
                  Cayman Rate Portion.

3.      FEES, EXPENSES AND DEPOSITS

3.1     Fees.

(a)      Loan Fee. The Borrower  agrees to pay a Five Thousand  Dollar  ($5,000)
         fee due on the date of this Agreement. The Bank acknowledges receipt of
         such fee.

(b)      Unused  Commitment  Fee.  The  Borrower  agrees  to  pay a fee  on  any
         difference  between the Commitment and the amount of credit it actually
         uses,  determined by the weighted average credit outstanding during the
         specified  period.  The fee will be calculated at 0.125% per year. This
         fee is due on January 1, 1998,  and on the first day of each  following
         quarter until the expiration of the availability period.

3.2      Expenses.  The  Borrower  agrees  to  immediately  repay  the  Bank for
expenses  that  include,  but are not limited to,  filing,  recording and search
fees, appraisal fees, title report fees and documentation fees.

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3.3      Reimbursement  Costs. The Borrower agrees to reimburse the Bank for any
expenses it incurs in the  preparation  of this  Agreement  and any agreement or
instrument required by this Agreement. Expenses include, but are not limited to,
reasonable attorneys' fees, including any allocated costs of the Bank's in-house
counsel.

4.       COLLATERAL

4.1      Personal  Property.  The Borrower's  obligations to the Bank under this
Agreement will be secured by personal property the Borrower now owns or will own
in the future as listed below.  The  collateral  is further  defined in security
agreement(s)  executed by the  Borrower.  In  addition,  all  personal  property
collateral  securing  this  Agreement  shall also  secure all other  present and
future  obligations of the Borrower to the Bank  (excluding any consumer  credit
covered by the federal  Truth in Lending law,  unless the Borrower has otherwise
agreed in writing).  All personal property collateral securing any other present
or future  obligations  of the  Borrower  to the Bank  shall  also  secure  this
Agreement.

(a)      Stock and other securities.

5.       DISBURSEMENTS, PAYMENTS AND COSTS

5.1      Requests  for Credit.  Each  request for an extension of credit will be
made in  writing  in a  manner  acceptable  to the  Bank,  or by  another  means
acceptable to the Bank.

5.2      Disbursements  and  Payments.  Each  disbursement  by the Bank and each
payment by the Borrower will be:

(a)      made at the Bank's branch (or other location) selected by the Bank from
         time to time;

(b)      made for the  account of the Bank's  branch  selected  by the Bank from
         time to time;

(c)      made in  immediately  available  funds,  or such  other  type of  funds
         selected by the Bank;

(d)      evidenced  by records kept by the Bank.  In addition,  the Bank may, at
         its  discretion,  require the  Borrower to sign one or more  promissory
         notes.

5.3      Telephone and Telefax Authorization.

(a)      The Bank may honor  telephone or telefax  instructions  for advances or
         repayments or for the  designation of optional  interest rates given by
         any one of the individuals authorized to sign loan agreements on behalf
         of the Borrower,  or any other individual designated by any one of such
         authorized signers.

(b)      Advances will be deposited in and repayments will be withdrawn from the
         Borrower's account number 14989-00617,  or such other of the Borrower's
         accounts with the Bank as designated in writing by the Borrower.

(c)      The Borrower  indemnifies and excuses the Bank (including its officers,
         employees,  and  agents)  from  all  liability,   loss,  and  costs  in
         connection   with  any  act   resulting   from   telephone  or  telefax
         instructions  it  reasonably   believes  are  made  by  any  individual
         authorized by the Borrower to give such  instructions.  This  indemnity
         and excuse will survive this Agreement's termination.

5.4      Direct Debit (Pre-Billing).

(a)      The  Borrower  agrees that the Bank will debit the  Borrower's  deposit
         account number  14989-00617,  or such other of the Borrower's  accounts
         with the Bank as designated in writing by the Borrower (the "Designated
         Account")  on the date each  payment of interest  and any fees from the
         Borrower becomes due (the "Due Date"). If the Due Date is not a banking
         day, the Designated Account will be debited on the next banking day.

