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                                                                   EXHIBIT 10.16

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                          CARDIAC PATHWAYS CORPORATION


                           LOAN AND SECURITY AGREEMENT










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                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                                     Page
                                                                                     ----
<S>                                                                                  <C>
1. DEFINITIONS AND CONSTRUCTION.....................................................  1
   1.1         Definitions..........................................................  1
   1.2         Accounting Terms.....................................................  7

2. LOAN AND TERMS OF PAYMENT........................................................  8
   2.1         Term Loan............................................................  8
   2.2         Interest Rate Protection.............................................  8
   2.3         Interest Rates, Payments, and Calculations...........................  8
   2.4         Crediting Payments...................................................  9
   2.5         Fees.................................................................  9
   2.6         Additional Costs..................................................... 10
   2.7         Term................................................................. 10

3. CONDITIONS OF LOANS.............................................................. 10
   3.1         Conditions Precedent to Initial Advance.............................. 10
   3.2         Post-Closing Obligation.............................................. 11

4. CREATION OF SECURITY INTEREST.................................................... 11
   4.1         Grant of Security Interest........................................... 11
   4.2         Delivery of Additional Documentation Required........................ 12
   4.3         Right to Inspect..................................................... 12

5. REPRESENTATIONS AND WARRANTIES................................................... 12
   5.1         Due Organization and Qualification................................... 12
   5.2         Due Authorization; No Conflict....................................... 12
   5.3         No Prior Encumbrances................................................ 13
   5.4         Bona Fide Accounts................................................... 13
   5.5         Merchantable Inventory............................................... 13
   5.6         Name; Location of Chief Executive Office............................. 13
   5.7         Litigation........................................................... 13
   5.8         No Material Adverse Change in Financial Statements................... 13
   5.9         Solvency............................................................. 13
   5.10        Regulatory Compliance................................................ 13
   5.11        Environmental Condition.............................................. 13
   5.12        Taxes................................................................ 14
   5.13        Subsidiaries......................................................... 14
   5.14        Government Consents.................................................. 14
   5.15        Full Disclosure...................................................... 14

6. AFFIRMATIVE COVENANTS............................................................ 14
   6.1         Good Standing........................................................ 14
   6.2         Government Compliance................................................ 14
   6.3         Adverse Information.................................................. 15
   6.4         Financial Statements, Reports, Certificates.......................... 15
   6.5         Inventory; Returns................................................... 15
   6.6         Taxes................................................................ 15
   6.7         Insurance............................................................ 16
   6.8         Principal Depository................................................. 16
   6.9         Total Liabilities-Net Worth Ratio.................................... 16
   6.10        Tangible Net Worth................................................... 16
</TABLE>


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<TABLE>
<CAPTION>

<S>                                                                                  <C>
   6.11        Minimum Liquidity and Debt Service Coverage.......................... 16
   6.12        Further Assurances................................................... 17

7. NEGATIVE COVENANTS............................................................... 17
   7.1         Dispositions......................................................... 17
   7.2         Change in Business................................................... 17
   7.3         Mergers or Acquisitions.............................................. 17
   7.4         Indebtedness......................................................... 17
   7.5         Encumbrances......................................................... 17
   7.6         Distributions........................................................ 17
   7.7         Investments.......................................................... 17
   7.8         Transactions with Affiliates......................................... 17
   7.9         Subordinated Debt.................................................... 18
   7.10        Inventory............................................................ 18
   7.11        Compliance........................................................... 18

8. EVENTS OF DEFAULT................................................................ 18
   8.1         Payment Default...................................................... 18
   8.2         Covenant Default..................................................... 18
   8.3         Material Adverse Change.............................................. 18
   8.4         Attachment........................................................... 19
   8.5         Insolvency........................................................... 19
   8.6         Other Agreements..................................................... 19
   8.7         Subordinated Debt.................................................... 19
   8.8         Judgments............................................................ 19
   8.9         Misrepresentations................................................... 19
   8.10        Change of Control.................................................... 19

9. BANK'S RIGHTS AND REMEDIES....................................................... 19
   9.1         Rights and Remedies.................................................. 19
   9.2         Power of Attorney.................................................... 20
   9.3         Accounts Collection.................................................. 21
   9.4         Bank Expenses........................................................ 21
   9.5         Bank's Liability for Collateral...................................... 21
   9.6         Remedies Cumulative.................................................. 21
   9.7         Demand; Protest...................................................... 21

10. NOTICES......................................................................... 21

11. CHOICE OF LAW AND VENUE; JURY TRIAL WAIVER...................................... 22

12. GENERAL PROVISIONS.............................................................. 22
  12.1         Successors and Assigns............................................... 22
  12.2         Indemnification...................................................... 23
  12.3         Time of Essence...................................................... 23
  12.4         Severability of Provisions........................................... 23
  12.5         Counterparts......................................................... 23
  12.6         Survival............................................................. 23
  12.7         Confidentiality...................................................... 24
</TABLE>



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     This LOAN AND SECURITY AGREEMENT is entered into as of May 15, 1998, by and
between SILICON VALLEY BANK ("Bank") and CARDIAC PATHWAYS CORPORATION
("Borrower").


                                    RECITALS

     Borrower wishes to obtain credit from time to time from Bank, and Bank
desires to extend credit to Borrower. This Agreement sets forth the terms on
which Bank will advance credit to Borrower, and Borrower will repay the amounts
owing to Bank.


                                    AGREEMENT

     The parties agree as follows:

          1. DEFINITIONS AND CONSTRUCTION

               1.1 Definitions. As used in this Agreement, the following terms
shall have the following definitions:

                    "Accounts" means all presently existing and hereafter
arising accounts, contract rights, and all other forms of obligations owing to
Borrower arising out of the sale or lease of goods (including, without
limitation, the licensing of software and other technology) or the rendering of
services by Borrower, whether or not earned by performance, and any and all
credit insurance, guaranties, and other security therefor, as well as all
merchandise returned to or reclaimed by Borrower and Borrower's Books relating
to any of the foregoing.

                    "Advance" or "Advances" means cash advances under the Term
Loan Facility.

                    "Affiliate" means, with respect to any Person, any Person
that owns or controls directly or indirectly such Person, any Person that
controls or is controlled by or is under common control with such Person, and
each of such Person's senior executive officers, directors and partners.

                    "Bank Expenses" means all Bank's reasonable costs or
expenses (including reasonable attorneys' fees and expenses) incurred in
connection with the preparation, negotiation, administration, and enforcement of
the Loan Documents; and Bank's reasonable attorneys' fees and expenses incurred
in amending, enforcing or defending the Loan Documents, whether or not suit is
brought.

                    "Borrower's Books" means all of Borrower's books and records
including: ledgers; records concerning Borrower's assets or liabilities, the
Collateral, business operations or financial condition; and all computer
programs, or tape files, and the equipment, containing such information.

                    "Business Day" means any day that is not a Saturday, Sunday,
or other day on which banks in the State of California are authorized or
required to close.

                    "Closing Date" means the date of this Agreement.

                    "Code" means the California Uniform Commercial Code.

                    "Collateral" means the property described on Exhibit A
attached hereto.

                    "Committed Loan Amount" means Eight Million Dollars
($8,000,000).



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                    "Contingent Obligation" means, as applied to any Person, any
direct or indirect liability, contingent or otherwise, of that Person with
respect to (i) any indebtedness, lease, dividend, letter of credit or other
obligation of another, including, without limitation, any such obligation
directly or indirectly guaranteed, endorsed, co-made or discounted or sold with
recourse by that Person, or in respect of which that Person is otherwise
directly or indirectly liable; (ii) any obligations with respect to undrawn
letters of credit issued for the account of that Person; and (iii) all
obligations arising under any interest rate, currency or commodity swap
agreement, interest rate cap agreement, interest rate collar agreement, or other
agreement or arrangement designated to protect a Person against fluctuation in
interest rates, currency exchange rates or commodity prices; provided, however,
that the term "Contingent Obligation" shall not include endorsements for
collection or deposit in the ordinary course of business. The amount of any
Contingent Obligation shall be deemed to be an amount equal to the stated or
determined amount of the primary obligation in respect of which such Contingent
Obligation is made or, if not stated or determinable, the maximum reasonably
anticipated liability in respect thereof as determined by such Person in good
faith; provided, however, that such amount shall not in any event exceed the
maximum amount of the obligations under the guarantee or other support
arrangement.

                    "Daily Balance" means the amount of the Obligations owed at
the end of a given day.

                    "Debt Service Coverage" means, as measured quarterly as of
the last day of each fiscal quarter of Borrower, on a consolidated basis
determined in accordance with GAAP, the ratio of (a) an amount equal to the sum
of (i) net income, plus (ii) depreciation, amortization of intangible assets and
other non-cash charges to income, and (iii) accrued interest, to (b) an amount
equal to the sum of all scheduled repayments for such quarter (or month, as
applicable), including accrued interest, and mandatory prepayments of principal
on account of long-term Debt.

                    "Equipment" means all present and future machinery,
equipment, tenant improvements, furniture, fixtures, vehicles, tools, parts,
substitutions, and attachments in which Borrower has any interest.

                    "Equity Infusion" means the receipt by Borrower of cash
proceeds from the sale of its capital stock or Subordinated Debt, other than in
a nonfinancing transaction to employees, officers, directors or consultants of
the Borrower, in a minimum aggregate amount of Twenty Million Dollars
($20,000,000).

                    "ERISA" means the Employment Retirement Income Security Act
of 1974, as amended, and the regulations thereunder.

                    "FDA" means the Food and Drug Administration of the United
States government, and any successor regulatory body.

                    "GAAP" means generally accepted accounting principles as in
effect from time to time.

                    "GMP" has the meaning set forth in Section 6.2.

                    "Indebtedness" means (a) all indebtedness for borrowed money
or the deferred purchase price of property or services, including without
limitation reimbursement and other obligations with respect to surety bonds and
letters of credit, (b) all obligations evidenced by notes, bonds, debentures or
similar instruments, (c) all capital lease obligations and (d) all Contingent
Obligations.

                    "Insolvency Proceeding" means any proceeding commenced by or
against any Person or entity under any provision of the United States Bankruptcy
Code, as amended, or under any other bankruptcy or insolvency law, including
assignments for the benefit of creditors, formal or informal moratoria,
compositions, extension generally with its creditors, or proceedings seeking
reorganization, arrangement, or other similar relief.

                    "Inventory" means all present and future inventory in which
Borrower has any interest, including merchandise, raw materials, parts,
supplies, packing and shipping materials, work in process and finished 



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products intended for sale or lease or to be furnished under a contract of
service, of every kind and description now or at any time hereafter owned by or
in the custody or possession, actual or constructive, of Borrower, including
such inventory as is temporarily out of its custody or possession or in transit
and including any returns upon any accounts or other proceeds, including
insurance proceeds, resulting from the sale or disposition of any of the
foregoing and any documents of title representing any of the above, and
Borrower's Books relating to any of the foregoing.

                    "Investment" means any beneficial ownership of (including
stock, partnership interest or other securities) any Person, or any loan,
advance or capital contribution to any Person.

                    "IRC" means the Internal Revenue Code of 1986, as amended,
and the regulations thereunder.

                    "Lien" means any mortgage, lien, deed of trust, charge,
pledge, security interest or other encumbrance.

                    "Liquidity" means, at any date of determination, the sum of
Borrower's cash, cash equivalents, and short term investments, less any cash and
cash equivalent balances that are held in a sinking fund for the retirement of
debt or capital stock or that are held in pledge for another creditor.

                    "Loan Documents" means, collectively, this Agreement, any
note or notes executed by Borrower, and any other agreement entered into between
Borrower and Bank in connection with this Agreement, all as amended,
supplemented or extended from time to time.

                    "Material Adverse Effect" means a material adverse effect on
(i) the business operations or condition (financial or otherwise) of Borrower
and its Subsidiaries taken as a whole or (ii) the ability of Borrower to repay
the Obligations or otherwise perform its obligations under the Loan Documents.

                    "Maturity Date" means the date immediately preceding the
fourth (4th) anniversary of the date of this Agreement.

