EXHIBIT  10.7

                                 LOAN AGREEMENT


THIS LOAN AGREEMENT is entered into as of December, 1997 (this "Loan
Agreement") between FUSION
MEDICAL TECHNOLOGIES, Inc, a Delaware corporation (herein called "Borrower"),
and WPERIAL BANK (herein called
                 "Bank').


                          1.      Commitments.

                                  A.       Facility-A Commitment. Subject to
all the terms and conditions of this Loan Agreement and prior
                 to the termination of its commitment as hereinafter provided,
Bank hereby agrees to make loans (each a 'Facility-A Loan")
                 to Borrower in such amounts as Borrower shall request pursuant
to this Section I.A. at any time from the date hereof
                 through March 31, 1999 (the "Facility-A Availability End
Date"), in an aggregate principal amount not to exceed
                 $2,500,000.00 (the "Facility-A Commitment"). If at any time or
for any reason, the outstanding principal amount of the
Facility-A Loan Account (as hereinafter defined) is greater than the Facility-A
Commitment, Borrower shall immediately
                 Pay to bank, in cash, the amount of such excess. Any
commitment of Bank, pursuant to the terms of this Loan Agreement,
                 to make Facility-A Loans shall expire on the Facility-A
Availability End Date, subject to Bank's right to renew said
                 commitment in its sole and absolute discretion at Borrower's
request. Any such renewal of said commitment shall not be
                 binding upon Bank unless it is in writing and signed by an
officer of Bank. The outstanding principal balance of the Facility-
                 A Loan Account may be prepaid in whole or in part (but only in
whole multiples of $1,000.00) at any time without penalty.
                 Facility-A Loans which are repaid by Borrower may not be
reborrowed. Borrower promises to pay to Bank the outstanding
                 unpaid principal balance (and all accrued unpaid interest
thereon) of the Facility-A Loan Account in accordance with the
                 terms and repayment schedules set forth in Section LA.(4)
hereof, but in no event shall any unpaid principal balance (and
                 all accrued unpaid interest thereon) of the Facility-A Loan
Account remain outstanding on March 29, 2002 ("Facility-A
                 Maturity Date").

                                           (1)      Facility-A Loans. The
amount of each Facility-A Loan made by Bank to Borrower
                 hereunder shall be debited to the loan ledger account of
Borrower maintained by Bank for the Facility-A Commitment (herein
                 called the 'Facility-A Loan Account') and Bank shall credit
the Facility-A Loan Account with all loan repayments in respect
                 thereof made by Borrower. When Borrower desires to obtain a
Facility-A Loan, Borrower shall notify Bank (which notice
                 shall be signed by an officer of Borrower and shall be
irrevocable) in accordance with Section 2 hereof, to be received no
                 later than 3:00 p.m. Pacific time one (1) Banking Day before
the day on which the Facility-A Loan is to be made. The
                 notice shall be signed by an officer of Borrower and contain a
detailed schedule of the items being financed, including copies
                 of paid invoices and serial numbers, if applicable. Facility-A
Loans may only be used to finance capital equipment, software
                 and telephone equipment purchased by Borrower after January 1,
1997 and will be limited to (a) one hundred percent
                 (100.0%) of the original invoice amount for such capital
equipment, approved from time to time by Bank, less any taxes,
                 shipping and freight charges or discounts, warranty charges,
installation expenses and other soft costs and (b) eighty percent
                 (80.0%) of the original amount for such software or telephone
equipment, approved from time to time by Bank, less any
                 taxes, shipping and freight charges or discounts, warranty
charges, installation expenses and other soft costs.
                 Notwithstanding the foregoing, Facility-A Loans made for the
purpose of financing software and telephone equipment shall
                 be limited to a maximum aggregate total amount of $100,000.00.

                                           (2)      Interest Payments Through
Facility-A Maturity Date. Borrower further promises to
                 pay to Bank from the date of the advance of the initial
Facility-A Loan through the Facility-A Maturity Date, on or before
                 the twenty-ninth (29th) day of each month, interest on the
average daily unpaid balance of the Facility-A Loan Account
                 during the immediately preceding month at a rate of interest
equal to one and one-half percent (1.50%) per annum in excess
                 of the rate of interest which Bank has announced as its prime
lending rate (the "Prime Rate"), which shall vary concurrently
                 with any change in the Prime Rate. Interest shall be computed
at the above rate on the basis of the actual number of days
                 during which the principal balance of the Facility-A Loan
Account is outstanding divided by 360, which shall for interest
                 computation purposes be considered one (1) year.







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                                            (3)      Quarterly Term Out and
Principal Payments.
                                                     (a)     First Quarterly
Term Out. Borrower promises to pay to Bank (i) the principal
                 balance of the Facility-A Loan Account outstanding on December
31, 1997 (the '1st Quarterly Term Out Date I in forty-two
                 (42) equal monthly installments of principal, beginning on
January 29, 1998 and continuing on the twenty-ninth (29th) day
                 of each month thereafter through and including a principal
payment on June 29, 2001, plus (ii) interest computed in
accordance with Section I.A. (3) hereof.

                                                    (b)      Second Quarterly
Term Out. Borrower promises to pay to Bank (i) the
                 principal balance of the Facility-A Loans made after the Ist
Quarterly Term Out Date through March 31, 1998 (the '2nd
                 Quarterly Term Out Date') in forty-two (42) equal monthly
installments of principal, beginning on April 29, 1998 and
                 continuing on the twenty-ninth (29th) day of each month
thereafter through and including a principal payment on September
29, 2001, plus (ii) interest computed in accordance with Section IA (3) hereof.
                                                    (c)      Third Quarterly
Term Out. Borrower promises to pay to Bank (i) the principal
                 balance of the Facility-A Loans made after the 2nd Quarterly
Term Out Date through June 30, 1998 (the '3rd Quarterly
                 Term Out Date) in forty-two (42) equal monthly installments of
principal, beginning on July 29, 1998 and continuing on
                 the twenty-ninth (29th) day of each month thereafter through
and including a principal payment on December 29, 200 1, plus
                 (ii) interest computed in accordance with Section 1.A.(3)
hereof.
                                                    (d)      Fourth Quarterly
Term Out. Borrower promises to pay to Bank (i) the
                 principal balance of the Facility-A Loans made after the 3rd
Quarterly Term Out Date through September 30, 1998 (the '4th
                 Quarterly Term Out Date) in forty-two (42) equal monthly
installments of principal, beginning on October 29, 1998 and
                 continuing on the twenty-ninth (29th) day of each month
thereafter through and including a principal payment on the Facility-
                 A Maturity Date, plus (ii) interest computed in accordance
with Section 1.A.(3) hereof.
                                                    (e)     Fifth Quarterly
Term Out. Borrower promises to pay to Bank (i) the principal
                 balance of the Facility-A Loans made after the 4th Quarterly
Term Out Date through December 31, 1998 (the '5th Quarterly
                 Term Out Date') in thirty-nine (39) equal monthly installments
of principal, beginning on January 29, 1999 and continuing
                 on the twenty-ninth (29th) day of each month thereafter
through and including a principal payment on the Facility-A Maturity
Date, plus (ii) interest computed in accordance with Section I.A. (3) hereof.
                                                   M        Final Quarterly
Term Out. Borrower promises to pay to Bank (i) the principal
                 balance of the Facility-A Loans made after the 5th Quarterly
Term Out Date through the Facility-A Availability End Date
                 in thirty-six (36) equal monthly installments of principal,
beginning on April 29, 1999 and continuing on the twenty-ninth
                 (29th) day of each month thereafter through and including a
principal payment on the Facility-A Maturity Date, plus
(ii) interest computed in accordance with Section I.A. (3) hereof.
                                 B.       Facility-B Commitment. Subject to all
the terms and conditions of this Loan Agreement and prior
                 to the termination of its commitment as hereinafter provided,
Bank hereby agrees to make loans (each a "Facility-B Loan")
                 to Borrower in such amounts as Borrower shall request pursuant
to this Section 1.B. at any time from the date hereof
                 through December 31, 1997 (the "Facility-B Availability End
Date"), in an aggregate principal amount not to exceed
                 $1,000,000.00 (the "Facility-B Commitment"). If at any time or
for any reason, the outstanding principal amount of the
                 Facility-B Loan Account (as hereinafter defined) is greater
than the Facility-B Commitment, Borrower shall immediately pay
                 to Bank, in cash, the amount of such excess. Any commitment of
Bank, pursuant to the terms of this Loan Agreement, to
                 make Facility-B Loans shall expire on the Facility-B
Availability End Date, subject to Bank's right to renew said commitment
                 in its sole and absolute discretion at Borrower's request. Any
such renewal of said commitment shall not be binding upon
                 Bank unless it is in writing and signed by an officer of Bank.
The outstanding principal balance of the Facility-B Loan
                 Account may be prepaid in whole or in part (but only in whole
multiples of $1,000.00) at any time without penalty.
                 Facility-B Loans which are repaid by Borrower may not be
reborrowed. Borrower promises to pay to Bank the outstanding
                 unpaid principal balance (and all accrued unpaid interest
thereon) of the Facility-B Loan Account on December 29, 2000
                 ("Facility-8 Maturity Date").