(b)      Approximately 10 days prior to each Due Date, the Bank will mail to the
         Borrower a statement  of the amounts  that will be due on that Due Date
         (the "Billed  Amount").  The calculation will be made on the 

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         assumption  that no new  extensions  of credit or payments will be made
         between the date of the billing  statement  and the Due Date,  and that
         there will be no changes in the applicable interest rate.

(c)      The Bank will  debit the  Designated  Account  for the  Billed  Amount,
         regardless  of  the  actual  amount  due on  that  date  (the  "Accrued
         Amount").

         If the Billed Amount debited to the Designated Account differs from the
         Accrued Amount, the discrepancy will be treated as follows:

         (i)      If the  Billed  Amount is less than the  Accrued  Amount,  the
                  Billed  Amount for the following Due Date will be increased by
                  the amount of the  discrepancy.  The  Borrower  will not be in
                  default by reason of any such discrepancy.

         (ii)     If the  Billed  Amount is more than the  Accrued  Amount,  the
                  Billed  Amount for the following Due Date will be decreased by
                  the amount of the discrepancy.

         Regardless  of any such  discrepancy,  interest will continue to accrue
         based  on  the  actual   amount  of   principal   outstanding   without
         compounding.  The  Bank  will  not pay  the  Borrower  interest  on any
         overpayment.

(d)      The Borrower will maintain  sufficient funds in the Designated  Account
         to cover each debit. If there are insufficient  funds in the Designated
         Account  on the date the  Bank  enters  any  debit  authorized  by this
         Agreement, the debit will be reversed.

5.5      Banking Days.  Unless otherwise  provided in this Agreement,  a banking
day is a day  other  than a  Saturday  or a Sunday on which the Bank is open for
business in California.  All payments and disbursements  which would be due on a
day which is not a banking day will be due on the next banking day. All payments
received  on a day which is not a banking  day will be  applied to the credit on
the next banking day.

5.6      Taxes.

(a)      If any payments to the Bank under this  Agreement are made from outside
         the United States,  the Borrower will not deduct any foreign taxes from
         any payments it makes to the Bank. If any such taxes are imposed on any
         payments  made  by  the  Borrower   (including   payments   under  this
         paragraph),  the  Borrower  will pay the taxes and will also pay to the
         Bank, at the time  interest is paid,  any  additional  amount which the
         Bank  specifies as necessary to preserve the  after-tax  yield the Bank
         would have  received if such taxes had not been  imposed.  The Borrower
         will confirm that it has paid the taxes by giving the Bank official tax
         receipts (or notarized copies) within 30 days after the due date.

(b)      Payments  made  by the  Borrower  to the  Bank  will  be  made  without
         deduction  of  United  States  withholding  or  similar  taxes.  If the
         Borrower is required to pay U.S.  withholding  taxes, the Borrower will
         pay such taxes in  addition  to the  amounts due to the Bank under this
         Agreement.  If the Borrower  fails to make such tax payments  when due,
         the Borrower indemnifies the Bank against any liability for such taxes,
         as well as for any related  interest,  expenses,  additions  to tax, or
         penalties asserted against or suffered by the Bank with respect to such
         taxes.

5.7      Additional  Costs.  The Borrower will pay the Bank, on demand,  for the
Bank's costs or losses arising from any statute or regulation, or any request or
requirement of a regulatory  agency which is applicable to all national banks or
a class of all  national  banks.  The costs and losses will be  allocated to the
loan in a manner determined by the Bank, using any reasonable  method. The costs
include the following:

(a)      any reserve or deposit requirements; and

(b)      any capital requirements  relating to the Bank's assets and commitments
         for credit.