                    "Negotiable Collateral" means all of Borrower's present and
future letters of credit of which it is a beneficiary, notes, drafts,
instruments, securities, documents of title, and chattel paper, and Borrower's
Books relating to any of the foregoing.

                    "Net Cash Losses" means, with respect to any date of
determination, determined on a consolidated basis in accordance with GAAP for
Borrower and its consolidated Subsidiaries, the reduction in cash from
operations (excluding non-recurring charges) during the three months prior to
such date of determination or if the date of determination is the last day of a
fiscal quarter, during the fiscal quarter then ending (or, if monthly reporting
is required pursuant to Section 6.4(c), during the three fiscal months ending
prior to such date of determination).

                    "Obligations" means all debt, principal, interest, Bank
Expenses and other amounts owed to Bank by Borrower pursuant to this Agreement
or any other agreement, whether absolute or contingent, due or to become due,
now existing or hereafter arising, including any interest that accrues after the
commencement of an Insolvency Proceeding and including any debt, liability, or
obligation owing from Borrower to others that Bank may have obtained by
assignment or otherwise.

                    "Payment Date" means the fourteenth (14th) calendar day of
each month during the term of this Agreement.

                    "Periodic Payments" means all installments or similar
recurring payments that Borrower may now or hereafter become obligated to pay to
Bank pursuant to the terms and provisions of any instrument, or agreement now or
hereafter in existence between Borrower and Bank.



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                    "Permitted Indebtedness" means:

                    (a) Indebtedness of Borrower in favor of Bank arising under
this Agreement or any other Loan Document;

                    (b) Indebtedness existing on the date of this Agreement and
disclosed in the Schedule;

                    (c) Indebtedness to trade creditors incurred in the ordinary
course of business;

                    (d) Subordinated Debt;

                    (e) Indebtedness of Borrower to any Subsidiary and
Contingent Obligations of any Subsidiary with respect to obligations of Borrower
(provided that the primary obligations are not prohibited hereby); Indebtedness
of any Subsidiary to any other Subsidiary and Contingent Obligations of any
Subsidiary with respect to obligations of any other Subsidiary (provided that
the primary obligations are not prohibited hereby); and Contingent Obligations
of the Borrower as a guarantor for obligations of its Subsidiaries that (i) are
existing on the date of this Agreement, or (ii) have been approved by Bank in
writing;

                    (f) Indebtedness secured by Permitted Liens;

                    (g) Capital leases or indebtedness incurred solely to
purchase equipment which is secured in accordance with clause (c) of "Permitted
Liens" below and is not in excess of the lesser of the purchase price of such
equipment or the fair market value of such equipment on the date of acquisition;
and

                    (h) Extensions, refinancings, modifications, amendments and
restatements of any of items of Permitted Indebtedness (a) through (g) above,
provided that the principal amount thereof is not increased or the terms thereof
are not modified to impose more burdensome terms upon Borrower or its
Subsidiary, as the case may be.

                    "Permitted Investment" means:

                    (a) Investments existing on the Date of this Agreement and
disclosed in the Schedule;

                    (b) (i) marketable direct obligations issued or
unconditionally guaranteed by the United States of America or any agency or any
State thereof maturing within one (1) year from the date of acquisition thereof,
(ii) commercial paper maturing no more than one (1) year from the date of
creation thereof and currently having the highest rating obtainable from either
Standard & Poor's Rating Services or Moody's Investors Service, Inc., and (iii)
certificates of deposit maturing no more than one (1) year from the date of
investment therein issued by Bank, and (iv) any Investments permitted by
Borrower's investment policy, as amended from time to time and approved by
Borrower's board of directors, provided that such investment policy (any such
amendment thereto) has been approved by Bank (with such approval not to be
unreasonably withheld);

                    (c) Investments consisting of the endorsement of negotiable
instrument for deposit or collection or similar transactions in the ordinary
course of business;

                    (d) Investments accepted in connection with Transfers
permitted by Section 7.1;

                    (e) Investments (whether consisting of the purchase of
securities, loans, capital contribution, or otherwise) of Borrower in
Subsidiaries and of Subsidiaries in or to other Subsidiaries or in Borrower;



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<PAGE>   8

                    (f) Investments consisting of (i) compensation of employees,
officers and directors of Borrower or its Subsidiaries so long as the Board of
Directors of Borrower determines that such compensation is in the best interests
of Borrower, (ii) travel advances, employee relocation loans and other employee
loans and advances in the ordinary course of business, and (iii) loans to
employees, officers or directors relating to the purchase of equity securities
of Borrower or its Subsidiaries pursuant to employee stock purchase plans or
agreements approved by Borrower's Board of Directors;

                    (g) Investments (including debt obligations) received in
connection with the bankruptcy or reorganization of customers or suppliers and
in settlement of delinquent obligations of, and other disputes with, customers
or suppliers arising in the ordinary course of business;

                    (h) Investments consisting of notes receivable of, or
prepaid royalties and other credit extensions, to customers and suppliers who
are not Affiliates, in the ordinary course of business; provided that this
paragraph (h) shall not apply to Investments by Borrower in any Subsidiary;

                    (i) Investments constituting acquisitions permitted under
Section 7.3; and

                    (j) Deposit accounts of Borrower in which Bank has a Lien
prior to any other Lien.

                    "Permitted Liens" means the following:

                    (a) Any Liens existing on the date of this Agreement and
disclosed in the Schedule or arising under this Agreement or the other Loan
Documents;

                    (b) Liens for taxes, fees, assessments or other governmental
charges or levies, either not delinquent or being contested in good faith by
appropriate proceedings, provided the same have no priority over any of Bank's
security interests; 

                    (c) Liens (i) upon or in any Equipment acquired or held by
Borrower or any of its Subsidiaries to secure the purchase price of such
Equipment or indebtedness incurred solely for the purpose of financing the
acquisition of such equipment, or (ii) existing on such Equipment at the time of
its acquisition, provided that the Lien is confined solely to the property so
acquired and improvements thereon, and the proceeds of such equipment; 

                    (d) Liens on Equipment leased by Borrower or any Subsidiary
pursuant to an operating or capital lease in the ordinary course of business
(including proceeds thereof and accessions thereto) incurred solely for the
purpose of financing the lease of such Equipment (including Liens pursuant to
leases permitted pursuant to Section 7.1 and Liens referred to in UCC financing
statements regarding leases permitted by this Agreement);

                    (e) Leases or subleases and license and sublicenses granted
to others in the ordinary course of Borrower's business not interfering in any
material respect with the business of Borrower and its Subsidiaries taken as a
whole, and any interest or title of a lessor, licensor or under any lease or
license;

                    (f) Liens arising from judgments, decrees or attachments in
circumstances not constituting an Event of Default under Section 8.8;

                    (g) Easements, reservations, rights-of-way, restrictions,
minor defects or irregularities in title and other similar charges or
encumbrances affecting real property not constituting a Material Adverse Effect;

                    (h) Liens in favor of customs and revenue authorities
arising as a matter of law to secure payments of customs duties in connection
with the importation of goods;



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                    (i) Liens incurred in connection with the extension, renewal
or refinancing of the indebtedness secured by Liens of the type described in
clauses (a), (c), (d), (e) and (f) above, provided that any extension, renewal
or replacement Lien shall be limited to the property encumbered by the existing
Lien and the principal amount of the indebtedness being extended, renewed or
refinanced does not increase;

                    (j) Liens (i) upon or in any real property to secure the
purchase price of such real property or indebtedness incurred solely for the
purpose of financing the acquisition of such real property or (ii) existing on
such real property owned by Borrower as of the Closing Date, provided that (x)
the real property is not financed hereunder and (y) the Lien is confined solely
to the real property and the proceeds thereof, attachments and accessories
thereto and improvements thereon;

                    (k) Mechanics', workers', materialmens', landlords',
carriers' or other like Liens arising in the ordinary and normal course of
business with respect to obligations which are not yet due;

                    (l) Liens that are not prior to the Lien of Bank which
constitute rights of set-off of a customary nature or banker's Liens with
respect to amounts on deposit, whether arising by operation of law or by
contract, in connection with arrangements entered into with banks in the
ordinary course of business;

                    (m) Earn-out and royalty obligations existing on the date
hereof or entered into in connection with an acquisition permitted by Section
7.3; and

                    (n) Liens on insurance proceeds in favor of insurance
companies granted solely as security for financed premiums.

                    "Person" means any individual, sole proprietorship,
partnership, limited liability company, joint venture, trust, unincorporated
organization, association, corporation, institution, public benefit corporation,
firm, joint stock company, estate, entity or governmental agency.

                    "Prime Rate" means the variable rate of interest, per annum,
most recently announced by Bank, as its "prime rate," whether or not such
announced rate is the lowest rate available from Bank.

                    "Remaining Months Liquidity" means, at the end of each
fiscal quarter, or if monthly reporting is required pursuant to Section 6.4(c),
as at the end of each fiscal month, the ratio of (i) Liquidity at such time to
(ii) the monthly average of Net Cash Losses.

                    "Responsible Officer" means each of the Chief Executive
Officer, the Chief Financial Officer and the Controller of Borrower.

                    "Schedule" means the schedule of exceptions attached hereto,
if any.

                    "Subordinated Debt" means any debt incurred by Borrower that
is subordinated to the debt owing by Borrower to Bank on terms acceptable to
Bank (and identified as being such by Borrower and Bank).

                    "Subsidiary" means any corporation or partnership in which
(i) any general partnership interest or (ii) more than 50% of the stock of which
by the terms thereof ordinary voting power to elect the Board of Directors,
managers or trustees of the entity shall, at the time as of which any
determination is being made, be owned by Borrower, either directly or through an
Affiliate.

                    "Tangible Net Worth" means at any date as of which the
amount thereof shall be determined, the consolidated total assets of Borrower
and its Subsidiaries minus, without duplication, (i) the sum of any amounts
attributable to (a) goodwill, (b) intangible items such as unamortized debt
discount and expense, 



                                       6
<PAGE>   10

patents, trade and service marks and names, copyrights and research and
development expenses except prepaid expenses, and (c) all reserves not already
deducted from assets, and (ii) Total Liabilities.

                    "Term Loan Facility" means the facility under which Borrower
may request cash advances as specified in Section 2.1.

                    "Term Availability Date" means the date immediately
preceding the first (1st) anniversary of the date of this Agreement.

                    "Total Liabilities" means at any date as of which the amount
thereof shall be determined, all obligations that should, in accordance with
GAAP be classified as liabilities on the consolidated balance sheet of Borrower,
including in any event all Indebtedness, but specifically excluding Subordinated
Debt, except as amended in Section 6.9 below.

                    "Unrestricted Cash Reserves" means, at any time of
determination, the sum of Borrower's (i) cash balance of deposit accounts and
investment accounts, plus (ii) market value of all readily marketable securities
beneficially owned by Borrower, minus (iii) cash value of any certificates of
deposit or securities encumbered and/or restricted by any Bank or any other
Persons.

               1.2 Accounting Terms. All accounting terms not specifically
defined herein shall be construed in accordance with GAAP and all calculations
made hereunder shall be made in accordance with GAAP. When used herein, the
terms "financial statements" shall include the notes and schedules thereto.



                                       7
<PAGE>   11

          2. LOAN AND TERMS OF PAYMENT

               2.1 Term Loans.

                    (a) Term Loan Facility. Subject to and upon the terms and
conditions of this Agreement, Bank agrees, at any time from the date of this
Agreement through the Term Availability Date, to make Advances to Borrower in an
aggregate principal amount not to exceed the Committed Loan Amount; provided,
however, the initial Advance in the amount of approximately Six Million Dollars
($6,000,000) shall be used by Borrower to pay in full an obligation owed to one
of Borrower's European distributors (the "Existing Obligation"). Borrower shall
deliver to Bank within twenty (20) days following the initial Advance hereunder,
evidence of payment in full of the Existing Obligation, satisfactory to Bank, in
Bank's sole discretion. Amounts borrowed pursuant to this Section 2.1 may not be
reborrowed once repaid.