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                                             (1)      Facility-B Loans. The
amount of each Facility-B Loan made by Bank to Borrower
                 hereunder shall be debited to the loan ledger account of
Borrower maintained by Bank for the Facility-B Commitment (herein
                 called the "Facility-B Loan Account") and Bank shall credit
the Facility-B Loan Account with all loan repayments in respect
                 thereof made by Borrower. When Borrower desires to obtain a
Facility-B Loan, Borrower shall notify Bank (which notice
                 shall be signed by an officer of Borrower and shall be
irrevocable) in accordance with Section 2 hereof, to be received no
                 later than 3:00 p.m. Pacific time one (1) Banking Day before
the day on which the Facility-B Loan is to be made. The
                 notice shall be signed by an officer of Borrower and contain a
detailed schedule of the items being financed, including copies
                 of paid invoices and serial numbers, if applicable. Facility-B
Loans may only be used to finance capital equipment, software
                 and telephone equipment purchased by Borrower prior to January
1, 1997 and will be limited to (a) seventy-five percent
                 (75.0%) of the original invoice amount for such capital
equipment, approved from time to time by Bank, less any taxes,
                 shipping and freight charges or discounts, warranty charges,
installation expenses and other soft costs and (b) seventy percent
                 (70.0%) of the original amount for such software or telephone
equipment, approved from time to time by Bank, less any
                 taxes, shipping and freight charges or discounts, warranty
charges, installation expenses and other soft costs.
                 Notwithstanding the foregoing, Facility-B Loans made for the
purpose of financing software and telephone equipment shall
                 be limited to a maximum aggregate total amount of $50,000.00.
                                            (2)      Interest Payments Through
Facility-B Maturity Date. Borrower further promises to
                 pay to Bank from the date of the advance of the initial
Facility-B Loan through the Facility-B Maturity Date, on or before
                 the twenty-ninth (29th) day of each month, interest on the
average daily unpaid balance of the Facility-B Loan Account
during the immediately preceding month at a rate of interest equal to one and
one-half percent (1.50%) per annum in excess
                 of the Prime Rate, which shall vary concurrently with any
change in the Prime Rate. Interest shall be computed at the above
                 rate on the basis of the actual number of days during which
the principal balance of the Facility-B Loan Account is
                 outstanding divided by 360, which shall for interest
computation purposes be considered one (1) year.
                                            (3)      Principal Payments
Following Facility-B Availability End Date. Borrower further
                 promises to pay to Bank, on or before January 29, 1998 and on
or before the twenty-ninth (29th) day of each month
                 thereafter through the Facility-B Maturity Date, (a) the
outstanding principal balance of the Facility-B Loan Account on the
                 Facility-B Availability End Date in thirty-six (36) equal
monthly installments plus (b) interest on the average daily unpaid
                 balance of the Facility-B Loan Account accruing during the
immediately preceding month at the rate of interest and computed
                 in accordance with Section I.B.(3) hereof.
                                  C.       Limitation on Advance of any Loan.
Notwithstanding any of the foregoing provisions contained
                 in Sections 1.A. and I.B. hereof, the maximum aggregate
principal amount outstanding under the Facility-A Loan Account
                 and the Facility-B Loan Account at any time may not exceed
$2,500,000.00 ("Maximum Outstanding Commitment"). If at
                 any time or for any reason, the outstanding principal amount
of the Facility-A Loan Account and the Facility-B Loan Account
                 is greater than the Maximum Outstanding Commitment, Borrower
shall immediately pay to Bank, in cash, the amount of
                 such excess which shall be applied pro rata to each such Loan
Account.
                                  D.       Quarterly Fee on Undisbursed
Commitment. From the date hereof through the Facility-A
                 Availability End Date, Borrower agrees to pay to Bank on a
quarterly basis, a commitment fee ("Commitment Fee") equal
                 to one-half of one percent (0.50 %) multiplied by the sum of
(1) the Maximum Outstanding Commitment less (2) the disbursed
principal amount under the Facility-A Commitment less (3) the disbursed
principal amount under the Facility-B Commitment
                 (the "Undisbursed Commitment"). 'the Commitment Fee for the
Undisbursed Commitment shall be calculated as of the end
                 of each calendar quarter and shall be paid in arrears on or
before January 29, 1998 and on or before the twenty-ninth (29th)
                 day of each month immediately following the end of each
calendar quarter thereafter, if applicable.
                         2.       Loan Requests. Requests for Loans hereunder
shall be in writing duly executed by Borrower in a form
                 satisfactory to Bank and shall contain a certification setting
forth the matters referred to in Section 1, which shall disclose
                 that Borrower is entitled to the amount and type of Loan being
requested. Bank is hereby authorized to charge Borrower's
                 deposit account with Bank for all sums due Bank under this
Loan Agree         t.
                        3.       Delivery of Payments. Payment to Bank of all
amounts due hereunder shall be made at its Santa Clara
                 Valley Regional office, or at such other place as may be
designated in writing by Bank from time to time. If any payment


                 21410385
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3.




                  date fall on a day that is not a day that Bank is open for
the transaction of business ("Banking Day"), the payment due date
                  shall be extended to the next Banking Day.
                           4.       Late Charge. If any interest payment,
principal payment or principal balance payment required hereunder
                  is not received by Bank on or before ten (10) days from the
date in which such payment becomes due, Borrower shall pay
                  to Bank, a late charge equal to the lesser of (a) five
percent (5.0%) of the amount of such unpaid payment, in addition to
                  said unpaid payment or (b) the maximum amount permitted to be
charged by applicable law, until remitted to Bank; provided,
                  however, nothing contained in this Section 4, shall be
construed as any obligation on the part of Bank to accept payment of
                  any past due payment or less than the total unpaid principal
balance of the applicable Loan Account following the Facility-A
                  Maturity Date and/or the Facility-B Maturity Date, as
applicable. All payments, including any voluntary prepayments of
                  principal, shall be applied first to any late charges due
hereunder, next to any other sums due Bank hereunder, next to
                  accrued interest then payable and the remainder, if any, to
reduce any unpaid principal due under the applicable Loan
                  Account in inverse order of maturity of payment.
                          5.        Default Interest. From and after the
Facility-A Maturity Date and/or the Facility-B Maturity Date, as
                  applicable, or such earlier date as all sums owing under any
Loan Account becomes due and payable by acceleration or
                  otherwise, or upon the occurrence of an Event of Default, at
the option of Bank all sums owing under the applicable Loan
                  Account shall bear interest until paid in full at a rate
equal to the lesser of (a) five percent (5.0%) per annum in excess of
                  the then applicable interest rate provided for in Sections
1.A.(2) and 1X(2) hereof or (b) the maximum amount permitted
                  to be charged by applicable law, until all obligations
hereunder are repaid in full or the Event of Default is waived or cured
                  to the satisfaction of Bank, as applicable.
6.       Definitions. As used in this Loan Agreement and unless otherwise
defined herein, all initially capitalized
                  terms shall have the meanings set forth on Exhibit A attached
hereto and incorporated herein by this reference.
                          7.       Representations and Warranties. Borrower
represents and warrants to Bank: (a) That Borrower is a
                  corporation, duly organized and existing in the State of its
incorporation and the execution, delivery and performance of each
                  of the Loan Documents are within Borrower's corporate powers,
have been duly authorized and are not in conflict with law
or the termis of any charter, by-law or other incorporation papers, or of any
indenture, agreement or undertaking to which
                  Borrower is a party or by which Borrower is bound or
affected; (b) Borrower is, and at the time the Collateral becomes
                  subject to Bank's security interest will be, the true and
lawful owner of and has, and at the time the Collateral becomes
                  subject to Bank's security interest will have, good and clear
title to the Collateral, subject only to Bank's rights therein and
                  to Permitted Liens; (c) Each Account is, and at the time the
Account comes into existence will be, a true and correct
                  statement of a bona fide indebtedness incurred by the debtor
named therein in the amount of the Account for either
                  merchandise sold or delivered (or being held subject to
Borrower's delivery instructions) to, or services rendered, performed
                  and accepted by, the account 'debtor; (d) That there are and
will be no defenses, counterclaims, or setoffs which may be
asserted against the Accounts from time to time, except as permitted in the
definition thereof; (e) Any and all financial
Information, including information relating to the Collateral, submitted by
Borrower tit Bank, whether previously or in the
                  future, is and will be true and correct; (f) There is no
litigation or other proceeding pending or threatened against or affecting
                  Borrower, and Borrower is not in default with respect to any
order, writ, injunction, decree or demand of any court or other
                  governmental or regulatory authority; (g) (i) The
consolidated balance sheets of Borrower dated as of September 30, 1997,
                  and the related consolidated profit and loss statements for
the fiscal year then ended, copies of which have heretofore been
                  delivered to Bank by Borrower, and all other statements and
data submitted in writing by Borrower to Bank in connection
                  with Borrower's request for credit are true and correct, and
said balance sheet and profit and loss statement accurately
                  present the financial condition of Borrower as of the date
thereof and the results of the operations of Borrower for the period
                  covered thereby, and have been prepared in accordance with
GAAP, (ii) since such date, there have been no material adverse
                  changes in the financial condition of Borrower, and (iii)
Borrower has no knowledge of any liabilities, contingent or
                  otherwise, which are not reflected in said balance sheet, and
Borrower has not entered into any special commitments or
                  substantial contracts which are not reflected in said balance
sheet, other than in the ordinary and normal course of its
                  business, which may have a Material Adverse Effect upon its
financial condition, operations or business as now conducted;
                  (h) Borrower has no liability for any delinquent local, state
or federal taxes, and, if Borrower has contracted with any
                  government agency, it has no liability for renegotiation of
profits; and (i) Borrower, as of the date hereof, possesses all



                  21410385
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                  necessary trademarks, trade names, copyrights, patents,
patent rights, and licenses to conduct its business as now operated,
                  without any known conflict with valid trademarks, trade
names, copyrights, patents, patent rights and license rights of others.
                           8.        Negative Covenants. Borrower agrees that
so long as any loans, obligations or liabilities remain
                  outstanding or unpaid to Bank or the commitment of Bank
hereunder is in effect, neither Borrower, nor any of its subsidiaries
                  ("Subsidiaries") will, without the prior written consent of
Bank:

                                     A.       Make any substantial change in
the character of its business as now conducted;
                                     B.       Create, incur, assume or permit
to exist any Indebtedness other than loans from Bank except
                  obligations now existing as shown in the financial statements
referenced in Section 7. (g) (i), excluding those being refinanced
                  by Bank, Subordinated Debt and Permitted Indebtedness; or
sell or transfer, either with or without recourse, any accounts
                  or notes receivable or any monies due or to become due;
                                     C.       Create, incur, assume or permit
to exist any mortgage, pledge, encumbrance, lien or charge of
                  any kind (including the charge upon property at any time
purchased or acquired under conditional sale or other title retention
                  agreement) upon any asset now owned or hereafter acquired by
it, including, without limitation, the Intellectual Property,
                  other than Permitted Liens and liens in favor of Bank;

                                     D.       Sell, dispose of or grant a
security interest in any of the Collateral or the Intellectual Property other
                  than to Bank (other than the disposing of such Collateral in
the ordinary and normal course of its business as now conducted
                  or other assets which are obsolete or otherwise considered
surplus), or execute any financing statements covering the
                  Collateral in favor of any secured party or Person other than
Bank;
                                     E.       Make any loans or advances to any
Person or other entity other than in the ordinary and normal
                  course of its business as now conducted (provided that such
loans or advances are not made to any Person or entity which
                  is controlled by or under common control with Borrower) or
make any investment in the securities of any Person or other
                  entity other than the United States Government;

                                     F.       Purchase or otherwise acquire all
or substantially all of the assets or business of any Person or
                  other entity; or liquidate, dissolve, merge or consolidate,
or commence any proceedings therefore; or, except in the ordinary
                  and normal course of its business as now conducted, sell
(including, without limitation, the selling of any property or other
                  asset accompanied by the leasing back of the same) any assets
including any fixed assets, any property, or other assets
                  necessary for the continuance of its business as now
conducted; and
                                     G.       Declare or pay any dividend or
make any other distribution on any of its capital stock now
                  outstanding or hereafter issued or purchase, redeem or retire
any of such stock other than in dividends or distributions
                  payable in Borrower's or any such Subsidiary's capital stock.
                          9.         Affirmative Covenants. Borrower
affirmatively covenants that so long as any loans, obligations or
                  liabilities remain outstanding or unpaid to Bank or the
commitment of Bank hereunder is in effect, it will:
                                     A.       Furnish Bank from time to time
such financial statements and information as Bank may reasonably
                  request and inform Bank immediately upon the occurrence of a
material adverse change therein;
                                     B.       Pen-nit representatives of Bank
to conduct an audit of Borrower's books and records relating to
                  the Collateral and make extracts therefrom, with results
satisfactory to Bank, provided that Bank shall use its best efforts
                  to not interfere with the conduct of Borrower's business, and
to the extent possible to arrange for verification of the Accounts
                  directly with the account debtors obligated thereon or
otherwise, all under reasonable procedures acceptable to Bank and at
Borrower's sole expense; provided further that, prior to an Event of Default,
Borrower shall not be responsible for the
                  expense of more than one such audit, in any fiscal year.