5.8      Interest Calculation. Except as otherwise stated in this Agreement, all
interest and fees,  if any,  will be computed on the basis of a 360-day year and
the actual number of days elapsed. This results in more interest

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or a higher fee than if a 365-day year is used.  Instalments of principal  which
are not paid when due under this Agreement shall continue to bear interest until
paid.

5.9      Default Rate.  Upon the occurrence and during the  continuation  of any
default under this Agreement, principal amounts outstanding under this Agreement
will at the option of the Bank bear  interest at a rate which is 2.0  percentage
point(s)  higher  than  the  rate of  interest  otherwise  provided  under  this
Agreement. This will not constitute a waiver of any default.

6.       CONDITIONS

The Bank must receive the following items, in form and content acceptable to the
Bank,  before it is  required  to extend any credit to the  Borrower  under this
Agreement:

6.1      Authorizations.  Evidence that the execution,  delivery and performance
by the Borrower  (and any  guarantor) of this  Agreement  and any  instrument or
agreement required under this Agreement have been duly authorized.

6.2      Governing   Documents.   A  copy   of  the   Borrower's   articles   of
incorporation.

6.3      Security Agreements. Signed original security agreements,  assignments,
financing  statements and fixture filings (together with collateral in which the
Bank requires a possessory security interest), which the Bank requires.

6.4      Evidence of Priority.  Evidence  that  security  interests and liens in
favor of the Bank are valid,  enforceable,  and prior to all others'  rights and
interests, except those the Bank consents to in writing.

6.5      Insurance.   Evidence  of  insurance  coverage,   as  required  in  the
"Covenants" section of this Agreement.

6.6      Environmental  Questionnaire.   A  completed  Bank  form  Environmental
Questionnaire.

6.7      Other Items. Any other items that the Bank reasonably requires.

7.       REPRESENTATIONS AND WARRANTIES

When the Borrower  signs this  Agreement,  and until the Bank is repaid in full,
the Borrower makes the following  representations  and warranties.  Each request
for an extension of credit constitutes a renewed representation.

7.1      Organization of Borrower. The Borrower is a corporation duly formed and
existing under the laws of the state where organized.

7.2      Authorization. This Agreement, and any instrument or agreement required
hereunder,  are within the Borrower's powers, have been duly authorized,  and do
not conflict with any of its organizational papers.

7.3      Enforceable  Agreement.  This  Agreement is a legal,  valid and binding
agreement of the Borrower,  enforceable  against the Borrower in accordance with
its terms, and any instrument or agreement required hereunder, when executed and
delivered, will be similarly legal, valid, binding and enforceable.

7.4      Good Standing. In each state in which the Borrower does business, it is
properly  licensed,  in good standing,  and, where required,  in compliance with
fictitious name statutes.

7.5      No Conflicts. This Agreement does not conflict with any law, agreement,
or obligation by which the Borrower is bound.

7.6      Financial  Information.  All financial and other  information  that has
been or will be supplied to the Bank is:

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                                      -7-
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(a)      sufficiently  complete  to give  the  Bank  accurate  knowledge  of the
         Borrower's (and any guarantor's) financial condition.

(b)      in compliance with all government regulations that apply.

7.7      Lawsuits.  There is no lawsuit,  tax claim or other dispute  pending or
threatened  against the Borrower,  which,  if lost,  would impair the Borrower's
financial  condition or ability to repay the loan, except as have been disclosed
in writing to the Bank.

7.8      Collateral.  All collateral  required in this Agreement is owned by the
grantor  of the  security  interest  free of any title  defects  or any liens or
interests of others.

7.9      Permits,  Franchises. The Borrower possesses all permits,  memberships,
franchises, contracts and licenses required and all trademark rights, trade name
rights,  patent  rights and  fictitious  name rights  necessary  to enable it to
conduct the business in which it is now engaged.

7.10     Other Obligations. The Borrower is not in default on any obligation for
borrowed  money,  any purchase  money  obligation or any other  material  lease,
commitment, contract, instrument or obligation.