                    (b) Procedures. Whenever Borrower desires an Advance,
Borrower shall notify Bank by facsimile transmission or telephone no later than
3:00 p.m. California time, one (1) Business Day before the day on which the
Advance is requested to be made. Each such notification shall be promptly
confirmed by a Payment/Advance Form in substantially the form of Exhibit B
hereto and signed by a Responsible Officer. Bank is authorized to make Advances
under this Agreement, based upon instructions received from a Responsible
Officer, or without instructions if in Bank's discretion such Advances are
necessary to meet Obligations which have become due and remain unpaid. Bank
shall be entitled to rely on any telephonic notice given by a person who Bank
reasonably believes to be a Responsible Officer, and Borrower shall indemnify
and hold Bank harmless for any damages or loss suffered by Bank as a result of
such reliance. Bank will credit the amount of Advances made under this Section
2.1 to Borrower's deposit account.

                    (c) Interest and Principal. Interest shall accrue from the
date of each Advance at the rate specified in Section 2.3(a), and shall be
payable monthly on the Payment Date for each month through the month in which
the Maturity Date falls. Bank shall, at its option, charge such interest, all
Bank Expenses, and all Periodic Payments against any of Borrower's deposit
accounts, including account number _____________, against the Term Loan
Facility, in which case those amounts shall thereafter accrue interest at the
rate then applicable hereunder. Any interest not paid when due shall be
compounded by becoming a part of the Obligations, and such interest shall
thereafter accrue interest at the rate then applicable hereunder.

                    (d) Maturity. The Term Loan Facility shall terminate on the
Maturity Date, at which time all Obligations owing under this Section 2.1 and
all other Obligations Borrower owes to Bank under this Agreement shall be
immediately due and payable.

               2.2 Interest Rate Protection. Subject to the terms and condition
of this Agreement, Borrower may prepay the Advances, in whole or in part, only
upon payment in full of (i) all accrued but unpaid interest and all outstanding
obligations hereunder (or, if partial prepayment, an applicable or proportionate
amount of such obligations), and (ii), if Borrower has elected the fixed rate
option set forth in Section 2.3(a), a fee as shall be determined by Bank in its
reasonable discretion to provide for interest rate protection in the event the
fixed interest rate set forth in Section 2.3(a) is higher than the then current
fixed rate for the Advances.



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<PAGE>   12

               2.3 Interest Rates, Payments, and Calculations.

                    (a) Interest Rate. Except as set forth in Section 2.3(b),
from and after the Closing Date through the Term Availability Date, the Advances
shall bear interest, on the average daily balance thereof, at a rate equal to
one and one-quarter (1.25) percentage points above the Prime Rate. Following the
Term Availability Date through the Maturity Date, the Advances shall bear
interest, on the average daily balance thereof, at a rate equal to, at
Borrower's election, either (i) (a) prior to the Equity Infusion, one and
one-quarter (1.25) percentage points above the Prime Rate, or (b) following the
Equity Infusion, three-quarters of one (.75) percentage point above the Prime
Rate; OR (ii) four (4) percentage points above the yield of the 48 month
Treasury Note as reported in the Western edition of The Wall Street Journal,
which rate shall be fixed at the time of Borrower's election. Borrower shall
give written notice to Bank of its interest rate election no later than two (2)
Business Days prior to the Term Availability Date of its interest rate election
hereunder. If Borrower fails to give such notice, then the applicable rate shall
be the 48 month Treasury Note fixed rate described herein.

                    (b) Default Rate. All Obligations shall bear interest, from
and after the occurrence and during the continuance of an Event of Default, at a
rate equal to five (5) percentage points above the interest rate applicable
immediately prior to the occurrence of the Event of Default.

                    (c) Payments. Interest hereunder shall be due and payable on
the Payment Date of each month during the term hereof. Borrower shall make
payments of interest only from and after the Closing Date through the Term
Availability Date. Following the Term Availability Date, Borrower shall make
payments of principal and interest to Bank in thirty-six (36) equal monthly
installments of principal and interest which shall be due and payable on the
Payment Date of each month during the term hereof. Borrower's final payment, due
on the Maturity Date, shall include all outstanding Advances under the Term Loan
Facility of principal plus all accrued interest not yet paid. Bank shall, at its
option, charge such interest, principal, all Bank Expenses, and all Periodic
Payments against any of Borrower's deposit accounts, including Account Number
______________ in which case those amounts shall thereafter accrue interest at
the rate then applicable hereunder. Any interest not paid when due shall be
compounded by becoming a part of the Obligations, and such interest shall
thereafter accrue interest at the rate then applicable hereunder.

                    (d) Computation. In the event the Prime Rate is changed from
time to time hereafter, the applicable rate of interest hereunder shall be
increased or decreased effective as of 12:01 a.m. on the day the Prime Rate is
changed, by an amount equal to such change in the Prime Rate. All interest
chargeable under the Loan Documents shall be computed on the basis of a three
hundred sixty (360) day year for the actual number of days elapsed.
Notwithstanding the foregoing, this Section 2.3(d) shall not apply in the event
the Borrower elects the fixed rate option as set forth in Section 2.3(a).

               2.4 Crediting Payments. Prior to the occurrence and during the
continuance of an Event of Default, Bank shall credit a wire transfer of funds,
check or other item of payment to such deposit account or Obligation as Borrower
specifies. After the occurrence and during the continuance of an Event of
Default, the receipt by Bank of any wire transfer of funds, check, or other
similar item for the purpose of payment of Obligations shall be immediately
applied to conditionally reduce Obligations, but shall not be considered a
payment on account unless such payment is of immediately available federal funds
or unless and until such check or other item of payment is honored when
presented for payment. Notwithstanding anything to the contrary contained
herein, any wire transfer or payment received by Bank after 12:00 noon
California time shall be deemed to have been received by Bank as of the opening
of business on the immediately following Business Day. Whenever any payment to
Bank under the Loan Documents would otherwise be due (except by reason of
acceleration) on a date that is not a Business Day, such payment shall instead
be due on the next Business Day, and additional fees or interest, as the case
may be, shall accrue and be payable for the period of such extension.

               2.5 Fees. Borrower shall pay to Bank the following:



                                       9
<PAGE>   13

                    (a) Facility Fee. A Facility Fee equal to (i) Sixty Thousand
Dollars ($60,000), which fee shall be due and payable on the Closing Date, and
shall be fully earned and non-refundable;

                    (b) Financial Examination and Appraisal Fees. Bank's
customary fees and out-of-pocket expenses for Bank's audits of Borrower's
Accounts, and for each appraisal of Collateral and financial analysis and
examination of Borrower performed from time to time by Bank or its agents; and

                    (c) Bank Expenses. Upon the date hereof, all Bank Expenses
incurred through the Closing Date, including reasonable attorneys' fees and
expenses (not to exceed Five Thousand Dollars ($5,000) prior to the Closing
Date), and, after the date hereof, all Bank Expenses, including reasonable
attorneys' fees and expenses as and when they become due; provided, however,
Borrower shall be responsible for fifty percent (50%) of all such attorneys'
fees and expenses incurred prior to the Closing Date in excess of Five Thousand
Dollars ($5,000).

               2.6 Additional Costs. In case any change in any law, regulation,
treaty or official directive or the interpretation or application thereof by any
court or any governmental authority charged with the administration thereof or
the compliance with any guideline or request of any central bank or other
governmental authority (whether or not having the force of law), in each case
after the date of this Agreement:

                    (a) subjects Bank to any tax with respect to payments of
principal or interest or any other amounts payable hereunder by Borrower or
otherwise with respect to the transactions contemplated hereby (except for taxes
on the overall net income of Bank imposed by the United States of America or any
political subdivision thereof);

                    (b) imposes, modifies or deems applicable any deposit
insurance, reserve, special deposit or similar requirement against assets held
by, or deposits in or for the account of, or loans by, Bank; or

                    (c) imposes upon Bank any other condition with respect to
its performance under this Agreement,

and the result of any of the foregoing is to increase the cost to Bank, reduce
the income receivable by Bank or impose any expense upon Bank with respect to
any loans made by Bank, Bank shall notify Borrower thereof. Borrower agrees to
pay to Bank the amount of such increase in cost, reduction in income or
additional expense as and when such cost, reduction or expense is incurred or
determined, upon presentation by Bank of a statement of the amount and setting
forth Bank's calculation thereof, all in reasonable detail which statement shall
constitute prima facie evidence of such amount; provided, however, that Borrower
shall not be liable for any such amount attributable to any period prior to the
date one hundred and eighty (180) days prior to the date of such certificate.

               2.7 Term. This Agreement shall become effective on the Closing
Date and, subject to Section 12.6, shall continue in full force and effect for a
term ending on the Maturity Date. Notwithstanding the foregoing, Bank shall have
the right to terminate its obligation to make the Advance under this Agreement
immediately and without notice upon the occurrence and during the continuance of
an Event of Default. Notwithstanding termination, Bank's Lien on the Collateral
shall remain in effect for so long as any Obligations (other than inchoate
indemnity obligations) are outstanding.

          3. CONDITIONS OF LOANS

               3.1 Conditions Precedent to Initial Advance. The obligation of
Bank to make the initial Advance is subject to the conditions precedent that:

                    (a) Bank shall have received, in form and substance
satisfactory to Bank, the following:

                         (i) this Agreement;



                                       10
<PAGE>   14

                         (ii) a certificate of the Secretary of Borrower with
respect to incumbency and resolutions authorizing the execution and delivery of
this Agreement;

                         (iii) a negative pledge agreement;

                         (iv) evidence of outstanding obligation owed to one of
Borrower's European distributors, which shall be paid in full by the initial
Advance, in form satisfactory to Bank, in Bank's sole discretion;

                         (v) financing statements (Forms UCC-1);

                         (vi) insurance certificate;

                         (vii) payment of the fees and Bank Expenses then due
specified in Section 2.5 hereof;

                         (viii) timely receipt of the Payment/Advance Form as
provided in Section 2.1;

                         (ix) such other documents, and completion of such other
matters, as Bank may reasonably deem necessary or appropriate; and

                    (b) the representations and warranties contained in Section
5 shall be true and correct in all material respects on and as of the date of
the Payment/Advance Form and on the effective date of each of the Advances, and
no Event of Default shall have occurred and be continuing, or would result from
each of the Advances. The making of each of the Advances shall be deemed to be a
representation and warranty by Borrower on the date of each of the Advances as
to the accuracy of the facts referred to in this Section 3.1(b).

               3.2 Post-Closing Obligation. Borrower shall deliver a consent to
release of collateral in substantially the form of Exhibit D attached hereto,
executed by each warehouseman, storage company or other bailee of Borrower's
Inventory, within ninety (90) days following the Closing Date. Borrower's
failure to deliver the foregoing consents shall be deemed an Event of Default
under this Agreement.

          4. CREATION OF SECURITY INTEREST

               4.1 Grant of Security Interest. Borrower grants and pledges to
Bank a continuing security interest in all presently existing and hereafter
acquired or arising Collateral in order to secure prompt repayment of any and
all Obligations and in order to secure prompt performance by Borrower of each of
its covenants and duties under the Loan Documents. Except as set forth in the
Schedule, such security interest constitutes a valid, first priority security
interest in the presently existing Collateral, and will constitute a valid,
first priority security interest in Collateral acquired after the date hereof,
in each case, to the extent that a security interest in such Collateral can be
perfected by the filing of a financing statement or, in the case of Collateral
consisting of instruments, documents, chattel paper or certificated securities,
to the extent that Bank takes possession of such Collateral. Bank agrees to
execute and deliver to Borrower from time to time such Lien subordinations as
Borrower may request and as are necessary to give to other lenders which finance
new Equipment for Borrower a first priority security interest in the new
Equipment financed so long as the Liens and the Indebtedness incurred with
respect to such Equipment financing are permitted under this Agreement.

               4.2 Delivery of Additional Documentation Required. Borrower shall
from time to time execute and deliver to Bank, at the request of Bank, all
Negotiable Collateral, all financing statements and other documents that Bank
may reasonably request, in form satisfactory to Bank, to perfect and continue
perfected Bank's security interests in the Collateral and in order to fully
consummate all of the transactions contemplated under the Loan Documents.