                  21410385
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5.





                                      C.     Promptly notify Bank of any
attachment or other legal process levied against any of the Collateral
                 and any information received by Borrower relative to the
Collateral, including the Accounts, the account debtors or other
                 Persons obligated in connection therewith, which may in any
way affect the value of the Collateral or the rights and remedies
                 of Bank in respect thereto;
                                      D.     Reimburse Bank upon demand for any
and all legal costs, including reasonable attorneys' fees,
                 and other expense incurred in collecting any sums payable by
Borrower under any Loan Account or any other obligation
                 secured hereby, enforcing any term or provision of this Loan
Agreement or otherwise or in the checking, handling and
                 collection of the Collateral and the preparation and
enforcement of any agreement relating thereto;
                                      E.     Notify Bank of each location and
of each office of Borrower at which records of Borrower relating
                 to the Accounts are kept;
                                      F.     Provide, maintain and deliver to
Bank policies insuring the Collateral against loss or damage by
                 such risks and in such amounts, forms and companies as Bank
may require (to the extent customarily maintained by
                 businesses similar to Borrower) and with loss payable to Bank,
and, in the event Bank takes possession of the Collateral,
                 the insurance policy or policies and any unearned or returned
premium thereon shall at the option of Bank become the sole
                 property of Bank, such policies and the proceeds of any other
insurance covering or in any way relating to the Collateral,
                 whether now in existence or hereafter obtained, being hereby
assigned to Bank;
                                      G.     In the event the unpaid balance of
any Loan Account shall exceed the maximum amount of
                 outstanding loans to which Borrower is entitled under Section
1 hereof, as applicable, Borrower shall immediately pay to
                 Bank for credit to such Loan Account the amount of such
excess;
                                      H.     Maintain and preserve all rights,
franchises and other authority adequate and necessary for the
                 conduct of its business and maintain and preserve its
existence in the State of its incorporation and any other state(s) in which
                 Borrower conducts its business, except with respect to such
other state(s), as the failure to do so would not have a Material
                 Adverse Effect;

                                      1.     Maintain public liability,
property damage and workers compensation insurance and insurance on
                 all its insurable property against fire and other hazards with
responsible insurance carriers to the extent usually maintained
                 by similar businesses. Borrower shall provide evidence of
property insurance in amounts and types acceptable to Bank, and
                 certificates naming Bank as a loss payee;

                                      J.     Pay and discharge, before the same
becomes delinquent and penalties accrue thereon, all taxes,
                 assessments and govermnental charges upon or against it or any
of its properties, and any of its other liabilities at any time
                 existing, except to the extent and so long as: (1) the same
are being contested in good faith and by appropriate proceedings
                 in such manner as not to cause any Material Adverse Effect or
the loss of any right of redemption from any sale thereunder;
                 and (2) it shall have set aside on its books reserves
(segregated to the extent required by GAAP);
                                      K.     Maintain a standard and modem
system of accounting in accordance with GAAP on a basis
                 consistently maintained; permit Bank's representatives to have
access to, and to examine its properties, books and records
                 at all reasonable times; provided that Bank shall use its best
efforts to not interfere with the conduct of Borrower's business;
                                      L.     Maintain its properties, equipment
and facilities in good order and repair;
                                      M.     Maintain its primary operating and
depository accounts with Bank; and
                                      N.     Prior to allowing any of
Borrower's raw materials, work in process, finished goods inventory and
                 property, plant and equipment to be transported to or be held
at any contract manufacturer, warehouse or other location
                 (other than with bona fide distributors and retail accounts),
Borrower shall provide notice to Bank and Borrower shall have
                 complied with such filing and notice requirements as shall, in
Bank's opinion, assure Borrower's and Bank's priority in such
                 property over creditors of such contract manufacturer,
warehouseman or operator of such other location, including, without


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6.





                 limitation, making filings under California Commercial Code
2326, providing notice under California Commercial
                 Code 9114 and making filings and publications as required
under California Civil Code 3440.1 and 3440.5 All such
                 filings, notices and publications shall be in form and
substance satisfactory to Bank.
                          10.      Financial Covenants and Information. All
financial covenants and financial information referenced herein
                 shall be interpreted and prepared in accordance with GAAP as
used in the United States of America applied on a basis
                 consistent with previous years. Compliance with the financial
covenants shall be calculated and monitored on a monthly
                 basis, except as shall be expressly stated to the contrary.
Borrower affirmatively covenants that so long as any loans,
                 obligations or liabilities remain outstanding or unpaid to
Bank or any commitment is outstanding hereunder, it will, on a
                 consolidated basis:

                                   A.      As soon as it is available, but not
later than forty-five (45) days after and as of the end of each
                 fiscal quarter of Borrower, deliver to Bank a copy of the
quarterly IO-Q report, as filed with the Securities Exchange
Commission;

                                   B.      Measured on a quarterly basis on the
last day of each fiscal quarter of Borrower, maintain a
                 Minimum Balance Sheet Cash (meaning the sum of all cash, cash
equivalents, short-term investments and the receivables
                 of all Eligible Accounts) of not less than $3,000,000.00
("Minimum Cash Threshold"), and in connection therewith, deliver
                 to Bank, in such form and detail as Bank may require,
statements showing aging of the Eligible Accounts, together with a
                 Compliance Certificate in the form of Exhibit B attached
hereto and incorporated herein by this reference, certified by an
                 officer of Borrower.

                                           (1)      If at any time the Minimum
Balance Sheet Cash falls below the Minimum Cash Threshold,
                 Borrower agrees to immediately execute and deliver to Bank (in
recordable form), Bank's form of IP Security Agreement
                 adding the intellectual property collateral to be covered
thereby to the Collateral secured hereby; provided, however, Bank
                 agrees to waive such collateral security requirement if at the
time of such failure to meet the Minimum Cash Threshold
                 (a) the aggregate outstanding principal balance of the
Facility-A Loan Account and the Facility-B Loan Account is less than
                 $500,000.00 and (2) Borrower has a Minimum Net Product Sales
of not less than $1,500,000.00 for the fiscal quarter
                 immediately preceding the date of Borrower's failure to meet
the Minimum Cash Threshold;

                                   C.      As soon as it is available, but not
later than ninety (90) days after the end of Borrower's fiscal
                 year, deliver to Bank (1) unqualified copies of Borrower's
consolidated and consolidating financial statements together with
                 changes in financial position audited by an independent
certified public accountant selected by Borrower but acceptable to
                 Bank and (2) a copy of the annual 10-K report, as filed with
the Securities Exchange Commission;
                                   D.      As soon as it is available, but not
later than one hundred twenty (120) days after the end of
                 Borrower's fiscal year, deliver to Bank a copy of its Annual
Report, as submitted to its shareholders;
                                   E.      Upon the reasonable request of Bank,
deliver to Bank current budgets, sales projections, operating
                 plans and other financial exhibits and information in form and
substance satisfactory to Bank; and
                                   F.      Upon any officer becoming aware,
deliver immediately to Bank written notice of any pending or
                 threatened litigation claiming, or reasonably likely to result
in, damages against Borrower in an amount in excess of
                 $50,000.00.

                         11.       Loan Fee. Borrower has paid, and Bank hereby
acknowledges receipt of a loan fee in the amount of
                 Twelve Thousand Five Hundred Dollars ($12,500.00).

                         12.       Default and Remedies. The occurrence of any
one or more of the following shall constitute an "Event
                 of De
                    .fault": (a) Default be made in the payment of any
obligation by Borrower under any Loan Document; (b) Except for
                 any failure to pay as described in clause (a) above, breach be
made in any warranty, statement, promise, term or condition,
                 contained herein or in any other Loan Document and the same
shall not have been cured to the satisfaction of Bank within
                 fifteen (15) days after Borrower shall have become aware
thereof, whether by written notice from Bank, or otherwise,


                 21410385
                 121197                                                      7.