7.11     Income Tax  Matters.  The  Borrower  has no  knowledge  of any  pending
assessments or adjustments of its income tax for any year.

7.12     No Tax Avoidance Plan. The Borrower's obtaining of credit from the Bank
under this Agreement does not have as a principal  purpose the avoidance of U.S.
withholding taxes.

7.13     No Event of  Default.  There is no event  which is,  or with  notice or
lapse of time or both would be, a default under this Agreement.

7.14     Location of  Borrower.  The  Borrower's  place of business  (or, if the
Borrower has more than one place of  business,  its chief  executive  office) is
located at the address listed under the Borrower's signature on this Agreement.

8.       COVENANTS

The Borrower  agrees,  so long as credit is available  under this  Agreement and
until the Bank is repaid in full:

8.1      Use  of  Proceeds.   To  use  the  proceeds  of  the  credit  only  for
construction of a new manufacturing facility in Santa Rosa, CA.

8.2      Financial  Information.  To provide the following financial information
and statements in form and content  acceptable to the Bank, and such  additional
information as requested by the Bank from time to time:

(a)      Within  120 days of the  Borrower's  fiscal  year end,  the  Borrower's
         annual financial statements. These financial statements must be audited
         (with an unqualified  opinion) by a Certified Public Accountant ("CPA")
         acceptable to the Bank.

(b)      Within  120 days of the  Borrower's  fiscal  year  end,  copies  of the
         Borrower's Form 10-K Annual Report.

(c)      Copies of the  Borrower's  Form 10-Q  quarterly  Report  within 45 days
         after the date of filing with the Securities and Exchange Commission.

(d)      Within 30 days of the period's end, the  Borrower's  monthly  brokerage
         statements.  These statements will reflect  individual  securities held
         including CUSIP numbers, by type and market value.

8.3      Notices to Bank. To promptly notify the Bank in writing of:

(a)      any substantial dispute between the Borrower (or any guarantor) and any
         government authority.

--------------------------------------------------------------------------------
                                      -8-
<PAGE>

(b)      any failure to comply with this Agreement.

(c)      any material  adverse  change in the  Borrower's  (or any  guarantor's)
         business condition (financial or otherwise),  operations, properties or
         prospects, or ability to repay the credit.

(d)      any change in the Borrower's name, legal structure,  place of business,
         or chief  executive  office if the  Borrower has more than one place of
         business.

8.4      Books and Records. To maintain adequate books and records.

8.5      Audits.  To allow the Bank and its agents to inspect the Borrower's and
examine,  audit and make copies of books and records at any reasonable  time. If
any of the  Borrower's  properties,  books or records are in the possession of a
third party, the Borrower  authorizes that third party to permit the Bank or its
agents to have  access to  perform  inspections  or audits and to respond to the
Bank's requests for information concerning such properties, books and records.

8.6      Compliance with Laws. To comply with the laws (including any fictitious
name statute),  regulations,  and orders of any  government  body with authority
over the Borrower's business.

8.7      Preservation   of  Rights.   To  maintain   and  preserve  all  rights,
privileges, and franchises the Borrower now has.

8.8      Maintenance  of  Properties.   To  make  any  repairs,   renewals,   or
replacements to keep the Borrower's properties in good working condition.

8.9      Perfection of Liens.  To help the Bank perfect and protect its security
interests and liens, and reimburse it for related costs it incurs to protect its
security interests and liens.

8.10     Cooperation.  To take any action  reasonably  requested  by the Bank to
carry out the intent of this Agreement.

8.11     Insurance. To maintain insurance as is usual for the business it is in.

8.12     Additional  Negative  Covenants.  Not to,  without  the Bank's  written
consent:

(a)      engage in any  business  activities  substantially  different  from the
         Borrower's present business.

(b)      liquidate or dissolve the Borrower's business.