                                       11
<PAGE>   15

               4.3 Right to Inspect. Bank (through any of its officers,
employees, or agents) shall have the right, upon reasonable prior notice, from
time to time during Borrower's usual business hours, to inspect Borrower's Books
and to make copies thereof and to check, test, and appraise the Collateral in
order to verify Borrower's financial condition or the amount, condition of, or
any other matter relating to, the Collateral; provided, that unless an Event of
Default has occurred and is continuing, such inspections and appraisals shall
occur no more frequently than once every six (6) calendar months.

               4.4 Requirement for Cash Collateral. Borrower shall pledge cash
or a certificate of deposit to Bank as follows:

                    (a) Upon an Event of Default (except for six (6) months
Remaining Months Liquidity of Section 6.11), the Borrower shall pledge cash in
the form of a certificate of deposit at Silicon Valley Bank, on terms acceptable
to Bank, in an amount equal to fifty-five percent (55%) of the outstanding loan
balances, at which time Borrower shall be deemed to have cured the Event of
Default. Notwithstanding the foregoing, Bank shall have no obligation to release
the cash pledged pursuant to this Section 4.4(a) unless and until Borrower
achieves compliance with all the terms of the Loan Documents and cures such
Event of Default.

                    (b) If at any time the Liquidity of Borrower is less than
(i) Twelve Million Dollars ($12,000,000), or (ii) six (6) times Remaining Months
Liquidity, then Borrower shall pledge cash in the form of a certificate of
deposit at Silicon Valley Bank, on terms acceptable to Bank, in an amount equal
to one hundred and five percent (105%) of the outstanding loan balances, at
which time Borrower shall be deemed to have cured the Event of Default.
Notwithstanding the foregoing, Bank shall have no obligation to release the cash
pledged pursuant to this Section 4.4(b) unless and until Borrower achieves
compliance with all the terms of the Loan Documents and cures such Event of
Default.

          5. REPRESENTATIONS AND WARRANTIES

          Borrower represents and warrants as follows:

               5.1 Due Organization and Qualification. Borrower and each
Subsidiary is a corporation duly existing and in good standing under the laws of
its state of incorporation and qualified and licensed to do business in, and is
in good standing in, any state in which the conduct of its business or its
ownership of property requires that it be so qualified, except to the extent
that failure to so qualify would not have a Material Adverse Effect on the
Borrower.

               5.2 Due Authorization; No Conflict. The execution, delivery, and
performance of the Loan Documents are within Borrower's powers, have been duly
authorized, and are not in conflict with nor constitute a breach of any
provision contained in Borrower's Articles of Incorporation or Bylaws, nor will
they constitute an event of default under any material agreement to which
Borrower is a party or by which Borrower is bound except to the extent that
certain intellectual property agreements prohibit the assignment of the rights
thereunder to a third party without the Borrower's or other party's consent and
the Loan Documents constitute an assignment. Borrower is not in default under
any agreement to which it is a party or by which it is bound, which default
could reasonably be expected to have a Material Adverse Effect.

               5.3 No Prior Encumbrances. Borrower has good and indefeasible
title to the Collateral, free and clear of Liens, except for Permitted Liens.

               5.4 Bona Fide Accounts. The Accounts are bona fide existing
obligations. The property giving rise to such Accounts has been delivered to the
account debtor or to the account debtor's agent for immediate shipment to and
unconditional acceptance by the account debtor. Borrower has not received notice
of actual or imminent Insolvency Proceeding of any account debtor.



                                       12
<PAGE>   16

               5.5 Merchantable Inventory. All Inventory, net of reserves in
accordance with GAAP, is in all material respects of good and marketable
quality, free from all material defects.

               5.6 Name; Location of Chief Executive Office. Except as disclosed
in the Schedule, Borrower has not done business under any name other than that
specified on the signature page hereof. The chief executive office of Borrower
is located at the address indicated in Section 10 hereof.

               5.7 Litigation. Except as set forth in the Schedule, there are no
actions or proceedings pending by or against Borrower or any Subsidiary before
any court or administrative agency in which an adverse decision could reasonably
be expected to have a Material Adverse Effect or a material adverse effect on
Borrower's interest or Bank's security interest in the Collateral. Borrower does
not have knowledge of any such pending or threatened actions or proceedings.

               5.8 No Material Adverse Change in Financial Statements. All
consolidated financial statements related to Borrower and any Subsidiary that
have been delivered by Borrower to Bank fairly present in all material respects
Borrower's consolidated financial condition as of the date thereof and
Borrower's consolidated results of operations for the period then ended. There
has not been a material adverse change in the consolidated financial condition
of Borrower since the date of the most recent of such financial statements
submitted to Bank.

               5.9 Solvency. The fair saleable value of Borrower's assets
(including goodwill minus disposition costs) exceeds the fair value of its
liabilities; Borrower is not left with unreasonably small capital after the
transactions contemplated by this Agreement; and Borrower is able to pay its
respective debts (including trade debts) as they mature.

               5.10 Regulatory Compliance. Borrower and each Subsidiary has met
the minimum funding requirements of ERISA with respect to any employee benefit
plans subject to ERISA. No event has occurred resulting from Borrower's failure
to comply with ERISA that is reasonably likely to result in Borrower's incurring
any liability that could have a Material Adverse Effect. Borrower is not an
"investment company" or a company "controlled" by an "investment company" within
the meaning of the Investment Company Act of 1940, as amended. Borrower is not
engaged principally, or as one of the important activities, in the business of
extending credit for the purpose of purchasing or carrying margin stock (within
the meaning of Regulations G, T and U of the Board of Governors of the Federal
Reserve System). Borrower has complied with all the provisions of the Federal
Fair Labor Standards Act and Borrower has not violated any statutes, laws,
ordinances or rules applicable to it, noncompliance with or which violation of
which could reasonably be expected to have a Material Adverse Effect.

               5.11 Environmental Condition. None of Borrower's or any
Subsidiary's properties or assets has ever been used by Borrower or any
Subsidiary or, to the best of Borrower's knowledge, by previous owners or
operators, in the disposal of, or to produce, store, handle, treat, release, or
transport, any hazardous waste or hazardous substance other than in accordance
with applicable law; to the best of Borrower's knowledge, none of Borrower's
properties or assets has ever been designated or identified in any manner
pursuant to any environmental protection statute as a hazardous waste or
hazardous substance disposal site, or a candidate for closure pursuant to any
environmental protection statute; no lien arising under any environmental
protection statute has attached to any revenues or to any real or personal
property owned by Borrower or any Subsidiary; and neither Borrower nor any
Subsidiary has received a summons, citation, notice, or directive from the
Environmental Protection Agency or any other federal, state or other
governmental agency concerning any action or omission by Borrower or any
Subsidiary resulting in the releasing, or otherwise disposing of hazardous waste
or hazardous substances into the environment.

               5.12 Taxes. Borrower and each Subsidiary has filed or caused to
be filed all tax returns required to be filed, and has paid, or has made
adequate provision for the payment of, all taxes reflected therein, except for
taxes the amount or validity of which the Borrower is contesting in good faith
by appropriate proceedings and with respect to which the Borrower has taken
adequate reserves in accordance with GAAP.



                                       13
<PAGE>   17

               5.13 Subsidiaries. Borrower does not own any stock, partnership
interest or other equity securities of any Person, except for Permitted
Investments.

               5.14 Government Consents. Borrower and each Subsidiary have
obtained all consents, approvals and authorizations of, made all declarations or
filings with, and given all notices to, all governmental authorities that are
necessary for the continued operation of Borrower's business as currently
conducted except where the failure to obtain any such consent, approval or
authorization, to make any such declaration or filing, or to be given any such
notice could not reasonably be expected to have a Material Adverse Effect.

               5.15 Full Disclosure. No representation, warranty or other
statement made by Borrower in any certificate or written statement furnished to
Bank contains any untrue statement of a material fact or omits to state a
material fact necessary in order to make the statements contained in such
certificates or statements not misleading (it being recognized by Bank that the
projections and forecasts provided by Borrower are not to be viewed as facts and
that actual results during the period or period covered by any such projections
and forecasts may differ from the projected or forecasted results).

          6. AFFIRMATIVE COVENANTS

          Borrower covenants and agrees that, until payment in full of all
outstanding Obligations, and for so long as Bank may have any commitment to make
an Advance hereunder, Borrower shall do all of the following:

               6.1 Good Standing. Borrower shall maintain its and each of its
Subsidiaries' corporate existence and good standing in its jurisdiction of
incorporation and maintain qualification in each jurisdiction in which the
failure to so qualify could have a Material Adverse Effect. Borrower shall
maintain, and shall cause each of its Subsidiaries to maintain, to the extent
consistent with prudent management of Borrower's business, in force all
licenses, approvals and agreements, the loss of which could have a Material
Adverse Effect.

               6.2 Government Compliance.

                    (a) ERISA. Borrower shall meet, and shall cause each
Subsidiary to meet, the minimum funding requirements of ERISA with respect to
any employee benefit plans subject to ERISA.

                    (b) FDA. To the extent required by law, Borrower shall cause
its, and each of its Subsidiaries', manufacturing and quality control to conform
in all material respects to FDA Good Manufacturing Practices ("GMP") regulations
and such other regulations applicable to Borrower and its Subsidiaries with
respect to advertising, labeling and reporting, product testing, design, safety
and labeling of products except where the failure to so conform is not
reasonably likely to have a Material Adverse Effect. To the extent necessary to
the conduct of its and its Subsidiaries' business, Borrower shall register, and
shall cause each of its Subsidiaries to register, with the Food and Drug Branch
of the California Department of Health Services and the FDA, and Borrower shall
register its, and shall cause each of its Subsidiaries to register their,
manufacturing facilities in accordance with GMP regulations.

                    (c) Statutory Compliance. Borrower shall comply, and shall
cause each Subsidiary to comply, with all statutes, laws, ordinances and
government rules and regulations to which it is subject, noncompliance with
which is reasonably likely to have a Material Adverse Effect, including without
limitation, compliance in all material respects with the Federal Food, Drug, and
Cosmetics Act, the Occupational Safety and Health Act, the Environmental
Protection Act, the Toxic Substances Control Act, and all other applicable
federal, state and local laws, orders and regulations.

               6.3 Adverse Information. Borrower shall immediately notify Bank
upon receipt of any information that indicates that the FDA or other
governmental agency has advised Borrower that it found material deficiencies in
Borrower's or a Subsidiary's compliance with applicable regulations.

               6.4 Financial Statements, Reports, Certificates.



                                       14
<PAGE>   18

                    (a) Borrower shall deliver to Bank, (i) as soon as
available, but in any event within ninety (90) days after the end of Borrower's
fiscal year, audited consolidated financial statements of Borrower prepared in
accordance with GAAP, consistently applied, together with an unqualified opinion
on such financial statements of an independent certified public accounting firm
reasonably acceptable to Bank; (ii) within five (5) days upon becoming
available, copies of all statements, reports and notices sent or made available
generally by Borrower to its security holders or to any holders of Subordinated
Debt and all reports on Form 10-K and 10-Q filed with the Securities and
Exchange Commission; (iii) promptly upon receipt of notice thereof, a report of
any legal actions pending or threatened against Borrower that would be likely to
result in damages or costs to Borrower of Two Hundred Fifty Thousand Dollars
($250,000) or more in a single action; and (iv) such budgets, sales projections,
operating plans or other financial information as Bank may reasonably request
from time to time.

                    (b) Borrower shall deliver to Bank with the quarterly
financial statements a Compliance Certificate signed by a Responsible Officer in
substantially the form of Exhibit C hereto. 

                    (c) If at any time and during such time that Borrower's
Liquidity is less than Twenty Million Dollars ($20,000,000), or if an Event of
Default occurs and is continuing, Borrower shall deliver to Bank, within
twenty-five (25) days after the last day of each calendar month, a company
prepared monthly report of liquidity and average of Net Cash Losses for such
period, in form and substance satisfactory to Bank, and certified by a
Responsible Officer. At such time that monthly reporting under this Section
6.4(c) is required and is continuing, until minimum liquidity exceeds Twenty
Million Dollars ($20,000,000), minimum liquidity under Section 6.11 below shall
be measured as of the last day of each calendar month.