                 (except that no cure period shall exist for breaches in
respect of Borrower's obligations under Section 8, Subsections 9.A.,
                 9.B., 9.C., 9.F., 9.G., 9.H. and 9.1., Subsections 1O.A.,
1O.B., 1O.C. and I.O.D. of this Loan Agreement, and Sections
                 1 and 2 of the General Security Agreement); (c) Any statement,
warranty or representation made by Borrower at any time
                 proves false; (d) Borrower defaults in the repayment of any
principal of or the payment of any interest on any indebtedness
                 exceeding in the aggregate principal amount $100,000.00 or
breaches or violates any term or provision of any promissory
                 note, loan agreement, mortgage, indenture or other evidence of
such indebtedness pursuant to which amounts outstanding
                 in the aggregate exceed $I 00,000.00 if the effect of such
breach is to permit the acceleration of such indebtedness, whether
                 or not waived by the note holder or obligee, and such failure
shall not have been cured to Bank's satisfaction within fifteen
                 (15) calendar days after Borrower shall become aware thereof,
whether by written notice from Bank or otherwise, or there
                 has in fact been an acceleration of such indebtedness; (e)
Borrower becomes insolvent or makes an assignment for the benefit
                 of creditors; (f) Any proceeding be commenced by Borrower
under any bankruptcy, reorganization, arrangement,
                 readjustment of debt or moratorium law or statute or, any such
a proceeding is commenced against Borrower and is not
                 dismissed or stayed within ten (10) days (provided that no
Loans will be made prior to the dismissal of such proceeding);
                 (g) Any money judgment, writ of attachment, garnishment,
execution or other legal process be entered against Borrower or
                 issued against any material property of Borrower which is not
fully covered by insurance (subject to reasonable deductibles)
                 and remains unvacated, unbonded, unstayed or unpaid or
undischarged for more than fifteen (15) days (whether or not
                 consecutive) or in any event later than five (5) days prior to
the date of any proposed sale thereunder, or if any assessment
                 for taxes against Borrower other than against any of its real
property, is made by the Federal or State government or any
                 department thereof-, or (h) Any change in Borrower's financial
condition, prospects or operations which has a Material
                 Adverse Effect. Upon the occurrence and during the continuance
of an Event of Default, Bank may, at its option and without
                 demand first made and without notice to Borrower, do any one
or more of the following: (i) Terminate its obligation to
                 make loans to Borrower as provided in Section 1 hereof; (ii)
Declare all sums secured hereby immediately due and payable;
                 (iii) Immediately take possession of the Collateral wherever
it may be found, using all legally permissible means to do so,
                 or require Borrower to assemble the Collateral and make it
available to Bank at a place designated by Bank which is
                 reasonably convenient to Borrower and Bank, and Borrower
waives all claims for damages due to or arising from or
                 connected with any such taking; (iv) Proceed in the
foreclosure of Bank's security interest and sale of the Collateral in any
                 manner permitted by law, or provided for herein; (v) Sell,
lease or otherwise dispose of the Collateral at public or private
                 sale, with or without having the Collateral at the place of
sale, and upon terms and in such manner as Bank may determine,
                 and Bank may purchase same at any such sale; (vi) Retain the
Collateral in full satisfaction of the obligations secured thereby
                 to the extent permitted under the Uniform Commercial Code; or
(vii) Exercise any remedies of a secured party under the
                 Uniform Commercial Code. Prior to any such disposition, Bank
may, at its option, cause any of the Collateral to be repaired
                 or reconditioned in such manner and to such extent as Bank may
deem advisable, and any sums expended therefor by Bank
                 shall be repaid by Borrower and secured hereby. Bank shall
have the right to enforce one or more remedies hereunder
                 successively or concurrently, and any such action shall not
estop or prevent Bank from pursuing any further remedy which
                 it may have hereunder or by law. If a sufficient sum is not
realized from any such disposition of the Collateral to pay all
                 obligations secured by this Loan Agreement, Borrower hereby
promises and agrees to pay Bank any deficiency.
                         13.      Records Retention. Borrower authorizes Bank
to destroy all invoices, delivery receipts, reports and other
                 types of documents and records submitted to Bank in connection
with the transactions contemplated herein at any time
                 subsequent to four (4) months from the time such items are
delivered to Bank.
                         14.      Attorneys' Fees. Borrower agrees to reimburse
Bank up to $5,000.00 for its reasonable attorneys' fees
                 and expenses incurred in connection with the negotiation,
preparation, execution and delivery of the Loan Documents.
                        15.       Governing Law; Judicial Reference.

                                  A.       Governing Law. '17his Agreement
shall be deemed to have been made in the State of California
                 and the validity, construction, interpretation, and
enforcement hereof, and the rights of the parties hereto, shall be determined
                 under, governed by, and construed in accordance with the
internal laws of the State of California, without regard to
                 principles of conflicts of law.








                 21410385
                 121197







                                    B.       Judicial Reference.

                                             (1)      Other than (a)
nonjudicial foreclosure and all matters in connection therewith regarding
                 security interests in real or personal property; or (b) the
appointment of a receiver, or the exercise of other provisional
                 remedies (any and all of which may be initiated pursuant to
applicable law), each controversy, dispute or claim between the
                 parties arising out of or relating to this Loan Agreement or
the other Loan Documents, which controversy, dispute or claim
                 is not settled in writing within thirty (30) days after the
"Claim Date" (defined as the date on which a party subject to this
                 Loan Agreement gives written notice to all other parties that
a controversy, dispute or claim exists), will be settled by a
                 reference proceeding in California in accordance with the
provisions of Section 638 et seq. of the California Code of Civil
                 Procedure, or their successor section ("CCP"), which shall
constitute the exclusive remedy for the settlement of any
                 controversy, dispute or claim concerning this Loan Agreement,
including whether such controversy, dispute or claim is
                 subject to the reference proceeding and except as set forth
above, the parties waive their rights to initiate any legal
                 proceedings against each other in any court or jurisdiction
other than the Superior Court in the County where the real
                 property, if any, is located or Santa Clara County, if none
(the "Court"). The referee shall be a retired Judge of the Court
                 selected by mutual agreement of the parties, and if they
cannot so agree within forty-five (45) days after the Claim Date,
                 the referee shall be promptly selected by the Presiding Judge
of the Court (or his/her representative). The referee shall be
                 appointed to sit as a temporary judge, with all of the powers
for a temporary judge, as authorized by law, and upon selection
                 should take and subscribe to the oath of office as provided
for in Rule 244 of the California Rules of Court (or any
                 subsequently enacted Rule). Each party shall have one
peremptory challenge pursuant to CCP  170.6. The referee shall
                 (x) be requested to set the matter for hearing within sixty
(60) days after the date of selection of the referee and (y) try any
                 and all issues of law or fact and report a statement of
decision upon them, if possible, within ninety (90) days of the Claim
                 Date. Any decision rendered by the referee will be final,
binding and conclusive and judgement shall be entered pursuant
                 to CCP  644 in any court in the State of California having
jurisdiction. Any party may apply for a reference proceeding
                 at any time after thirty (30) days following notice to any
other party of the nature of the controversy, dispute or claim, by
                 filing a petition for a hearing and/or trial. All discovery
permitted by this Loan Agreement shall be completed no later than
                 fifteen (15) days before the first hearing date established by
the referee. The referee may extend such period in the event
                 of a party's refusal to provide requested discovery for any
reason whatsoever, including, without limitation, legal objections
                 raised to such discovery or unavailability of a witness due to
absence or illness. No party shall be entitled to "priority" in
                 conducting discovery. Depositions may be taken by either party
upon seven (7) days written notice, and request for
                 production or inspection of documents shall be responded to
within ten (10) days after service. All disputes relating to
                 discovery which cannot be resolved by the parties shall be
submitted to the referee whose decision shall be final and binding
                 upon the parties. Pending appointment of the referee as
provided herein, the Superior Court is empowered to issue
                 temporary and/or provisional remedies, as appropriate.

                                            (2)      Except as expressly set
forth in this Loan Agreement, the referee shall determine the
                 manner in which the reference proceeding is conducted
including the time and place of all hearings, the order of presentation
                 of evidence, and another questions that arise with respect to
the course of the referep@e proceeding. All proceedings and
                 hearings conduct6d before the referee, except for trial, shall
be conducted without a court reporter except that when any party
                 so requests, a court reporter will be used at any hearing
conducted before the referee. The party making such a request shall
                 have the obligation to arrange for and pay for the court
reporter. The costs of the court reporter at the trial shall be bome
                 equally by the parties.

                                            (3)      The referee shall be
required to determine all issues in accordance with existing case law
                 and the statutory laws of the State of California. The rules
of evidence applicable to proceedings at law in the State of
                 California will be applicable to the reference proceeding. The
referee shall be empowered to enter equitable as well as legal
                 relief, to provide all temporary and/or provisional remedies
and to enter equitable orders that will be binding upon the
                 parties. The referee shall issue a single judgment at the
close of the reference proceeding which shall dispose of all of the
                 claims of the parties that are the subject of the reference.
The parties hereto expressly reserve the right to contest or appeal
                 from the final judgment or any appealable order or appealable
judgment entered by the referee. The parties hereto expressly
                 reserve the right to findings of fact, conclusions of laws, a
written statement of decision, and the right to move for a new
                 trial or a different judgment, which new trial, if granted, is
also to be a reference proceeding under this provision.




                 21410385
                 121197
9.





                                          (4)     In the event that the
enabling legislation which'i
                repealed (and no successor statute is enacted), any dispute
between the parties that
                reference procedure herein described will be resolved and
determined by arbitration.
                a retired judge of the Court, in accordance with the California
Arbitration Act,  1280'L,
                amended from time to time. The limitations with respect to
discovery as set forth herein
                arbitration proceeding.

                         16.     Miscellaneous Provisions.
                                 A.       Nothing herein shall in any way limit
the effect of the conditions set forth in 91,
                or other agreement executed by Borrower, but each and every
condition hereof shall be in addition thereto.
                                 B.       No failure or delay on the part of
Bank, in the exercise of any power, right or privilege shall operate as a
waiver thereof, nor shall any single or partial exercise thereof.
                                 C.      All rights and remedies existing under
this Loan Agreement or any other Loan Document cumulative to, and not exclusive
of, any rights or remedies otherwise available.

                                 D.      All headings and captions in this Loan
Agreement and any related documents are for convenience
                only and shall not have any substantive effect.

                                 E.      This Loan Agreement may be executed in
any number of counterparts, each of which when so
                delivered shall be deemed an original, but all such
counterparts shall constitute but one and the same instrument. Each such
                agreement shall become effective upon the execution of a
counterpart hereof or thereof by each of the parties hereto and
                telephonic notification that such executed counterparts has
been received by Borrower and Bank.
                BANK:
BORROWER:
                IMPERIAL BANK
FUSION NUMAL TECHNOLOGIES, INC.,

a Delaware corporation


                By:
                        James M. Petroff
Raymond W. Anderson
                        Assistant Vice President
Chief Financial Officer



                LIST OF EXHIBITS AND SCHEDULES

                Exhibit A: Definitions

                SCHEDULE I To Exhibit A: List of Specific Permitted
                   Indebtedness
                SCHEDULE 2 To Exhibit A: List of Specific Permitted Liens

                Exhibit B: Compliance Certificate




                21410385
                121197                                                   10.






EXHIBIT A



DEFENITIONS


                          "Accounts" means any right to payment for goods sold
or leased, or to be sold or to be leased, or for services
                 rendered or to be rendered no matter how evidenced, including
accounts receivable, contract rights, chattel paper,
                 instruments, purchase orders, notes, drafts, acceptances,
general intangibles and other forms of obligations and receivables.
                          "Capital Lease" means, as to any Person, any lease of
any Property by such Person as lessee that is, or should be
                 in accordance with Financing Accounting Standards Board
Statement No. 13, classified and accounted for as a "capital lease"
                 on the balance sheet of such Person prepared in accordance
with GAAP.
                          "Capital Lease Obligation" means, with respect to any
Capital Lease, the amount of the obligation of the lessee
                 thereunder that, in accordance with GAAP, would appear on a
balance sheet of such lessee in respect of such Capital Lease
                 or otherwise be disclosed in a note to such balance sheet.
                          "Collateral" means any and all personal property of
Borrower which is assigned or hereafter is assigned to Bank
                 as security or in which Bank now has or hereafter acquires a
security interest hereunder (including, without limitation, the
                 Accounts), or pursuant to the terms of the General Security
Agreement, the IP Security Agreement (as applicable) or
                 otherwise.