9.       HAZARDOUS WASTE INDEMNIFICATION

The  Borrower  will  indemnify  and  hold  harmless  the  Bank  from any loss or
liability   directly  or  indirectly   arising  out  of  the  use,   generation,
manufacture,   production,  storage,  release,  threatened  release,  discharge,
disposal or presence of a hazardous substance. This indemnity will apply whether
the  hazardous  substance  is on,  under or about  the  Borrower's  property  or
operations or property leased to the Borrower. The indemnity includes but is not
limited to attorneys' fees  (including the reasonable  estimate of the allocated
cost of in-house  counsel and staff).  The  indemnity  extends to the Bank,  its
parent, subsidiaries and all of their directors,  officers,  employees,  agents,
successors,  attorneys and assigns.  "Hazardous substances" means any substance,
material  or waste  that is or  becomes  designated  or  regulated  as  "toxic,"
"hazardous,"   "pollutant,"  or  "contaminant"  or  a  similar   designation  or
regulation  under any  federal,  state or local law  (whether  under common law,
statute,  regulation or otherwise) or judicial or administrative  interpretation
of such,  including without limitation  petroleum or natural gas. This indemnity
will survive repayment of the Borrower's obligations to the Bank.

10.     DEFAULT

If any of the  following  events  occurs,  the  Bank  may do one or  more of the
following:  declare the Borrower in default,  stop making any additional  credit
available  to the  Borrower,  and require the  Borrower to repay its entire debt
immediately  and without prior notice.  If an event of default  occurs under the
paragraph entitled 

--------------------------------------------------------------------------------
                                      -9-
<PAGE>

"Bankruptcy,"  below,  with  respect  to the  Borrower,  then  the  entire  debt
outstanding under this Agreement will automatically be due immediately.

10.1     Failure  to Pay.  The  Borrower  fails  to make a  payment  under  this
Agreement when due.

10.2     Lien Priority. The Bank fails to have an enforceable first lien (except
for any prior liens to which the Bank has  consented  in writing) on or security
interest in any property given as security for this loan.

10.3     False  Information.  The Borrower (or any guarantor) has given the Bank
false or misleading information or representations.

10.4     Bankruptcy.   The  Borrower  (or  any  guarantor)  files  a  bankruptcy
petition, a bankruptcy petition is filed against the Borrower (or any guarantor)
or the Borrower (or any guarantor) makes a general assignment for the benefit of
creditors.

10.5     Receivers.  A  receiver  or  similar  official  is  appointed  for  the
Borrower's (or any guarantor's) business, or the business is terminated.

10.6     Government Action. Any government  authority takes action that the Bank
believes  materially  adversely  affects  the  Borrower's  (or any  guarantor's)
financial condition or ability to repay.

10.7     Material  Adverse  Change.  A  material  adverse  change  occurs in the
Borrower's (or any  guarantor's)  business  condition  (financial or otherwise),
operations, properties or prospects, or ability to repay the credit.

10.8     Cross-default.  Any default  occurs under any  agreement in  connection
with any credit the Borrower (or any guarantor) has obtained from anyone else or
which the Borrower (or any guarantor) has guaranteed.

10.9     Default Under Related Documents. Any guaranty, subordination agreement,
security agreement,  deed of trust, or other document required by this Agreement
is violated or no longer in effect.

10.10    Other Bank  Agreements.  The Borrower (or any guarantor)  fails to meet
the conditions of, or fails to perform any obligation  under any other agreement
the Borrower (or any guarantor) has with the Bank or any affiliate of the Bank.

10.11    Other Breach Under Agreement. The Borrower fails to meet the conditions
of, or fails to perform any  obligation  under,  any term of this  Agreement not
specifically  referred  to  in  this  Article.  This  includes  any  failure  or
anticipated  failure by the Borrower to comply with any financial  covenants set
forth  in this  Agreement,  whether  such  failure  is  evidenced  by  financial
statements  delivered to the Bank or is  otherwise  known to the Borrower or the
Bank.