               6.5 Inventory; Returns. Borrower shall keep all Inventory in good
and marketable condition, free from all material defects. Returns and
allowances, if any, as between Borrower and its account debtors shall be on the
same basis and in accordance with the usual customary practices of Borrower, as
they exist at the time of the execution and delivery of this Agreement. Borrower
shall promptly notify Bank of all returns and recoveries and of all disputes and
claims, where the return, recovery, dispute or claim involves more than Two
Hundred Fifty Thousand Dollars ($250,000).

               6.6 Taxes. Borrower shall make, and shall cause each Subsidiary
to make, due and timely payment or deposit of all material federal, state, and
local taxes, assessments, or contributions required of it by law, and will
execute and deliver to Bank, upon reasonable request, appropriate certificates
attesting to the payment or deposit thereof; and Borrower will make, and will
cause each Subsidiary to make, timely payment or deposit of all material tax
payments and withholding taxes required of it by applicable laws, including, but
not limited to, those laws concerning F.I.C.A., F.U.T.A., state disability, and
local, state, and federal income taxes, and will, upon reasonable request,
furnish Bank with proof satisfactory to Bank indicating that Borrower or a
Subsidiary has made such payments or deposits; provided that Borrower or a
Subsidiary need not make any payment required hereunder if the amount or
validity of such payment is contested in good faith by appropriate proceedings
and is reserved against (to the extent required by GAAP) by Borrower.

               6.7 Insurance.

                    (a) Borrower, at its expense, shall keep the Collateral
insured against loss or damage by fire, theft, explosion, sprinklers, and all
other hazards and risks, and in such amounts, as ordinarily insured against by
other owners in similar businesses conducted in the locations where Borrower's
business is conducted on the date hereof. Borrower shall also maintain insurance
relating to Borrower's ownership and use of the Collateral in amounts and of a
type that are customary to businesses similar to Borrower's. Nothing herein
shall be construed as requiring the Borrower to maintain credit insurance with
respect to its accounts receivable.

                    (b) All such policies of insurance shall be in such form,
with such companies and in such amounts as reasonably satisfactory to Bank. All
such policies of property insurance shall contain a lender's loss payable
endorsement, in a form satisfactory to Bank, showing Bank as an additional loss
payee thereof and all liability 



                                       15
<PAGE>   19

insurance policies shall show the Bank as an additional insured, and shall
specify that the insurer must give at least twenty (20) days notice to Bank
before canceling its policy for any reason. Upon Bank's request, Borrower shall
deliver to Bank certified copies of such policies of insurance and evidence of
the payments of all premiums therefor. So long as no Event of Default has
occurred and is continuing, Borrower shall have the option of applying the
proceeds of any casualty policy to the replacement or repair of destroyed or
damaged property; provided, that after the occurrence and during the continuance
of an Event of Default, all proceeds payable under any such policy shall, at the
option of Bank, be payable to Bank to be applied on account of the Obligations.

               6.8 Principal Depository. Borrower shall maintain its principal
domestic operating accounts with Bank.

               6.9 Total Liabilities-Net Worth Ratio. Borrower shall maintain,
as of the last day of each fiscal quarter during the term of this Agreement, a
ratio of Total Liabilities less Subordinated Debt to Tangible Net Worth plus
Subordinated Debt of not more than (i) 1.75 to 1.00, prior to the Equity
Infusion, and (ii) 1.50 to 1.00, following the Equity Infusion.

               6.10 Tangible Net Worth. Borrower shall maintain, as of the last
day of each fiscal quarter, (i) commencing on the Closing Date through the date
of the Equity Infusion, a Tangible Net Worth of not less than Eight Million
Dollars ($8,000,000), and (ii) following the Equity Infusion, a Tangible Net
Worth of not less than Eighteen Million Dollars ($18,000,000).

               6.11 Minimum Liquidity and Debt Service Coverage. Subject to the
remainder of this Section, Borrower shall maintain, as of the last day of each
of fiscal quarter, a minimum Liquidity of the greater of (a) two (2) times the
amount of Obligations plus all other debt owed by Borrower to Bank, OR (b) six
times (6x) the average of Net Cash Losses for the immediately preceding three
(3) month period. Notwithstanding the foregoing, from and after the time
Borrower achieves a Debt Service Coverage for two consecutive fiscal quarters of
at least 1.50 to 1.00, and for so long as Borrower maintains as of the last day
of each fiscal quarter thereafter, a Debt Service Coverage of at least 1.50 to
1.00, Borrower shall not be subject to the minimum required Liquidity set forth
above.




               6.12 Further Assurances. At any time and from time to time
Borrower shall execute and deliver such further instruments and take such
further action as may reasonably be requested by Bank to effect the purposes of
this Agreement.

          7. NEGATIVE COVENANTS

          Borrower covenants and agrees that, so long as any credit hereunder
shall be available and until payment in full of the outstanding Obligations or
for so long as Bank may have any commitment to make the Advance, Borrower will
not do any of the following:

               7.1 Dispositions. Convey, sell, lease, transfer or otherwise
dispose of (collectively, a "Transfer"), or permit any of its Subsidiaries to
Transfer, all or any part of its business or property, other than Transfers: (i)
of inventory in the ordinary course of business, (ii) of non-exclusive licenses
and similar arrangements for the use of the property of Borrower or its
Subsidiaries in the ordinary course of business, (iii) of worn-out or obsolete
Equipment or Equipment financed by other vendors, (iv) which constitute
liquidation of Investments permitted under Section 7.7, (v) permitted by Section
7.8, and (vi) not otherwise permitted by this Section 7.1 not exceeding Two
Hundred and Fifty Thousand Dollars ($250,000) in the aggregate in any fiscal
year.

               7.2 Change in Business. Engage in any business, or permit any of
its Subsidiaries to engage in any business, other than the businesses currently
engaged in by Borrower and any business substantially similar or related thereto
(or incidental thereto). Borrower will not, without thirty (30) days prior
written notification to Bank, relocate its chief executive office.



                                       16
<PAGE>   20

               7.3 Mergers or Acquisitions. Merge or consolidate, or permit any
of its Subsidiaries to merge or consolidate, with or into any other business
organization, or acquire, or permit any of its Subsidiaries to acquire, all or
substantially all of the capital stock or property of another Person; provided
that this Section 7.3 shall not apply to (i) the purchase of inventory,
equipment or intellectual property rights in any single transaction valued at
less than Two Hundred Fifty Thousand Dollars ($250,000) in the ordinary course
of business or (ii) transactions among Subsidiaries or among Borrower and its
Subsidiaries in which Borrower is the surviving entity.

               7.4 Indebtedness. Create, incur, assume or be or remain liable
with respect to any Indebtedness, or permit any Subsidiary so to do, other than
Permitted Indebtedness.

               7.5 Encumbrances. Create, incur, assume or suffer to exist any
Lien with respect to any of its property, or assign or otherwise convey any
right to receive income, including the sale of any Accounts, or permit any of
its Subsidiaries so to do, except for Permitted Liens.

               7.6 Distributions. Pay any dividends or make any other
distribution or payment on account of or in redemption, retirement or purchase
of any capital stock, provided, that (i) Borrower may declare and make any
dividend payment or other distribution payable in its equity securities, (ii)
Borrower may convert any of its convertible securities into other securities
pursuant to the terms of such convertible securities or otherwise in exchange
therefor and (iii) for so long as an Event of Default has not occurred, Borrower
may repurchase stock from former employees of Borrower in accordance with the
terms of repurchase or similar agreements between Borrower and such employees.

               7.7 Investments. Directly or indirectly acquire or own, or make
any Investment in or to any Person, or permit any of its Subsidiaries so to do,
other than Permitted Investments.

               7.8 Transactions with Affiliates. Directly or indirectly enter
into or permit to exist any material transaction with any Affiliate of Borrower
except for transactions that are in the ordinary course of Borrower's business,
upon fair and reasonable terms that are no less favorable to Borrower than would
be obtained in an arm's length transaction with a nonaffiliated Person and
except for transactions with a Subsidiary that are upon fair and reasonable
terms and transactions constituting Permitted Investments.

               7.9 Subordinated Debt. Make any payment in respect of any
Subordinated Debt, or permit any of its Subsidiaries to make any such payment,
except in compliance with the terms of such Subordinated Debt, or amend any
provision contained in any documentation relating to the Subordinated Debt
without Bank's prior written consent.

               7.10 Inventory. Store the Inventory with a bailee, warehouseman,
or similar party unless Bank has received a pledge of the warehouse receipt
covering such Inventory. Except for Inventory sold in the ordinary course of
business and except for such other locations as disclosed in the Schedule and as
Bank may approve in writing, Borrower shall keep the Inventory only at the
location set forth in Section 10 hereof and such other locations of which
Borrower gives Bank prior written notice and as to which Borrower signs and
files a financing statement where needed to perfect Bank's security interest.

               7.11 Compliance. Become an "investment company" controlled by an
"investment company," within the meaning of the Investment Company Act of 1940,
as amended, or become principally engaged in, or undertake as one of its
important activities, the business of extending credit for the purpose of
purchasing or carrying margin stock, or use the proceeds of any Advance or Loan
for such purpose. Fail to (i) comply in all material respects with FDA's GMP
regulations and registration requirements; (ii) comply in all material respects
with Federal Food, Drug and Cosmetics Act, the Occupational Safety and Health
Act, the Environmental Protection Act, and the Toxic Substances Control Act;
(iii) meet the minimum funding requirements of ERISA, permit a reportable event
or prohibited transaction, as defined in ERISA, to occur; (iv) comply with the
Federal Fair Labor Standards Act in all material respects; or (v) violate any
law or regulation, in each case which violation could have a Material Adverse
Effect.



                                       17
<PAGE>   21

          8. EVENTS OF DEFAULT

          Any one or more of the following events shall constitute an Event of
Default by Borrower under this Agreement:

               8.1 Payment Default. If Borrower fails to pay the principal of,
or any interest on, the Advance when due and payable; or fails to pay any
portion of any other Obligations not constituting such principal or interest,
including without limitation Bank Expenses, within thirty (30) days of receipt
by Borrower of an invoice for such other Obligations;

               8.2 Covenant Default. If Borrower fails to perform any obligation
under Section 6.8, 6.9, 6.10 or 6.11 or violates any of the covenants contained
in Article 7 of this Agreement, or fails or neglects to perform, keep, or
observe any other material term, provision, condition, covenant, or agreement
contained in this Agreement, in any of the Loan Documents, or in any other
present or future agreement between Borrower and Bank and as to any default
under such other term, provision, condition, covenant or agreement that can be
cured, has failed to cure such default within ten (10) days after Borrower
receives notice thereof or any officer of Borrower becomes aware thereof;
provided, however, that if the default cannot by its nature be cured within the
ten (10) day period or cannot after diligent attempts by Borrower be cured
within such ten (10) day period, and such default is likely to be cured within a
reasonable time, then Borrower shall have an additional reasonable period (which
shall not in any case exceed thirty (30) days) to attempt to cure such default,
and within such reasonable time period the failure to have cured such default
shall not be deemed an Event of Default (provided that no Advance will be
required to be made during such cure period);

               8.3 Material Adverse Change. If there occurs a material adverse
change in Borrower's business or financial condition, or if there is a material
impairment of the prospect of repayment of any portion of the Obligations or a
material impairment of the value or priority of Bank's security interests in the
Collateral;

               8.4 Attachment. If any material portion of Borrower's assets is
attached, seized, subjected to a writ or distress warrant, or is levied upon, or
comes into the possession of any trustee, receiver or person acting in a similar
capacity and such attachment, seizure, writ or distress warrant or levy has not
been removed, discharged or rescinded within ten (10) days, or if Borrower is
enjoined, restrained, or in any way prevented by court order from continuing to
conduct all or any material part of its business affairs, or if a judgment or
other claim becomes a lien or encumbrance upon any material portion of
Borrower's assets, or if a notice of lien, levy, or assessment is filed of
record with respect to any of Borrower's assets by the United States Government,
or any department, agency, or instrumentality thereof, or by any state, county,
municipal, or governmental agency, and the same is not paid within ten (10) days
after Borrower receives notice thereof, provided that none of the foregoing
shall constitute an Event of Default where such action or event is stayed or an
adequate bond has been posted pending a good faith contest by Borrower (provided
that no Advance will be required to be made during such cure period);