                          "Contingent Obligation" means, as applied to any
Person, any direct or indirect liability, contingent or otherwise,
                 of that Person with respect to any indebtedness, lease,
dividend, letter of credit or other obligation of another, including,
                 without limitation, any such obligation directly or indirectly
guaranteed, endorsed (otherwise than for collection or deposit
                 in the ordinary course of business), co-made or discounted or
sold with recourse by that Person, or in respect of which that
                 Person is otherwise directly or indirectly liable, including,
without limitation, any such obligation for which that Person is
                 in effect liable through any agreement (contingent or
otherwise) to purchase, repurchase or otherwise acquire such obligation
                 or any security therefor, or to provide funds for the payment
or discharge of such obligation (whether in the form of loans,
                 advances, capital stock purchases, capital contributions or
otherwise), or to maintain the solvency of the obligor of such
                 obligation, or to make payment for any products, materials or
supplies or for any transportation, services or lease regardless
                 of the non-delivery or non-furnishing thereof, in any such
case if the purpose or intent of such agreement is to provide
                 assurance that such obligation will be paid or discharged, or
that any agreements relating thereto will be complied with, or
                 that the holders of such obligation will be protected (in
whole or in part) against loss in respect thereof. The amount of any
                 Contingent Obligation of any Per-son shall be deemed to be an
amount equal to the maximum amount of such Person's
                 liability with respect to the stated or determinable amount of
the primary obligation for which such Contingent Obligation
                 is incurred or, if not stated or determinable, the maximum
reasonably anticipated liability in respect thereof (assuming such
                 Person is required to perform thereunder).

                          "Eligible Accounts" means such of Borrower's Accounts
as Bank in its sole reasonable discretion shall determine
                 are eligible from time to time; provided, however, that in no
event shall Eligible Accounts include the following:
                                  (1)      all Accounts under which payment is
not received within 90 days from the applicable invoice date;
                                  (2)      all Accounts against which the
account debtor or any other Person obligated to make payment
                          thereon asserts any defense, offset, counterclaim or
other right to avoid or reduce the liability represented by the
                          Accounts;

                                  (3)      any Accounts if the account debtor
or any other Person liable in connection therewith is insolvent,
                          subject to bankruptcy or receivership proceedings or
has made an assignment for the benefit of creditors or whose
                          credit standing is unacceptable to Bank and Bank has
so notified Borrower;




                 21410385
Exhibit A
                 121197                                                  Page I
of 5





                                    (4)      Accounts with respect to which the
account debtor is an officer, director, shareholder, employee
                          or Subsidiary;

                                    (5)      Accounts due from an account
debtor if more than twenty-five percent (25.0%) of the aggregate
                          amount of Accounts of such account debtor have at
that time remained unpaid for more than ninety (90) days from
                          the applicable invoice date;

                                    (6)      Accounts with respect to
international transactions unless either (a) such Accounts are insured or
                          covered by a letter of credit in a manner and form
acceptable to the Bank or (b) Bank shall have otherwise permitted
                          in writing in its sole and absolute direction;

                                    (7)      salesperson's accounts for
promotional purposes;
                                    (8)      the amount by which the aggregate
of all Accounts of an account debtor exceeds twenty percent
                          (20.0%) of the total accounts receivable balance;

                                    (9)      Accounts where the account debtor
is a seller to borrower, to the extent that a potential offset
                          exists; and

                                    (10)     Accounts where the account debtor
is a federal governmental entity, federal agency or
                          instrumentality thereof.

                          "Event of Default" has the meaning set forth in
Section 12.

                          Vacility-A Maturity Date" has the meaning set forth
in Section l.A.

                          "Facility-B Maturity Date" has the meaning set forth
in Section I.B.

                          "GAAP" means generally accepted accounting principles
set forth in the opinions and pronouncements of the
                 Accounting Principles Board of the American Institute of
Certified Public Accountants and statements and pronouncements
                 of the Financial Accounting Standards Board or in such other
statements by such other Person as may be approved by the
                 significant segment of the accounting profession, which are
applicable to the circumstances as of the date of determination.
                          "General Security Agreement" means that certain
General Security Agreement (Tangible and Intangible Personal
                 Property) dated of even date herewith, made by Borrower in
favor of Bank.
                          `EP Security Agreement" means any Collateral
Assignment, Patent Mortgage and Security Agreement that may
                 be entered into after the date hereof by and between Borrower
and Bank to ftirther secure Borrower's obligations to Bank
                 under this Loan Agreement.

                          "Indebtedness" means, as to any Person, without
duplication, (a) all indebtedness of such Person for borrowed
                 money, including, without limitation, all of such indebtedness
outstanding under this Loan Agreement and any of the other
                 Loan Documents, (b) all Capital Lease Obligations of such
Person, (c) to the extent of the outstanding indebtedness
                 thereunder, any obligation of such Person representing an
extension of credit to such Person, whether or not for borrowed
                 money, (d) any obligation of such Person for the deferred
purchase price of Property or services (other than (i) trade or other
                 accounts payable in the ordinary course of business in
accordance with customary industry terms and (ii) deferred franchise
                 fees), (e) all Contingent Obligations, (f) any obligation of
such Person of the nature described in clauses (a), (b), (c), (d)
                 or (e) above, that is secured by a Lien on assets of such
Person and which is non-recourse to the credit of such Person, but
                 only to the extent of the fair market value of the assets so
subject to the Lien, (g) obligations of such Person arising under
                 acceptance facilities or under facilities for the discount of
accounts receivable of such Person, (h) any obligation of such
                 Person to reimburse the issuer of any letter of credit issued
for the account of such Person upon which a draw has been
                 made, and (i) any lease having the effect of indebtedness,
whether or not the same shall be treated as such on the balance
                 sheet of Borrower under GAAP.



                 21410385
Exhibit A
                 121197                                                   Page
2 of 5





                         "Intellectual Property" means all of Borrower's
intellectual property of any kind or nature, whether now owned
                or hereafter acquired or in which Borrower now holds or
hereafter acquires any interest, including, without limitation, all
                registered copyrights, copyright applications, copyright
licenses, registered trademarks, trademark applications, trademark
                licenses, registered patents, patent applications, patent
licenses, trade secrets, customer lists, proprietary or confidential
                information, inventions (whether or not patented or
patentable), technical information, procedures, designs, knowledge,
                know-how, software, data bases, data, skill, expertise,
recipes, experience, processes, models, drawings, materials and
                records and all reissues, continuations, continuations-in-part
or extensions thereof
                         "Lien" means any mortgage, pledge, security interest,
lien or other charge or encumbrance, including the lien or
                retained security title of a conditional vendor, upon or with
respect to any property or assets.
                         "Loan Account or Loan Accounts" means individually and
collectively, the Facility-A Loan Account and the
                Facility-B Loan Account.

                         "Loan Documents" means this Loan Agreement, the
General Security Agreement, the IP Security Agreement (as
                applicable), the Warrant to Purchase Stock and that certain
Itemization of Amount Financed/Disbursement Instructions,
                Agreement to Provide Insurance (Real or Personal Property) and
Automatic Debit Authorization, each dated of even date
                herewith, each -as executed by Borrower in favor of Bank,
together with all other documents entered into or delivered
                pursuant to any of the foregoing, in each case as originally
executed or as the same may from time to time be modified,
                amended, supplemented or restated.
                         "Loans" means individually and collectively, the
Facility-A Loans and the Facility-B Loans advanced pursuant to
                Section 1.

                         "Material Adverse Effect" means any set of
circumstances or events which (a) has or could reasonably be expected
                to have any material adverse effect upon the validity or
enforceability of any material provision of any Loan Document, (b) is
                or could reasonably be expected to be material and adverse to
the condition (financial or otherwise) or business operations
                of Borrower, (c) materially impairs or could reasonably be
expected to materially impair the ability of Borrower, to perform
                its material Obligations, (d) materially impairs or could
reasonably be expected to materially impair the value or priority of
                Bank's security interest in any Collateral or (e) materially
impairs or could reasonably be expected to materially impair the
                ability of Bank to enforce any of its legal remedies pursuant
to the Loan Documents.

                         "Permitted Indebtedness" means the following:

                                  (1)      indebtedness of Borrower or
Indebtedness and Contingent Obligations of its Subsidiaries in favor
                         of Bank arising under this Loan Agreement andthe other
Loan Documents;

                                  (2)      the existing Indebtedness and
Contingent Obligations disclosed on Schedule 1 attached hereto and
                         incorporated herein by this reference; provided that
the principal amount thereof is not increased and the terms
                         thereof are not modified to impose more burdensome
terms upon Borrower or any of its Subsidiaries;

                                  (3)      the Subordinated Debt;

                                  (4)      extensions, renewals or refinancings
of Indebtedness permitted under this Loan Agreement, other
                         than clause (3) immediately above;

                                  (5)      accrued dividends on the preferred
stock of Borrower;

                                  (6)      interest rate and currency hedging
agreements;
                                  (7)      guaranties of any Subsidiary's
suppliers in connection with the purchase of supplies in the ordinary
                         course of business;




                21410385
Exhibit A
                121197                                                  Page 3
of 5




                                        (8)    guaranties of lease obligations
incurred in the ordinary course of business and to the extent
                           otherwise pen-nitted hereunder;

                                        (9)    Contingent Obligations
constituting Permitted Liens; and
                                        (10)   the indebtedness referred to in
clause (3) of the definition of Permitted Liens.
                           "Permitted Liens" means the following:
                                        (1)    liens and security interests
existing as of this date and disclosed in Schedule 2 attached hereto and
                           incorporated herein by this reference;
                                        (2)    liens for taxes, fees,
assessments or other governmental charges or levies, either not delinquent
                           or being contested in good faith by appropriate
proceedings;
                                        (3)    liens and security interests (a)
upon or in any equipment acquired or held by Borrower to secure
                           the purchase price of such equipment or indebtedness
incurred solely for the purpose of financing the acquisition
                           of such equipment and in an amount not greater than
the purchase price thereof or (b) existing on such equipment
                           at the time of its acquisition, provided that the
lien and security interest is confined solely to the property so
                           acquired and improvements thereon, and the proceeds
of such equipment;
                                        (4)    liens consisting of leases or
subleases and licenses 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 any interest
                           or title of a lessor or licensor under any lease or
license, as applicable;
                                        (5)    liens securing claims or demands
of materialmen, mechanics, carriers, warehousemen, landlords
                           and other like persons or entities imposed without
action of such parties, provided that the payment thereof is not
                           yet required;
                                        (6)    liens incurred or deposits made
in the ordinary course of Borrower's business in connection with
                           worker's compensation, unemployment insurance,
social security and other like laws;
                                        (7)    liens arising from judgments,
decrees or attachments in circumstances not constituting an Event
                           of Default;
                                        (8)    easements, reservations, rights-
of-way, restrictions, minor defects or irregularities in title and other
                           similar charges or encumbrances affecting real
property not interfering in any, material respect with the ordpary
                           conduct-of-Dorrower's business;
                                        (9)    liens in favor of customs and
revenue authorities arising as a matter of law to secure payment of
                           customs duties in connection with the importation of
goods;
                                        (10)   liens that are not prior to
Bank's security interest which constitute rights of set-off of a customary
                           nature;
                                        (I 1)  any interest or title of a
lessor in equipment subject to any Capitalized Lease otherwise permitted
                           hereunder; and

                                        (12)   any liens arising from the
filing of any financing statements relating to true leases otherwise
                           permitted hereunder.