11.      ENFORCING THIS AGREEMENT; MISCELLANEOUS

11.1     GAAP.  Except as  otherwise  stated in this  Agreement,  all  financial
information  provided to the Bank and all financial covenants will be made under
generally accepted accounting principles, consistently applied.

11.2     California Law. This Agreement is governed by California law.

11.3     Successors and Assigns. This Agreement is binding on the Borrower's and
the Bank's successors and assignees.  The Borrower agrees that it may not assign
this   Agreement   without  the  Bank's  prior   consent.   The  Bank  may  sell
participations  in or assign this loan, and may exchange  financial  information
about the Borrower with actual or potential participants or assignees;  provided
that such actual or potential participants or assignees shall agree to treat all
financial information  exchanged as confidential.  If a participation is sold or
the loan is assigned,  the purchaser will have the right of set-off  against the
Borrower.

--------------------------------------------------------------------------------
                                      -10-
<PAGE>

11.4     Arbitration.

(a)      This paragraph  concerns the resolution of any  controversies or claims
         between the Borrower and the Bank,  including  but not limited to those
         that arise from:

         (i)      This  Agreement   (including   any  renewals,   extensions  or
                  modifications of this Agreement);

         (ii)     Any document,  agreement or procedure  related to or delivered
                  in connection with this Agreement;

         (iii)    Any violation of this Agreement; or

         (iv)     Any claims for damages  resulting from any business  conducted
                  between the Borrower and the Bank, including claims for injury
                  to persons, property or business interests (torts).

(b)      At the request of the Borrower or the Bank, any such  controversies  or
         claims will be settled by  arbitration  in  accordance  with the United
         States  Arbitration  Act. The United States  Arbitration Act will apply
         even though this  Agreement  provides that it is governed by California
         law.

(c)      Arbitration   proceedings   will  be   administered   by  the  American
         Arbitration  Association and will be subject to its commercial rules of
         arbitration.

(d)      For  purposes of the  application  of the statute of  limitations,  the
         filing of an  arbitration  pursuant to this paragraph is the equivalent
         of the filing of a lawsuit,  and any claim or controversy  which may be
         arbitrated under this paragraph is subject to any applicable statute of
         limitations.  The arbitrators will have the authority to decide whether
         any such claim or  controversy  is barred by the statute of limitations
         and, if so, to dismiss the arbitration on that basis.

(e)      If there is a  dispute  as to  whether  an  issue  is  arbitrable,  the
         arbitrators will have the authority to resolve any such dispute.

(f)      The  decision  that  results  from  an  arbitration  proceeding  may be
         submitted to any authorized court of law to be confirmed and enforced.

(g)      The  procedure  described  above will not apply if the  controversy  or
         claim, at the time of the proposed  submission to  arbitration,  arises
         from or relates to an  obligation  to the Bank secured by real property
         located in  California.  In this case,  both the  Borrower and the Bank
         must consent to submission of the claim or controversy to  arbitration.
         If both parties do not consent to arbitration, the controversy or claim
         will be settled as follows:

         (i)      The Borrower and the Bank will designate a referee (or a panel
                  of  referees)  selected  under the  auspices  of the  American
                  Arbitration  Association in the same manner as arbitrators are
                  selected in Association-sponsored proceedings;

         (ii)     The  designated  referee  (or the panel of  referees)  will be
                  appointed by a court as provided in  California  Code of Civil
                  Procedure Section 638 and the following related sections;

         (iii)    The referee (or the presiding referee of the panel) will be an
                  active attorney or a retired judge; and

         (iv)     The award that  results  from the  decision of the referee (or
                  the panel)  will be  entered  as a judgment  in the court that
                  appointed the referee,  in accordance  with the  provisions of
                  California Code of Civil Procedure Sections 644 and 645.