               8.5 Insolvency. If Borrower becomes insolvent, or if an
Insolvency Proceeding is commenced by Borrower, or if an Insolvency Proceeding
is commenced against Borrower and is not dismissed or stayed within thirty (30)
days (provided that no Advance will be made prior to the dismissal of such
Insolvency Proceeding);

               8.6 Other Agreements. If there is a default in any agreement to
which Borrower is a party with a third party or parties resulting in a right by
such third party or parties, whether or not exercised, to accelerate the
maturity of any Indebtedness in an amount in excess of Two Hundred Fifty
Thousand Dollars ($250,000) or that could have a Material Adverse Effect;

               8.7 Subordinated Debt. If Borrower makes any payment on account
of Subordinated Debt, except to the extent such payment is allowed under any
subordination agreement entered into with Bank;

               8.8 Judgments. If a judgment or judgments for the payment of
money in an amount, individually or in the aggregate, of at least Two Hundred
Fifty Thousand Dollars ($250,000) shall be rendered against 



                                       18
<PAGE>   22

Borrower and shall remain unsatisfied and unstayed for a period of thirty (30)
days (provided that no Advances will be made prior to the satisfaction or stay
of such judgment);

               8.9 Misrepresentations. If any material misrepresentation or
material misstatement exists now or hereafter in any warranty or representation
set forth herein or in any certificate delivered to Bank by any Responsible
Officer pursuant to this Agreement or to induce Bank to enter into this
Agreement or any other Loan Document.

               8.10 Change of Control. If any "person" or "group" (within the
meaning of Section 13(d) and 14(d)(2) of the Securities Exchange Act of 1934)
becomes the "beneficial owner" (as defined in Rule 13d-3 under the Securities
Exchange Act of 1934), directly or indirectly, of a sufficient number of shares
of all classes of stock then outstanding of Borrower ordinarily entitled to vote
in the election of directors, empowering such "person" or "group" to elect a
majority of the Board of Directors of Borrower.

          9. BANK'S RIGHTS AND REMEDIES

               9.1 Rights and Remedies. Upon the occurrence and during the
continuance of an Event of Default, Bank may, at its election, without notice of
its election and without demand, do any one or more of the following, all of
which are authorized by Borrower:

                    (a) Declare all Obligations, whether evidenced by this
Agreement, by any of the other Loan Documents, or otherwise, immediately due and
payable (provided that upon the occurrence of an Event of Default described in
Section 8.5 all Obligations shall become immediately due and payable without any
action by Bank);

                    (b) Cease advancing money or extending credit to or for the
benefit of Borrower under this Agreement or under any other agreement between
Borrower and Bank;

                    (c) Settle or adjust disputes and claims directly with
account debtors for amounts, upon terms and in whatever order that Bank
reasonably considers advisable;

                    (d) Without notice to or demand upon Borrower, make such
payments and do such acts as Bank considers necessary or reasonable to protect
its security interest in the Collateral. Borrower agrees to assemble the
Collateral if Bank so requires, and to make the Collateral available to Bank as
Bank may reasonably designate. Borrower authorizes Bank to enter the premises
where the Collateral is located, to take and maintain possession of the
Collateral, or any part of it, and to pay, purchase, contest, or compromise any
encumbrance, charge, or lien which in Bank's determination appears to be prior
or superior to its security interest and to pay all expenses incurred in
connection therewith. With respect to any of Borrower's owned premises, Borrower
hereby grants Bank a license to enter into possession of such premises and to
occupy the same, without charge, for up to one hundred twenty (120) days in
order to exercise any of Bank's rights or remedies provided herein, at law, in
equity, or otherwise;

                    (e) Without notice to Borrower set off and apply to the
Obligations any and all (i) balances and deposits of Borrower held by Bank, or
(ii) indebtedness at any time owing to or for the credit or the account of
Borrower held by Bank;

                    (f) Ship, reclaim, recover, store, finish, maintain, repair,
prepare for sale, advertise for sale, and sell (in the manner provided for
herein and pursuant to applicable law) the Collateral. Bank is hereby granted a
license or other right, solely pursuant to the provisions of this Section 9.1,
to use, without charge, Borrower's labels, patents, copyrights, rights of use of
any name, trade secrets, trade names, trademarks, service marks, and advertising
matter, or any property of a similar nature, as it pertains to the Collateral,
in completing production of, advertising for sale, and selling any Collateral
and, in connection with Bank's exercise of its rights under this Section 9.1,
Borrower's rights under all licenses and all franchise agreements shall inure to
Bank's benefit;

                    (g) Sell the Collateral at either a public or private sale,
or both, by way of one or more contracts or transactions, for cash or on terms,
in such manner and at such places (including Borrower's premises) as 



                                       19
<PAGE>   23

Bank determines is commercially reasonable, and apply any proceeds to the
Obligations in whatever manner or order Bank deems appropriate;

                    (h) Bank may credit bid and purchase at any public sale; and

                    (i) Any deficiency that exists after disposition of the
Collateral as provided above will be paid immediately by Borrower.

               9.2 Power of Attorney. Effective only upon the occurrence and
during the continuance of an Event of Default, Borrower hereby irrevocably
appoints Bank (and any of Bank's designated officers, or employees) as
Borrower's true and lawful attorney to: (a) send requests for verification of
Accounts or notify account debtors of Bank's security interest in the Accounts;
(b) endorse Borrower's name on any checks or other forms of payment or security
that may come into Bank's possession; (c) sign Borrower's name on any invoice or
bill of lading relating to any Account, drafts against account debtors,
schedules and assignments of Accounts, verifications of Accounts, and notices to
account debtors; (d) make, settle, and adjust all claims under and decisions
with respect to Borrower's policies of insurance; and (e) settle and adjust
disputes and claims respecting the Accounts directly with account debtors, for
amounts and upon terms which Bank determines to be reasonable; (f) file, in its
sole discretion, one or more financing or continuation statements and amendments
thereto, relative to any of the Collateral without the signature of Borrower
where permitted by law; and (g) transfer the Collateral into the name of Bank or
a third party to the extent permitted under the California Uniform Commercial
Code provided Bank may exercise such power of attorney to sign the name of
Borrower on any of the documents described in Section 4.2 regardless of whether
an Event of Default has occurred. The appointment of Bank as Borrower's attorney
in fact, and each and every one of Bank's rights and powers, being coupled with
an interest, is irrevocable until all of the Obligations have been fully repaid
and performed and Bank's obligation to provide advances hereunder is terminated.

               9.3 Accounts Collection. After the occurrence and during the
continuance of an Event of Default, Bank may notify any Person owing funds to
Borrower of Bank's security interest in such funds and verify the amount of such
Account. Borrower shall collect all amounts owing to Borrower for Bank, receive
in trust all payments as Bank's trustee, and immediately deliver such payments
to Bank in their original form as received from the account debtor, with proper
endorsements for deposit.

               9.4 Bank Expenses. If Borrower fails to pay any amounts when due
or furnish any required proof of payment due to third persons or entities, as
required under the terms of this Agreement, then Bank may do any or all of the
following: (a) make payment of the same or any part thereof; (b) set up such
reserves under the Revolving Facility as Bank deems necessary to protect Bank
from the exposure created by such failure; or (c) obtain and maintain insurance
policies of the type discussed in Section 6.6 of this Agreement, and take any
action with respect to such policies as Bank deems prudent. Any amounts so paid
or deposited by Bank shall constitute Bank Expenses, shall be immediately due
and payable, and shall bear interest at the then applicable rate hereinabove
provided, and shall be secured by the Collateral. Any payments made by Bank
shall not constitute an agreement by Bank to make similar payments in the future
or a waiver by Bank of any Event of Default under this Agreement.

               9.5 Bank's Liability for Collateral. So long as Bank complies
with Section 9207 of the Code and only so long as any Obligations remain
outstanding and unpaid under this Agreement, Bank shall not in any way or manner
be liable or responsible for: (a) the safekeeping of the Collateral; (b) any
loss or damage thereto occurring or arising in any manner or fashion from any
cause; (c) any diminution in the value thereof; or (d) any act or default of any
carrier, warehouseman, bailee, forwarding agency, or other person whomsoever.
All risk of loss, damage or destruction of the Collateral shall be borne by
Borrower.

               9.6 Remedies Cumulative. Bank's rights and remedies under this
Agreement, the Loan Documents, and all other agreements shall be cumulative.
Bank shall have all other rights and remedies not inconsistent herewith as
provided under the Code, by law, or in equity. No exercise by Bank of one right
or remedy shall be deemed an election, and no waiver by Bank of any Event of
Default on Borrower's part shall be deemed a continuing waiver. No delay by Bank
shall constitute a waiver, election, or acquiescence by it. No waiver by Bank



                                       20
<PAGE>   24


shall be effective unless made in a written document signed on behalf of Bank
and then shall be effective only in the specific instance and for the specific
purpose for which it was given.

               9.7 Demand; Protest. Borrower waives demand, protest, notice of
protest, notice of default or dishonor, notice of payment and nonpayment, notice
of any default, nonpayment at maturity, release, compromise, settlement,
extension, or renewal of accounts, documents, instruments, chattel paper, and
guarantees at any time held by Bank on which Borrower may in any way be liable.



                                       21
<PAGE>   25

          10. NOTICES

               Unless otherwise provided in this Agreement, all notices or
demands by any party relating to this Agreement or any other agreement entered
into in connection herewith shall be in writing and (except for financial
statements and other informational documents which may be sent by first-class
mail, postage prepaid) shall be personally delivered or sent by a recognized
overnight delivery service, certified mail, postage prepaid, return receipt
requested, to Borrower or to Bank, as the case may be, at its addresses set
forth below:

     If to Borrower:        Cardiac Pathways Corporation
                            995 Benecia Avenue
                            Sunnyvale, CA  94086
                            Attn:  Mr. David W. Gryska, Chief Financial Officer
                            FAX:  (408) 737-1700

     If to Bank:            Silicon Valley Bank
                            1731 Embarcadero Road, Suite 220
                            Palo Alto, CA  94303
                            Attn:  Ms. Debra Springer-Bowman
                            FAX:  (650) 812-0640

     The parties hereto may change the address at which they are to receive
notices hereunder, by notice in writing in the foregoing manner given to the
other.

          11. CHOICE OF LAW AND VENUE; JURY TRIAL WAIVER

               This Agreement shall be governed by, and construed in accordance
with, the internal laws of the State of California, without regard to principles
of conflicts of law. Each of Borrower and Bank hereby submits to the exclusive
jurisdiction of the state and federal courts located in the County of Santa
Clara, State of California. BORROWER AND BANK EACH HEREBY WAIVE THEIR RESPECTIVE
RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT
OF ANY OF THE LOAN DOCUMENTS OR ANY OF THE TRANSACTIONS CONTEMPLATED THEREIN,
INCLUDING CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS, AND ALL OTHER
COMMON LAW OR STATUTORY CLAIMS. EACH PARTY RECOGNIZES AND AGREES THAT THE
FOREGOING WAIVER CONSTITUTES A MATERIAL INDUCEMENT FOR IT TO ENTER INTO THIS
AGREEMENT. EACH PARTY REPRESENTS AND WARRANTS THAT IT HAS REVIEWED THIS WAIVER
WITH ITS LEGAL COUNSEL AND THAT IT KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY
TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL COUNSEL.

          12. GENERAL PROVISIONS

               12.1 Successors and Assigns.

                    (a) This Agreement shall bind and inure to the benefit of
the respective successors and permitted assigns of each of the parties;
provided, however, that neither this Agreement nor any rights hereunder may be
assigned by Borrower without Bank's prior written consent, which consent may be
granted or withheld in Bank's sole discretion. Bank shall have the right without
the consent of or notice to Borrower to sell, transfer, negotiate, or grant
participations in all or any part of, or any interest in Bank's obligations,
rights and benefits hereunder subject to the provisions of this Section 12.1.