               21410385
Exhibit A
               121197                                                      Page
4 of 5




                           "Person" means any individual, sole proprietorship,
partnership, joint venture, trust, unincorporated organization,
                  association, corporation, limited liability company,
institution, public benefit corporation, firm, joint stock company, estate,
                  entity or governmental agency.
                           "Property" means any interest in any kind of
property or asset, whether real, personal or mixed, whether tangible
                  or intangible.
                           "Subordinated Debt" means indebtedness of Borrower,
the repayment of principal of which is fully subordinated
                  in time and right of payment to the Loans, and has been
approved in Bank's sole and absolute discretion and in writing.
                           "Warrant to Purchase Stock" means collectively, that
certain Warrant to Purchase Stock issued to Bank on
                  September 15, 1994 by Borrower, as amended, and that certain
Warrant to Purchase Stock issued as of the date hereof by
                  Borrower to Bank in connection herewith.



               21410385
Exhibit A
                121197                                                    Page
5 of 5







                                                      SCHEDULE I To Exhibt A

                                               SPECIFIC PERMITTED INDEBTEDNESS




            21410385                                   Schedule I to Exhibit A
             121197                                         Page I of I



     I






                                                       SCHEDULE 2 To Exhibit A


                                                     SPECIFIC PERMITTED LIENS






             21410385                                   Schedule 2 to Exhibit A
              121197                                          Page I of I




                                                                      EXHIBIT B


                                                          COMPLIANCE CERTMCATE



                                                        (To be provided and
attached by Bank)




                21410385
                121197                                                Exhibit B

                                                  EXHIBIT  10.7 (CONTINUED)


                      GENERAL SECURITY AGREEMENT


THIS GENERAL SECURITY AGREEMENT is executed on December 21,1997 (this "Security
Agreement"), by FUSION MEDICAL TECHNOLOGIES, INC., a Delaware corporation
(hereinafter called "Grantor"). In consideration of financial accommodations
given, to be given or continued, Grantor hereby grants to IMPERIAL BANK
(hereinafter called "Bank") a
security interest in (a) all property (i) delivered to Bank by Grantor, (ii)
which shall be in Bank's possession or control in any matter or for any
purpose, (iii) described below or (iv) now owned or hereafter acquired by
Grantor of the type or class described below and/or in any exhibit or
supplementary schedule hereto, or in any financing statement filed by Bank and
executed by or on behalf of Grantor; and (b) the proceeds, increase and
products of such property, all accessions thereto, and all property which
Grantor may receive on account of such collateral (collectively referred to as
'Collateral") to secure payment and performance of all of Grantor's present or
future debts or obligations to Bank, whether absolute or contingent (hereafter
referred to as "Debt"). See Exhibit A attached hereto and incorporated herein
by this reference for a description of the Collateral. The Collateral which is
not in Bank's possession will be located at the locations set forth on Exhibit
B attached hereto and incorporated herein by this reference. Unless otherwise
defined herein, initially capitalized terms used herein shall have the meanings
given them in the California Uniform Commercial Code, as defined in that
certain Loan Agreement dated as of the date hereof entered into by and among
Grantor and Bank (the "Loan Agreement") or as defined in Exhibit A hereto.


                          Grantor hereby represents, warrants and agrees:

                          I .      Grantor will immediately pay (a) any Debt
when due, (b) Bank's costs of collecting the Debt, of protecting,
                 insuring or realizing on Collateral, and any expenditure of
Bank pursuant hereto, including attorneys' fees and expenses, with
                 interest at the rate of twenty-four percent (24 %) per year,
or the rate applicable to the Debt, whichever is less, from the date
                 of expenditure, and (c) any deficiency after realization of
Collateral.

                          2 .      Grantor will use the proceeds of any loan
that becomes Debt hereunder for the purpose indicated on the
                 application therefor, and will promptly contract to purchase
and pay the purchase price of any property which becomes
                 Collateral hereunder from the proceeds of any loan made for
that purpose.

                          3 .      As to all Collateral in Grantor's possession
or the possession of its contract manufacturers (unless
                 specifically otherwise agreed to by Bank in writing), Grantor
will:

                          (a)      Have or has possession of the Collateral at
the location disclosed to Bank and will not remove the Collateral
                 from said location, except for sales in the ordinary course of
Borrower's business.

                          (b)      Keep the Collateral separate and
identifiable.

                          (c)      Maintain the Collateral in good and saleable
condition, repair it if necessary and otherwise deal with the
                 Collateral in all such ways as are considered good practice by
owners of like property, use it lawfully and only as permitted
                 by insurance policies, and permit Bank to inspect the
Collateral at any reasonable tirrie in accordance with the terms of the
                 Loan Agreement.

                          (d)      Not sell, contract to sell, lease, encumber
or transfer the Collateral (other than the disposition of such
                 inventory Collateral in the ordinary course of Borrower's
business and other assets which are obsolete or otherwise
                 considered surplus) until the Debt has been paid or performed
in ftill, even though Bank has a security interest in the
                 proceeds of such Collateral.











                 21410169
                 121197






                           4.        As to Collateral which is inventory and
accounts, Grantor:

                           (a)       May, until notice from Bank after the
occurrence and during the continuance of an Event of Default, sell,
                 lease or otherwise dispose of inventory Collateral in the
ordinary course of business only, and collect the cash proceeds
                 thereof.

                           (b)       Will, upon notice from Bank after the
occurrence and during the continuance of an Event of Default, deposit
                 all cash proceeds as received in a demand deposit account with
Bank, containing only such proceeds and deliver statements
                 identifying units of inventory disposed of, accounts which
gave rise to proceeds, and all acquisitions and returns of inventory
                 as required by Bank.

                           (c)       Will receive in trust after the occurrence
and during the continuance of an Event of Default, schedule on
                 forms satisfactory to Bank and, upon notice from Bank, deliver
to Bank all non-cash proceeds other than inventory received
                 in trade.


                           (d)       So long as there does not exist an Event
of Default, may obtain release of Bank's interest in individual units
                 of inventory upon request therefore, payment to Bank of the
release price of such units shown on any Collateral schedule
                 supplementary hereto, and compliance herewith as to proceeds
thereof.

                           5.        As to Collateral which are Accounts,
Chattel Paper, General Intangibles and Proceeds described in
                 Section 4(c) above, Grantor warrants, represents and agrees:

                           (a)       All such Collateral is genuine,
enforceable in accordance with its terms and conditions precedent (except
                 as disclosed to and accepted by Bank in writing), and is
supported by consecutively numbered invoices to, or rights against,
                 the debtors thereon. Grantor will supply Bank with duplicate
invoices or other evidence of Grantor's rights on Bank's
                 request.

                           (b)       All persons appearing to be obligated on
such Collateral have authority and capacity to contract.
                           (c)       All Chattel Paper is in compliance with
applicable law as to form, content and manner of preparation and
                 execution and has been properly registered, recorded, and/or
filed to protect Grantor's interest thereunder.

                           (d)       If an account debtor shall also be
indebted to Grantor on another obligation, any payment made by such
                 account debtor not specifically designated to be applied on
any particular obligation shall be considered to be a payment on
                 the account in which Bank has a security interest. Should any
remittance include a payment not on an account, it shall be
                 delivered to Bank and, if no Event of Default has occurred,
Bank shall pay Grantor the amount of such payment.
                           (e)       Grantor agrees that following the
occurrence and during the continuance of an Event of Default, Grantor
                 shall not compromise, settle or adjust any Account or renew or
extend the time of payment thereof without Bank's prior
                 written consent.

                           M         Until Bank exercises its rights to collect
the Accounts pursuant to Section 11 hereof, Grantor will collect
                 with diligence all Grantor's Accounts. Any collection of
Accounts by Grantor, whether in the form of cash, checks, notes,
                 or other instruments for the payment of money (properly
endorsed or assigned where required to enable Bank to collect
                 same), shall be in trust for Bank. If an Event of Default has
occurred andis continuing, Grantor shall keep all such
                 collections separate and apart from all other funds and
property so as to be capable of identification as the property of Bank
                 and deliver said collections daily to Bank in the identical
form received. The proceeds of such collections when received
                 by Bank may be applied by Bank directly to the payment of the
applicable Loan Account or to any other obligation secured
                 hereby. Any credit given by Bank upon receipt of said proceeds
shall be conditional credit subject to collection. Returned
                 items at Bank's option may be charged to Grantor's deposit
account with Bank. All collections of the Accounts shall be set
                 forth on an itemized schedule, showing the name of the account
debtor, the amount of each payment and such other
                 information as Bank may request.




                 21410169
                 121197
2.





                          (g)       Until Bank exercises its rights to collect
the Accounts pursuant to Section 11 hereof, Grantor may continue
                 its present policies with respect to returned merchandise and
adjustments. However, Grantor shall immediately notify Bank
                 of all cases involving repossessions, and material loss or
damage of or to merchandise represented by the Accounts.
                          6.        Grantor owns all of the Collateral
absolutely and no other person has or claims any interest in any of the
                 Collateral, except for Permitted Liens and as disclosed to and
accepted by Bank in writing. Grantor will defend any
                 proceeding which may affect title to or Bank's security
interest in any of the Collateral, and will indemnify and hold Bank
                 free and harmless from all costs and expenses of Bank's
defense.

                          7.        Grantor will pay when due all existing or
future charges, liens or encumbrances on and all taxes and
                 assessments (except for taxes not yet due and payable or which
are contested in good faith and for which Grantor has set
                 aside adequate reserves) now or hereafter imposed on or
affecting the Collateral and, if the Collateral is in Grantor's
                 possession, the realty on which the Collateral is located.