(h)      This provision does not limit the right of the Borrower or the Bank to:

         (i)      exercise self-help remedies such as setoff;

         (ii)     foreclose  against  or  sell  any  real or  personal  property
                  collateral; or

--------------------------------------------------------------------------------
                                      -11-
<PAGE>

         (iii)    act in a court of law, before, during or after the arbitration
                  proceeding to obtain:

                  (A)      an interim remedy; and/or

                  (B)      additional or supplementary remedies.

(i)      The  pursuit of or a  successful  action  for  interim,  additional  or
         supplementary  remedies,  or the  filing  of a court  action,  does not
         constitute a waiver of the right of the Borrower or the Bank, including
         the suing party,  to submit the  controversy or claim to arbitration if
         the other party contests the lawsuit.  However,  if the  controversy or
         claim  arises  from or  relates to an  obligation  to the Bank which is
         secured  by real  property  located  in  California  at the time of the
         proposed submission to arbitration,  this right is limited according to
         the provision  above requiring the consent of both the Borrower and the
         Bank to seek resolution through arbitration.

(j)      If  the  Bank  forecloses  against  any  real  property  securing  this
         Agreement,  the Bank has the option to exercise the power of sale under
         the deed of trust or mortgage, or to proceed by judicial foreclosure.

11.5     Severability;   Waivers.   If  any  part  of  this   Agreement  is  not
enforceable,  the rest of the  Agreement  may be enforced.  The Bank retains all
rights,  even if it makes a loan after default. If the Bank waives a default, it
may enforce a later default.  Any consent or waiver under this Agreement must be
in writing.

11.6     Administration   Costs.  The  Borrower  shall  pay  the  Bank  for  all
reasonable  costs  incurred by the Bank in connection  with  administering  this
Agreement.

11.7     Attorneys'  Fees.  The  Borrower  shall  reimburse  the  Bank  for  any
reasonable costs and attorneys' fees incurred by the Bank in connection with the
enforcement or  preservation  of any rights or remedies under this Agreement and
any other documents  executed in connection  with this Agreement,  and including
any amendment,  waiver,  "workout" or restructuring under this Agreement. In the
event of a lawsuit or arbitration  proceeding,  the prevailing party is entitled
to recover costs and reasonable  attorneys' fees incurred in connection with the
lawsuit or arbitration proceeding,  as determined by the court or arbitrator. In
the event  that any case is  commenced  by or  against  the  Borrower  under the
Bankruptcy  Code (Title 11,  United  States  Code) or any  similar or  successor
statute,  the Bank is entitled to recover costs and reasonable  attorneys'  fees
incurred by the Bank related to the preservation,  protection, or enforcement of
any rights of the Bank in such a case.  As used in this  paragraph,  "attorneys'
fees" includes the allocated costs of in-house counsel.

11.8     One  Agreement.  This  Agreement  and any  related  security  or  other
agreements required by this Agreement, collectively:

(a)      represent the sum of the understandings and agreements between the Bank
         and the Borrower concerning this credit; and

(b)      replace any prior oral or written  agreements  between the Bank and the
         Borrower concerning this credit; and

(c)      are  intended by the Bank and the  Borrower as the final,  complete and
         exclusive statement of the terms agreed to by them.

In the event of any conflict  between this  Agreement  and any other  agreements
required by this Agreement, this Agreement will prevail.