                    (b) Bank may sell, negotiate or grant participations to
other financial institutions in all or part of the obligations of the Borrower
outstanding under the Loan Documents, without notice to or the approval of
Borrower; provided that any such sale, negotiation or participation shall be in
compliance with the applicable federal and state securities laws and the other
requirements of this Section 12.1. Notwithstanding the sale, negotiation or
grant 



                                       22
<PAGE>   26

of participations, Bank shall remain solely responsible for the performance of
its obligations under this Agreement, and Borrower shall continue to deal solely
and directly with Bank in connection with this Agreement and the other Loan
Documents.

                    (c) The grant of a participation interest shall be on such
terms as Bank determines are appropriate, provided only that (1) the holder of
such a participation interest shall not have any of the rights of Bank under
this Agreement except, if the participation agreement so provides, rights to
demand the payment of costs of the type described in Section 2.6, (ii) extend
the term of this Agreement, (iii) decrease the rate of interest or the amount of
any fee or any other amount payable to Bank under this Agreement, (iv) reduce
the principal amount payable under this Agreement, or (v) extend the date fixed
for the payment of principal or interest or any other amount payable under this
Agreement.

                    (d) Bank may assign, from time to time, all or any portion
of its pro rata share of the Committed Loan Amount to an Affiliate of the Bank
or to the Federal Reserve Bank or, subject to the prior written approval of
Borrower (which approval will not be unreasonably withheld), to any other
financial institution; provided, that the parties to each such assignment shall
execute and deliver to Borrower an assignment agreement in a form renewable
acceptable to each. Upon such execution and delivery, from and after the
effective date specified in such assignment agreement (x) the assignee
thereunder shall be a party hereto and, to the extent that rights and
obligations hereunder have been assigned to it pursuant to such assignment
agreement, have the rights and obligations of Bank hereunder and (y) Bank shall,
to the extent that rights and obligations hereunder have been assigned by it
pursuant to such assignment agreement, relinquish its rights and be released
from its obligations under this Agreement (other than pursuant to this Section
12.1(d)), and, in the case of an assignment agreement covering all or the
remaining portion of Bank's rights and obligations under this Agreement, Bank
shall cease to be a party hereto. In the event of an assignment hereunder, the
parties agree to amend this Agreement to the extent necessary to reflect the
mechanical changes which are necessary to document such assignment and which are
standard for a multi-bank credit facility.

               12.2 Indemnification. Borrower shall defend, indemnify and hold
harmless Bank and its officers, employees, and agents against: (a) all
obligations, demands, claims, and liabilities claimed or asserted by any other
party in connection with the transactions contemplated by this Agreement; and
(b) all losses or Bank Expenses in any way suffered, incurred, or paid by Bank
as a result of or in any way arising out of, following, or consequential to
transactions between Bank and Borrower whether under this Agreement, or
otherwise (including without limitation reasonable attorneys' fees and
expenses), except for losses caused by Bank's gross negligence or willful
misconduct.

               12.3 Time of Essence. Time is of the essence for the performance
of all obligations set forth in this Agreement.

               12.4 Severability of Provisions. Each provision of this Agreement
shall be severable from every other provision of this Agreement for the purpose
of determining the legal enforceability of any specific provision.

               12.5 Counterparts. This Agreement may be executed in any number
of counterparts and by different parties on separate counterparts, each of
which, when executed and delivered, shall be deemed to be an original, and all
of which, when taken together, shall constitute but one and the same Agreement.

               12.6 Survival. All covenants, representations and warranties made
in this Agreement shall continue in full force and effect so long as any
Obligations (excluding Obligations under Section 2.6 and 12.2 to the extent they
remain inchoate at the time the outstanding payment Obligations are paid in
full) remain outstanding. The obligations of Borrower to indemnify Bank with
respect to the expenses, damages, losses, costs and liabilities described in
Section 12.2 shall survive until all applicable statute of limitations periods
with respect to actions that may be brought against Bank have run, provided that
so long as the obligations set forth in the first sentence of this Section 12.8
have been satisfied, and Bank has no commitment to make any Advance or to make
any other loans to Borrower, Bank shall release all security interests granted
hereunder and redeliver all Collateral held by it in accordance with applicable
law.



                                       23
<PAGE>   27

               12.7 Confidentiality. In handling any confidential information
Bank shall exercise the same degree of care that it exercises with respect to
its own proprietary information of the same types to maintain the
confidentiality of any non-public information thereby received or received
pursuant to this Agreement except that disclosure of such information may be
made (i) to the Subsidiaries or Affiliates of Bank in connection with their
present or prospective business relations with Borrower, (ii) to prospective
transferees or purchasers of any interest in the Advances, provided that they
have entered into a comparable confidentiality agreement in favor of Borrower
and have delivered a copy to Borrower, (iii) as required by law, regulations,
rule or order, subpoena, judicial order or similar order, (iv) as may be
required in connection with the examination, audit or similar investigation of
Bank and (v) as Bank may determine in connection with the enforcement of any
remedies hereunder. Confidential information hereunder shall not include
information that either: (a) is in the public domain or in the knowledge or
possession of Bank when disclosed to Bank, or becomes part of the public domain
after disclosure to Bank through no fault of Bank; or (b) is disclosed to Bank
by a third party, provided Bank does not have actual knowledge that such third
party is prohibited from disclosing such information.

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

                                            CARDIAC PATHWAYS CORPORATION


                                            By: /s/ David W. Gryska
                                               ---------------------------------

                                            Title: CFO
                                                  ------------------------------



                                            SILICON VALLEY BANK


                                            By: /s/ D.S. Bowman
                                               ---------------------------------

                                            Title: Vice President
                                                  ------------------------------


                                       24
<PAGE>   28

                                    EXHIBIT A


     The Collateral shall consist of all right, title and interest of Borrower
in and to the following:

     (a) All goods and equipment now owned or hereafter acquired, including,
without limitation, all machinery, fixtures, vehicles (including motor vehicles
and trailers), and any interest in any of the foregoing, and all attachments,
except those which were purchased pursuant to a lease agreement, accessories,
accessions, replacements, substitutions, additions, and improvements to any of
the foregoing, wherever located;

     (b) All inventory, now owned or hereafter acquired, including, without
limitation, all merchandise, raw materials, parts, supplies, packing and
shipping materials, work in process and finished products including such
inventory as is temporarily out of Borrower's custody or possession or in
transit and including any returns upon any accounts or other proceeds, including
insurance proceeds, resulting from the sale or disposition of any of the
foregoing and any documents of title representing any of the above, and
Borrower's Books relating to any of the foregoing;

     (c) All contract rights and general intangibles now owned or hereafter
acquired, including, without limitation, goodwill, leases, license agreements,
franchise agreements, blueprints, drawings, purchase orders, customer lists,
route lists, claims, literature, reports, catalogs, income tax refunds, payments
of insurance and rights to payment of any kind;

     (d) All now existing and hereafter arising accounts, contract rights,
royalties, license rights and all other forms of obligations owing to Borrower
arising out of the sale or lease of goods, the licensing of technology or the
rendering of services by Borrower, whether or not earned by performance, and any
and all credit insurance, guaranties, and other security therefor, as well as
all merchandise returned to or reclaimed by Borrower and Borrower's Books
relating to any of the foregoing;

     (e) All documents, cash, deposit accounts, securities, securities
entitlements, financial assets, investment properties, securities accounts,
securities entitlements, letters of credit, certificates of deposit, instruments
and chattel paper now owned or hereafter acquired and Borrower's Books relating
to the foregoing; and

     (f) Any and all claims, rights and interests in any of the above and all
substitutions for, additions and accessions to and proceeds thereof.



                                       25
<PAGE>   29

                                    EXHIBIT B

                   LOAN PAYMENT/ADVANCE TELEPHONE REQUEST FORM

              DEADLINE FOR SAME DAY PROCESSING IS 3:00 P.M., P.S.T.

TO:  CENTRAL CLIENT SERVICE DIVISION                         DATE:______________


FAX#:  (408) 496-2426                                        TIME:______________


FROM:  CARDIAC PATHWAYS CORPORATION
     ---------------------------------------------------------------------------
                             CLIENT NAME (BORROWER)

REQUESTED BY:
             -------------------------------------------------------------------
                            AUTHORIZED SIGNER'S NAME

AUTHORIZED SIGNATURE:
                     -----------------------------------------------------------

PHONE NUMBER:
             -------------------------------------------------------------------

FROM ACCOUNT #                                  TO ACCOUNT #
               ---------------------------------             -------------------

REQUESTED TRANSACTION TYPE                                 REQUEST DOLLAR AMOUNT

PRINCIPAL INCREASE (TERM ADVANCE)                          $____________________
PRINCIPAL PAYMENT (ONLY)                                   $____________________
INTEREST PAYMENT (ONLY)                                    $____________________
PRINCIPAL AND INTEREST (PAYMENT)                           $____________________

OTHER INSTRUCTIONS:_____________________________________________________________
________________________________________________________________________________

     All representations and warranties of Borrower stated in the Loan Agreement
are true, correct and complete in all material respects as of the date of the
telephone request for and Advance confirmed by this Borrowing Certificate;
provided, however, that those representations and warranties expressly referring
to another date shall be true, correct and complete in all material respects as
of such date.




                                  BANK USE ONLY


TELEPHONE REQUEST:

The following person is authorized to request the loan payment transfer/loan
advance on the advance designated account and is known to me.


----------------------------------                ------------------------------
      Authorized Requester                                 Phone #


----------------------------------                ------------------------------
      Received By (Bank)                                   Phone #


                   --------------------------------------------
                           Authorized Signature (Bank)



                                       26
<PAGE>   30

                                    EXHIBIT C
                             COMPLIANCE CERTIFICATE


TO:      SILICON VALLEY BANK


FROM:    CARDIAC PATHWAYS CORPORATION


     The undersigned authorized officer of Cardiac Pathways Corporation hereby
certifies that in accordance with the terms and conditions of the Loan and
Security Agreement between Borrower and Bank (the "Agreement"), (i) Borrower is
in complete compliance for the period ending ___________ with all required
covenants except as noted below and (ii) all representations and warranties of
Borrower stated in the Agreement are true and correct in all material respects
as of the date hereof. Attached herewith are the required documents supporting
the above certification. The Officer further certifies that these are prepared
in accordance with Generally Accepted Accounting Principles (GAAP) and are
consistently applied from one period to the next except as explained in an
accompanying letter or footnotes.

  PLEASE INDICATE COMPLIANCE STATUS BY CIRCLING YES/NO UNDER "COMPLIES" COLUMN.

<TABLE>
<CAPTION>
REPORTING COVENANT                                 REQUIRED                                          COMPLIES
------------------                                 --------                                          --------
<S>                                                <C>                                               <C>         <C>
10-K 10-Q                                          within 5 days                                     Yes         No
Annual (CPA Audited)                               FYE within 90 days                                Yes         No
Liquidity/Cash Burn Report(1)                      Monthly within 25 days                            Yes         No
</TABLE>

(1) Only required if Liquidity below $20,000,000.

<TABLE>
<CAPTION>
FINANCIAL COVENANT                                  REQUIRED                    ACTUAL               COMPLIES
------------------                                  --------                    ------               --------
<S>                                                 <C>                         <C>                  <C>         <C>
Maintain on a Quarterly Basis:
Total Liabilities/Tangible Net Worth                (2)                         _____:1.0            Yes         No
Tangible Net Worth                                  (3)                         $_______             Yes         No
Liquidity/Debt Service Coverage                     2x obligations/_____:1.0                         Yes         No
                                                    Bank debt or 6 RML(4)
</TABLE>

(2)(i) prior to Equity Infusion, 1.75 to 1.00, (ii) following Equity Infusion,
       1.50 to 1.00

(3)(i) prior to Equity Infusion, 8,000,000, (ii) following Equity Infusion,
       $18,000,000 

(4)    converts to Debt Service Coverage of 1.5:1.0 upon two
       consecutive quarters of compliance with Debt Service Coverage 

                                                       BANK USE ONLY

                                             Received by:_______________________
                                                            AUTHORIZED SIGNER
                                             Date:______________________________

                                             Verified:__________________________
                                                           AUTHORIZED SIGNER
                                             Date:______________________________

                                             Compliance Status:    Yes     No




COMMENTS REGARDING EXCEPTIONS:  See Attached.