                          8.        Grantor will insure the Collateral with
Bank as loss payee in form and amounts with companies, and against
                 risks and liability satisfactory to Bank (to the extent
customarily maintained by businesses similar to Borrower's), and hereby
                 assigns such policies to Bank, agrees to deliver them to Bank
at Banks request, and authorizes Bank to make any claim
                 thereunder, to cancel the insurance upon Grantor's default,
and to receive payment of and endorse any instrument in payment
                 of any loss or return premium. If Grantor should fail to
deliver the required insurance policy or policies to Bank, Bank may,
                 at Grantor's cost and expense, without any duty to do so, get
and pay for insurance naming as the insured, at Bank's option,
                 either both Grantor and Bank, or only Bank, and the cost
thereof shall be secured by this Security Agreement, and shall be
                 repayable as provided in Section I above.

                          9.        Grantor will give Bank any information it
reasonably requires in accordance with the terms of the Loan
                 Documents. All information at any time supplied to Bank by
Grantor (including, but not limited to, the value and condition
                 of Collateral, financial statements, financing statements, and
statements made in documentary Collateral) is correct and
                 complete, and Grantor will notify Bank of any adverse change
in such information. Grantor will promptly notify Bank of
                 any change of Grantor's residence, chief executive office or
mailing address.

                          10.       At any time and from time to time, upon the
written request of Bank, and at the sole expense of Grantor,
                 Grantor shall promptly and duly execute and deliver any and
all such further instruments and documents and take such further
                 action as Bank may reasonably deem desirable to obtain the
full benefits of this Security Agreement and of the rights and
                 powers herein granted, including, without limitation, (a)
using its best efforts to secure all consents and approvals necessary
                 or appropriate for the grant of a security interest to Bank in
any Contract or License held by Grantor or in which Grantor
                 has any rights not heretofore assigned, (b) filing any
financing or continuation statements under the UCC with respect to the
                 security interests granted hereby, (c) transferring Collateral
to Bank's possession (if a security interest in such Collateral can
                 be perfected by possession), (d) placing the interest of Bank
as lienholder on the certificate of title (or other evidence of
                 ownership) of any vehicle owned by Grantor or in or with
respect to which Grantor holds a beneficial interest and (e) using
                 its best efforts to obtain waivers of liens from landlords and
mortgagees. Grantor also hereby authorizes Bank to file any
                 such financing or continuation statement without the signature
of Grantor. If any amount payable under or in connection
                 with any of the Collateral is or shall become evidenced by any
Instrument, such Instrument, other than checks and notes
                 received in the ordinary course of business, shall be duly
endorsed in a manner satisfactory to Bank and delivered to Bank
                 promptly upon Grantor's receipt thereof.

                          IL        Upon the occurrence and during the
continuation of an Event of Default Bank may, without prior notice
                 to Grantor, collect the Collateral and may give notice of
assignment of Accounts to any and all account debtors and Grantor
                 does hereby make, constitute and appoint Bank its irrevocable,
true and lawful attorney-in-fact with power to do any act
                 which Grantor is obligated hereby to do, to exercise such
rights as Grantor may exercise, to use such equipment as Grantor
                 might use, to enter Grantor's premises to give notice of
Bank's security interest, and to collect Collateral and proceeds and
                 to execute and file in Grantor's name any financing statements
and amendments thereto required to perfect Bank's security
                 interest hereunder, all to protect and preserve the Collateral
and Bank's rights hereunder. Without limiting the generality
                 of the foregoing, after and during the continuance of an Event
of Default, Bank may:




                 21410169
                 121197
3






                          (a)      Endorse the name of Grantor, collect and
receive delivery or payment of Instruments and Documents
                 constituting Collateral.

                          (b)      Demand, sue for, give acquittances for, make
extension agreements with respect to or affecting Collateral,
                 exchange it for other Collateral, release persons liable
thereon or take security for the payment thereof, and compromise,
                 prosecute or defend any action, claim, proceeding or other
disputes in connection therewith.

                          (c)      Use or operate Collateral for the purpose of
preserving Collateral or its value and for preserving or
                 liquidating Collateral.

                          12.      Discharge of Grantor except for full
payment, or any extension, forbearance, change of rate of interest,
                 or acceptance, release or substitution of Collateral or any
impairment or suspension of Bank's rights against Grantor, or any
                 transfer of Grantor's interest to another shall not affect the
liability of Grantor hereunder. Until the Debt shall have been
                 paid or performed in full, Bank's rights shall continue even
if the Debt is deemed unenforceable. Grantor hereby waives:
                 (a) any right to require Bank to proceed against Grantor
before any other, or to pursue any other remedy; (b) presentment,
                 protest and notice of protest, demand and notice of
nonpayment, demand or performance, notice of sale, and advertisement
                 of sale; (c) any right to the benefit of or to direct the
application of any Collateral until the Debt shall have been paid or
                 performed in full; and (d) any right of subrogation to Bank
until the Debt shall have been paid or performed in full.

                          13.      After and during the continuance of an Event
of Default, at Bank's option, without demand or notice, all
                 or any part of the Debt shall immediately become due and
payable. Bank shall have all rights given by law, and may sell,
                 in one or more sales, Collateral in any county where Bank has
an office. Bank may purchase at such sale. Sales for cash
                 or on credit to a wholesaler, retailer or user of the
Collateral, or at public or private auction, are all to be considered
                 commercially reasonable. Bank may require Grantor to assemble
the Collateral and make it available to Bank at the entrance
                 to the location where the Collateral is stored, or at a place
designated by Bank.

                          14.      Bank's acceptance of partial or delinquent
payments or the failure of Bank to exercise any right or remedy
                 shall not waive any obligation of Grantor or right of Bank to
modify this Security Agreement, or waive any other similar
                 default.


                          15.      Upon the transfer of all or any part of the
Debt, Bank may transfer all or any part of the Collateral. Bank
                 may deliver all or any part of the Collateral to any Grantor
at any time. Any such transfer or delivery shall discharge Bank
                 from all liability and responsibility with respect to such
Collateral transferred or delivered. This Security Agreement benefits
                 Bank's successors and assigns and binds Grantor's heirs,
legatees, personal representatives, successors and assigns. Time
                 is of the essence. This Security Agreement, the other Loan
Documents and the exhibit(s) attached hereto contain the entire
                 security agreement between Bank and Grantor. Grantor will
execute any additional agreements, assignments or documents
                 reasonably require4,by Bank to carry this Security Agreement
into effect.

                          16.      If one or more Grantor signs this Security
Agreement, their liability hereunder shall be joint and several.
                 Any Grantor who is married hereby agrees that recourse may be
had against his or her separate property for the Debt.

                          17.      This Security Agreement shall be governed by
and construed in accordance with the laws of the State of
                 California, to the jurisdiction of whose courts Grantor hereby
agrees to submit. Grantor agrees that service of process may
                 be accomplished by any means authorized by California law. All
words used herein in the singular shall be considered to
                 have been used in the plural where the context and
construction so require.












                 21410169
                 121197





                    18.    Grantor hereby acknowledges receiving a copy of this
Security Agreement and waives all rights to receive
            from Bank a copy of any financing statement or financing change
statement filed, or any verification statement received, at
            any time in respect of this Security Agreement.

                                                                      GRAWOR


                                                                      FUSION
MEDICAL TECHNOLOGIES, INC.,
                                                                      a
Delaware corporation


                                                                      By

Raymond W. Anderson

Chief Financial Officer


            21410169
            121197

                                                                 EXHIBIT  A

                                  DESCRIPTION OF COLLATERAL



                         A.       Collateral. This Exhibit A covers all right,
title and interest of Grantor in, to and under all of the
                following, wherever located and whether now owned or hereafter
owned or acquired (collectively, the "Collateral"):

                                  (a)      All Accounts of Grantor;

                                  (b)      All Chattel Paper of Grantor;

                                  W        All Contracts of Grantor;

                                  (d)      All Deposit Accounts of Grantor;

                                  (e)      All Documents of Grantor;

                                  (f)      All Equipment of Grantor;

                                  (g)      All Fixtures of Grantor;

                                  (h)      All General Intangibles of Grantor;

                                  W        All Instruments of Grantor;

                                  0)       All Inventory of Grantor;

                                  (k)      All Investment Property of Grantor;

                                  (1)      All Licenses of Grantor;

                                  (m)      All property of Grantor held by Bank
or any other party for whom Bank is acting as agent
                hereunder, including, without limitation, all property of every
description now or hereafter in the possession or custody of
                or in transit to Bank or such other party for any purpose,
including, without limitation, safekeeping, collection or pledge,
                for the account of Grantor, or as to which Grantor may have any
right or power;

                                  (n)      All other goods and personal
property of Grantor whether tangible or intangible and whether now
                or hereafter owned or existing, leased, consigned by or to, or
acquired by, Grantor and wherever located; and

                                  (0)      To the extent not otherwise
included, all Proceeds of each of the foregoing and all accessions to,
                substitutions and replacements for, and rents, profits and
products of each of the foregoing.

                         B.       Defined Terms. Unless otherwise defined
herein, the following terms shall have the following meanings
                (such meanings being equally applicable to both the singular
and plural forms of the terms defined):

                         "Accounts" means any "account,,. as such term is
defined in Section 9106 of the UCC, now owned or hereafter
                acquired by Grantor and, in any event, shall include, without
limitation, all accounts receivable, book debts and other forms
                of obligations (other than forms of obligations evidenced by
Chattel Paper, Documents or Instruments) now owned or
                hereafter received or acquired by or belonging or owing to
Grantor (including, without limitation, under any trade name,
                style or division thereof) whether arising out of goods sold or
services rendered by Grantor or from any other transaction,
                whether or not the same involves the sale of goods or services
by Grantor (including, without limitation, any such obligation
                which may be characterized as an account or contract right
under the UCC) and all of Grantor's rights in, to and under all


                21410169
Exhibit A
                121197                                                  Page 1
of 3






                purchase orders or receipts now owned or hereafter acquired by
it for goods or services, and all of Grantor's rights to any
                goods represented by any of the foregoing (including, without
limitation, unpaid seller's rights of rescission, replevin,
                reclamation and stoppage in transit and rights to returned,
reclaimed or repossessed goods), and all monies due or to become
                due to Grantor under all purchase orders and contracts for the
sale of goods or the performance of services or both by
                Grantor (whether or not yet earned by performance on the part
of Grantor or in connection with any other transaction), now
                in existence or hereafter occurring, including, without
limitation, the right to receive the proceeds of said purchase orders
                and contracts, and all collateral security and guarantees of
any kind given by any Person with respect to any of the foregoing.