11.9     Indemnification. The Borrower will indemnify and hold the Bank harmless
from any loss, liability,  damages, judgments, and costs of any kind relating to
or arising  directly or  indirectly  out of (a) this  Agreement  or any document
required  hereunder,  (b) any credit  extended or  committed  by the Bank to the
Borrower  hereunder,  and (c) any litigation or proceeding related to or arising
out of this Agreement,  any such document,  or any such credit,  except, in each
case, to the extent that such loss  liability,  damages,  judgments or costs are
due to the gross  negligence or willful  misconduct of the Bank.  This indemnity
includes but is not limited to attorneys'  fees (including the allocated cost of
in-house counsel). This indemnity extends to the Bank, its parent,  subsidiaries

--------------------------------------------------------------------------------
                                      -12-
<PAGE>

and all of their directors, officers, employees, agents, successors,  attorneys,
and assigns. This indemnity will survive repayment of the Borrower's obligations
to the Bank.  All sums due to the Bank  hereunder  shall be  obligations  of the
Borrower, due and payable immediately without demand.

11.10    Notices.  All notices required under this Agreement shall be personally
delivered or sent by first class mail, postage prepaid,  to the addresses on the
signature page of this Agreement, or to such other addresses as the Bank and the
Borrower may specify from time to time in writing.

11.11    Headings.  Article and paragraph  headings are for  reference  only and
shall not  affect  the  interpretation  or  meaning  of any  provisions  of this
Agreement.

11.12    Counterparts. This Agreement may be executed in as many counterparts as
necessary or convenient,  and by the different parties on separate  counterparts
each of  which,  when so  executed,  shall be deemed  an  original  but all such
counterparts shall constitute but one and the same agreement.

This Agreement is executed as of the date stated at the top of the first page.

[LOGO]

Bank of America                           Arterial Vascular Engineering, Inc.
National Trust and Savings Association




X /s/   Joni Topper                        X /s/  Bradly A. Jendersee
  --------------------------                 --------------------------
By:     Joni Topper                        By:    Bradly A. Jendersee
Title:  Vice President                     Title: Chairman of the Board



                                           X /s/  John D. Miller
                                             --------------------------
                                           By:    John D. Miller
                                           Title: Chief Financial Officer



Address where notices to the Bank          Address where notices to the Borrower
are to be sent:                            are to be sent:

Santa Rosa Commercial Banking Office #1498
10 Santa Rosa Avenue, 2nd Floor            3576 Unocal Place
Santa Rosa, CA 95404                       Santa Rosa, CA  95403


--------------------------------------------------------------------------------
                                      -13-
<PAGE>
<TABLE>

                                 Attachment "A"
                     Acceptable Securities and Advance Rates
<CAPTION>
------------------------------------------------------------ ------------------------ ---------------
Acceptable Securities                                        Minimum Rating           Maximum
                                                                                      Advance
------------------------------------------------------------ ------------------------ ---------------
<S>                                                          <C>                      <C>
U.S. marketable securities (common stock and convertible     A+, A, or A-             75% of Market
securities) with current market price in excess of $15                                  Value (MV)
excluding BankAmerica Corporation common stock
------------------------------------------------------------ ------------------------ ---------------
U.S. Corporate and Municipal Bonds and preferred stock       S&P: AAA, AA                 80% MV
                                                             Moody's Aaa & Aa*
------------------------------------------------------------ ------------------------ ---------------
U.S. Government issued or guaranteed (e.g. Treasury Bills,   less than 1 year            90% MV**
Notes, Bonds, GNMA, MBSs)                                    1-5 Years                   85% MV**
                                                             more than 5 years           80% MV**
------------------------------------------------------------ ------------------------ ---------------
U.S. Government sponsored (e.g. Farm Credit, Federal Home                                75% MV**
Loan Bank Board, FNMA)
------------------------------------------------------------ ------------------------ ---------------
Bankers Acceptances                                          Call for acceptability       90% of
                                                                                         Discount
                                                                                        Value (DV)
------------------------------------------------------------ ------------------------ ---------------
Commercial Paper issued by U.S. Companies                    A1/P1                       90% (DV)
------------------------------------------------------------ ------------------------ ---------------
*   Most conservative rating applies
------------------------------------------------------------ ------------------------ ---------------
**Advance not to exceed par value
------------------------------------------------------------ ------------------------ ---------------
</TABLE>