Sincerely,

----------------------------------

SIGNATURE

----------------------------------

TITLE

----------------------------------

DATE



                                       27

<PAGE>   31

                                    EXHIBIT D

                        CONSENT TO RELEASE OF COLLATERAL


To:       __________________
          __________________
          __________________

From:     Silicon Valley Bank
          1731 Embarcadero Road, Suite 220
          Palo Alto, CA 94303


Date:     __________________, 1998

     Cardiac Pathways Corporation ("Cardiac Pathways") has requested a line of
credit from Silicon Valley Bank. The line of credit is to be secured by all the
personal property of Cardiac Pathways, including equipment and inventory (the
"Inventory") in which Cardiac Pathways has any interest. Cardiac Pathways has
advised us that some of its Inventory are stored on your premises. It is
important to us that, if we need to exercise our remedies under the line of
credit, we have the right to remove the Inventory from your premises and sell or
otherwise dispose of the Inventory.

     Please confirm that you have no interest in the Inventory and that you
irrevocably give us or our agents permission to promptly remove the Inventory
from your premises upon our giving notice to you that we are exercising our
remedies under the line of credit and upon payment of all warehousing and
transportation services due and owing to you at such time. Please confirm also
that you have not given to any person (other than Cardiac Pathways) the right to
remove the Inventory. Finally, please confirm that you will not issue any
warehouse receipts or documents of title, or release any of the Inventory, to
any person except in the ordinary course of business and that, upon our notice
to you that a default has occurred under our agreement with Cardiac Pathways,
you will release the Inventory only to Silicon Valley Bank or any other person
designated by us.

     Your agreement with the above is important to our making the proposed line
of credit available to Cardiac Pathways. Please sign and return a copy of this
Consent as promptly as possible to the undersigned, in the envelope provided.
Thank you for your consideration.

                                            SILICON VALLEY BANK


                                            By:_________________________________
                                            Title:______________________________

We confirm the foregoing.

__________________________________


By:_______________________________

Date:_____________________________




cc:_______________________________



                                       29
<PAGE>   32

                     DISBURSEMENT REQUEST AND AUTHORIZATION

Borrower:  Cardiac Pathways Corporation              Bank:   Silicon Valley Bank

--------------------------------------------------------------------------------

LOAN TYPE. This is a Variable/Fixed Rate, Term Loan Facility of a principal
amount up to $8,000,000.

PRIMARY PURPOSE OF LOAN.  The primary purpose of this loan is for business.

SPECIFIC PURPOSE. The specific purpose of this loan is: General Corporate
Purposes.

DISBURSEMENT INSTRUCTIONS. Borrower understands that no loan proceeds will be
disbursed until all of Bank's conditions for making the loan have been
satisfied. Please disburse the loan proceeds as follows:

                                                                       Term
Loan

         Amount paid to Borrower directly:                             $____
         Undisbursed Funds                                             $____

         Principal                                                     $____

CHARGES PAID IN CASH. Borrower has paid or will pay in cash as agreed the
following charges:

         Prepaid Finance Charges Paid in Cash:

              Facility Fee:    $60,000

         Other Charges Paid in Cash:                                   $____
                  $     100    UCC Search Fees
                  $     100    UCC Filing Fees
                  $     TBD    Outside Counsel Fees and Expenses (Estimate)

         Total Charges Paid in Cash                                    $____

AUTOMATIC PAYMENTS. Borrower hereby authorizes Bank automatically to deduct from
Borrower's account numbered the amount of any loan payment. If the funds in the
account are insufficient to cover any payment, Bank shall not be obligated to
advance funds to cover the payment.

FINANCIAL CONDITION. BY SIGNING THIS AUTHORIZATION, BORROWER REPRESENTS AND
WARRANTS TO BANK THAT THE INFORMATION PROVIDED ABOVE IS TRUE AND CORRECT AND
THAT THERE HAS BEEN NO ADVERSE CHANGE IN BORROWER'S FINANCIAL CONDITION AS
DISCLOSED IN BORROWER'S MOST RECENT FINANCIAL STATEMENT TO BANK. THIS
AUTHORIZATION IS DATED AS OF MAY 15, 1998.

BORROWER:

__________________________________

__________________________________

     Authorized Officer

     ___________________________________________________________________________



                                       30
<PAGE>   33

                         AGREEMENT TO PROVIDE INSURANCE

GRANTOR:   Cardiac Pathways Corporation          BANK:Silicon Valley Bank

--------------------------------------------------------------------------------

     INSURANCE REQUIREMENTS. Cardiac Pathways Corporation ("Grantor")
understands that insurance coverage is required in connection with the extending
of a loan or the providing of other financial accommodations to Grantor by Bank.
These requirements are set forth in the Loan Documents. The following minimum
insurance coverages must be provided on the following described collateral (the
"Collateral"):

      Collateral:       All Inventory, Equipment and Fixtures.
      Type:             All risks, including fire, theft and liability.
      Amount:           Full insurable value.
      Basis:            Replacement value.
      Endorsements:     Loss payable clause to Bank with stipulation
                        that coverage will not be cancelled or
                        diminished without a minimum of twenty (20)
                        days' prior written notice to Bank.

     INSURANCE COMPANY. Grantor may obtain insurance from any insurance company
Grantor may choose that is reasonably acceptable to Bank. Grantor understands
that credit may not be denied solely because insurance was not purchased through
Bank.

     FAILURE TO PROVIDE INSURANCE. Grantor agrees to deliver to Bank, on or
before closing, evidence of the required insurance as provided above, with an
effective date of May 15, 1998, or earlier. Grantor acknowledges and agrees that
if Grantor fails to provide any required insurance or fails to continue such
insurance in force, Bank may do so at Grantor's expense as provided in the Loan
and Security Agreement. The cost of such insurance, at the option of Bank, shall
be payable on demand or shall be added to the indebtedness as provided in the
security document. GRANTOR ACKNOWLEDGES THAT IF BANK SO PURCHASES ANY SUCH
INSURANCE, THE INSURANCE WILL PROVIDE LIMITED PROTECTION AGAINST PHYSICAL DAMAGE
TO THE COLLATERAL, UP TO THE BALANCE OF THE LOAN; HOWEVER, GRANTOR'S EQUITY IN
THE COLLATERAL MAY NOT BE INSURED. IN ADDITION, THE INSURANCE MAY NOT PROVIDE
ANY PUBLIC LIABILITY OR PROPERTY DAMAGE INDEMNIFICATION AND MAY NOT MEET THE
REQUIREMENTS OF ANY FINANCIAL RESPONSIBILITY LAWS.

     AUTHORIZATION. For purposes of insurance coverage on the Collateral,
Grantor authorizes Bank to provide to any person (including any insurance agent
or company) all information Bank deems appropriate, whether regarding the
Collateral, the loan or other financial accommodations, or both.

     GRANTOR ACKNOWLEDGES HAVING READ ALL THE PROVISIONS OF THIS AGREEMENT TO
PROVIDE INSURANCE AND AGREES TO ITS TERMS. THIS AGREEMENT IS DATED MAY 15, 1998.

GRANTOR:

CARDIAC PATHWAYS CORPORATION

x
 Authorized Officer

--------------------------------------------------------------------------------

                                FOR BANK USE ONLY
                             INSURANCE VERIFICATION

                                                            PHONE: 
DATE: 
AGENT'S NAME: 
INSURANCE COMPANY: 
POLICY NUMBER:
EFFECTIVE DATES:
COMMENTS:

--------------------------------------------------------------------------------



<PAGE>   34

                         CORPORATE RESOLUTIONS TO BORROW

--------------------------------------------------------------------------------

BORROWER:             Cardiac Pathways Corporation

--------------------------------------------------------------------------------

     I, the undersigned Secretary or Assistant Secretary of Cardiac Pathways
Corporation (the "Corporation"), HEREBY CERTIFY that the Corporation is
organized and existing under and by virtue of the laws of the State of Delaware.

     I FURTHER CERTIFY that attached hereto as Attachments 1 and 2 are true and
complete copies of the Certificate of Incorporation and Bylaws of the
Corporation, each of which is in full force and effect on the date hereof.

     I FURTHER CERTIFY that at a meeting of the Directors of the Corporation,
duly called and held, at which a quorum was present and voting (or by other duly
authorized corporate action in lieu of a meeting), the following resolutions
were adopted.

     BE IT RESOLVED, that ANY ONE (1) of the following named officers,
employees, or agents of this Corporation, whose actual signatures are shown
below:

NAMES                       POSITIONS                  ACTUAL SIGNATURES

_________________________________________________      _________________________

_________________________________________________      _________________________

_________________________________________________      _________________________

_________________________________________________      _________________________

_________________________________________________      _________________________



acting for an on behalf of this Corporation and as its act and deed be, and they
hereby are, authorized and empowered:

     BORROW MONEY. To borrow from time to time from Silicon Valley Bank
("Bank"), on such terms as may be agreed upon between the officers, employees,
or agents and Bank, such sum or sums of money as in their judgment should be
borrowed, without limitation, including such sums as are specified in that
certain Loan and Security Agreement dated as of May 15, 1998 (the "Loan
Agreement").

     EXECUTE NOTES. To execute and deliver to Bank the promissory note or notes
of the Corporation, on Lender's forms, at such rates of interest and on such
terms as may be agreed upon, evidencing the sums of money so borrowed or any
indebtedness of the Corporation to Bank, and also to execute and deliver to
Lender one or more renewals, extensions, modifications, refinancings,
consolidations, or substitutions for one or more of the notes, or any portion of
the notes.

     GRANT SECURITY. To grant a security interest to Bank in the Collateral
described in the Loan Agreement, which security interest shall secure all of the
Corporation's Obligations, as described in the Loan Agreement.

     NEGOTIATE ITEMS. To draw, endorse, and discount with Bank all drafts, trade
acceptances, promissory notes, or other evidences of indebtedness payable to or
belonging to the Corporation or in which the Corporation may have an interest,
and either to receive cash for the same or to cause such proceeds to be credited
to the account of the Corporation with Bank, or to cause such other disposition
of the proceeds derived therefrom as they may deem advisable.



                                       1
<PAGE>   35

     FURTHER ACTS. In the case of lines of credit, to designate additional or
alternate individuals as being authorized to request advances thereunder, and in
all cases, to do and perform such other acts and things, to pay any and all fees
and costs, and to execute and deliver such other documents and agreements as
they may in their discretion deem reasonably necessary or proper in order to
carry into effect the provisions of these Resolutions.

     BE IT FURTHER RESOLVED, that any and all acts authorized pursuant to these
resolutions and performed prior to the passage of these resolutions are hereby
ratified and approved, that these Resolutions shall remain in full force and
effect and Bank may rely on these Resolutions until written notice of their
revocation shall have been delivered to and received by Bank. Any such notice
shall not affect any of the Corporation's agreements or commitments in effect at
the time notice is given.

     I FURTHER CERTIFY that the officers, employees, and agents named above are
duly elected, appointed, or employed by or for the Corporation, as the case may
be, and occupy the positions set forth opposite their respective names; that the
foregoing Resolutions now stand of record on the books of the Corporation; and
that the Resolutions are in full force and effect and have not been modified or
revoked in any manner whatsoever.

     IN WITNESS WHEREOF, I have hereunto set my hand on May 15, 1998, and attest
that the signatures set opposite the names listed above are their genuine
signatures.


                                            CERTIFIED TO AND ATTESTED BY:



                                            X

     ___________________________________________________________________________

Attachments:

1.  Certificate of Incorporation
2.  By-Laws


                                            ____________________________________


                                       2