                          "Chattel Paper" means any "chattel paper," as such
term is defined in Section 91050)(b) of the UCC, now owned
                or hereafter acquired by Grantor.

                          "Contracts" means all contracts, undertakings,
franchise agreements or other agreements (other than rights evidenced
                by Chattel paper, Documents or Instruments) in or under which
Grantor may now or hereafter have any right, title or
                interest, including, without limitation, with respect to an
Account, any agreement relating to the terms of payment or the
                terms of performance thereof.

                          'Devosit Account' means any "deposit account" as such
term is defined in Section 9105(e) of the UCC, and should
                include, without limitation, any demand, time, savings passbook
or like account, now or hereafter maintained by or for the
                benefit of Grantor, or in which Grantor now holds or hereafter
acquires any interest, with a bank, savings and loan
                association, credit union or like organization (including Bank)
and all funds and amounts therein, whether or not restricted
                or designated for a particular purpose.

                          'Documents" means any "documents," as such term is
defined in Section 9105(l)(0 of the UCC, now owned or
                hereafter acquired by Grantor.

                          "Eguip      . means any "equipment," as such term is
defined in Section 9109(2) of the UCC, now or hereafter
                owned or acquired by Grantor and, in any event, shall include,
without limitation, all machinery, equipment, furnishings,
                vehicle, computers and other electronic data-processing and any
other office equipment of any nature whatsoever, any and
                all additions, substitutions and replacements of any of the
foregoing, wherever located, together with all attachments,
                components, parts, equipment and accessories installed thereon
or affixed thereto.

                          "Fixtures" means 'fixtures," as such term is defined
in Section 9313(l)(a) of the UCC, now or hereafter owned
                or acquired by Grantor and, in any event, shall include,
without limitation, regardless of where located, all of the fixtures,
                systems, machinery, apparatus, equipment and fittings of every
kind and nature whatsoever and all appurtenances and
                additions thereto and substitutions or replacements thereof,
now or hereafter attached or affixed to or constituting a part of,
                or located in or upon, real property wherever located,
including, without limitation, all heating, electrical, mechanical,
                lighting, lifting, plumbing, ventilating, air-conditioning and
air cooling, refrigerating, food preparation, incinerating and
                power, loading and unloading, signs, escalators, elevators,
boilers, communication, switchboards, sprinkler and other fire
                prevention and extinguishing fixtures, systems, machinery,
apparatus and equipment, and all engines, motors, dynamos,
                machinery, pipes, pumps, tanks, conduits and ducts constituting
a part of any of the foregoing, together with all right, title
                and interest of Grantor in and to all extensions, improvements,
betterments, renewals, substitutes, and replacements of, and
                all additions and appurtenances to any of the foregoing
property, and all conversions of the security constituted thereby,
                immediately upon any acquisition or release thereof or any such
conversion, as the case may be.

                          "General Intangibles" means any "general
intangibles," as such term is defined in Section 9106 of the UCC, now
                owned or hereafter acquired by Grantor and, in any event, shall
include, without limitation, all right, title and interest which
                Grantor may now or hereafter have in or under any Contract,
interests in partnerships, joint ventures and other business
                associations, Licenses, permits, goodwill, claims in or under
insurance policies, including unearned premiums, uncertificated
                securities, deposit accounts, rights to receive tax refunds and
other payments and rights of indemnification.

                          "Instruments" means any "instrument," as such term is
defined in Section 9105(l)(i) of the UCC now owned or
                hereafter acquired by Grantor, including, without limitation,
all notes, certificated securities, and other evidences of
                indebtedness, other than instruments that constitute, or are a
part of a group of writings that constitute, Chattel Paper.


                21410169
Exhibit A
                121197                                                    Page
2 of 3






                          "Inventory" means any 'inventory," as such term is
defined in Section 9109(4) of the UCC, wherever located, now
                 or hereafter owned or acquired by, Grantor and, in any event,
shall include, without limitation, all inventory, merchandise,
                 goods and other personal property which are held by or on
behalf of Grantor for sale or lease or are furnished or are to be
                 furnished under a contract of service or which constitute raw
materials, work in process or materials used or consumed or
                 to be used or consumed in Grantor's business, or the
processing, packaging, promotion, delivery or shipping of the same,
                 and all furnished goods whether or not such inventory is
listed on any schedules, assignments or reports furnished to Bank
                 from time to time and whether or not the same is in transit or
in the constructive, actual or exclusive occupancy or possession
                 of Grantor or is held by Grantor or by others for Grantor's
account, including, without limitation, all goods covered by
                 purchase orders and contracts with supplier's and all goods
billed and held by suppliers and all inventory which may be
                 located on premises of Grantor or of any carriers, forwarding
agents, truckers, warehousemen, vendors, selling agents or
                 other persons.

                          'Investment Property" means any "investment
property," as such term is defined in Section 9115(l)(f) of the UCC,
                 now owned or hereafter acquired by Grantor, including, without
limitation, a security, whether certificated or uncertificated,
                 a security entitlement, a securities account, a comniodity
contract or a commodity account.

                          "License" means any license of rights or interests
now held or hereafter acquired by Grantor.

                          'Proceeds" means 'proceeds,' as such term is defined
in Section 9-306(l) of the UCC and, in any event, shall
                 include, without limitation, (a) any and all Accounts, Chattel
Paper, Instruments, cash or other proceeds payable to Grantor
                 from time to time in respect of the Collateral, (b) any and
all proceeds of any insurance, indemnity, warranty or guaranty
                 payable to Grantor from time to time with respect to any of
the Collateral, (c) any and all payments (in any form whatsoever)
                 made or due and payable to Grantor from time to time in
connection with any requisition, confiscation, condemnation,
                 seizure or forfeiture of all or any part of the Collateral
above by any governmental body, authority, bureau or agency (or
                 any person acting under color of governmental authority), (d)
all certificates, dividends, cash, Instruments and other property
                 received or distributed in respect of or in exchange for any
Investment Property and (e) any and all other amounts from time
                 to time paid or payable under or in connection with any of the
Collateral or any Contract.

                          'UCC" means the Uniform Commercial Code as the same
may, from time to time, be in effect in the State of California; provided,
however, in the event that, by reason of mandatory provisions of law, any or
all of the attachment,
                 perfection or priority of Bank's security interest in any
collateral is governed by the Uniform Commercial Code as in effect
                 in a jurisdiction other than the State of California, the term
" UCC " shall mean the Uniform Commercial Code as in effect
                 in such other jurisdiction for purposes of the provisions
hereof relating to such attachment, perfection of priority and for
                 purposes of definitions related to such provisions.









                 21410169
Exhibit A
                 121197
Page 3 of 3






                               LOCATION OF COLLATERAL NOT IN BANK'S POSSESSION




             1       1804 Shoreline Boulevard, Suite 130, Mountain View,
California 94043


             2.      Please add other address locations, if any. If none,
please indicate "None" below:












              21410169                                         Exhibit B
              121197                                          Page I of I





THIS SPACE FOR USE OF FILING OFFICER






                FINANCING STATEMENT - FOLLOW INSTRUCTIONS CAREFULLY
                This Financing Statement Is Presented for filing pursuant to
the Uniform Commercial Code
                and will remain effective. with certain exceptions. for 5 vears
from date of film.
                A. NAME & TEL # OF CONTACT AT FILER (optional) S. FILING OFFICE
ACCT. # optional)


                C. RETURN COPY TO: (Name and Mailing Address)
7
                                  Imperial Bank
                                  9920 So. LaCienaga Blvd., Suite 628
                                  Inglewood, California 90301


                D.OPTIONAL DESIGJNATION lit
app6coMei:HLEssopiLEssEEHCONSIGNOFVCONMGNEE7NON-UCC FILING1
                I. DEBTOR'S EXACT FULL LEGAL NAME - Insert only one debtor name
la or lb)
                      Ia. ENTITY'S NAME
                                  Fusion Medical Techmlogies, Inc.
                OR    I b. IND114DUAL'S LAST NAME      FIRST NAME      MIDDLE
NAME                           SUFFIX


                I a. MAILING ADDRESS          CITY
STATE COUNTRY POSTAL CODE
                                  1804 Shoreline BlVd., Ste. 130
Mountain View                                             CA I USA
94043
                Id. S.$. OR TAX LO.#                   OPTIONAL
lie.TYPEoFENTITY                                If. ENTITY'S STATE
I g. ENTITY'S ORGANIZATIONAL I.D.#, It any
                                                   ADD'NL INFO RE
OR COUNTRY OF
                                                   1wnTYDEErroR1
Comoraitim                       JORGANIZATION           r)pl
NONE
                2. ADDITIONAL DEBTOR'S EXACT FULL LEGAL NAME - insert onIV one
debtor name (2a or 2b)
                      2s. ENTITY'S NAME


                OR    2b. INDMIDUAL'S LAST NAME
FIRST NAME                                                MIDDLE NAME
SUFFIX
                2c. MAILING ADDRESS
CITY                                                      STATE 1COUNTRY
POSTALCODE
                2d. S.S. OR TAX I.D.#                  OPnoNAL 12a. TYPE OF
ENTITY                              .2f.ENTfrY'S STATE
 .2g. ENTITY'S ORGANIZATIONAL I.D.#, It any
                                                   ADD'NL INFO RE
OR COUNTRY OF
                                                   ENTITY DEIrrOR
IORGANIZATION                                             I
1-1 NONE
                3. SECURED PARTY'S (ORIGINAL S/P or ITS TOTAL ASSIGNEE) EXACT
FULL LEGAL NAME - insert only one secured party name (3a or 3b)
                      3s. ENTITY'S NAME
                OR          TT(Inerial Pnnk
                      3b. INDIVIDUAL'S LAST NAME
FIRST NAME                                                MIDDLE NAME
SUFFIX
                3c. MAILING ADDRESS
CITY                                                      STATE COUNTRY]POSTAL
CODE
                            226 Airport Parkway
San Jose                                               CA I USA
95110
                4. This FINANCING STATEMENT covers the following types or Items
of prop":


                            All of the Debtor - s right, title and interest,
whether mw amed
                            or hereafter arising or acquired, in and to the
personal property
                            described on Exhibit A attached hereto and
incorporated herein
                            by this reference (continued).





                5. CHECK [J This FINANCING STATEMENT Is signed by the Secured
Party Instead of the Debtor to perfect a security interest
-T7. -Iffild In Florida (check one)
                    Box             (a) In collateral already subject to a
security interest In another Jurisdiction when It woo brought Into this state,
or when the                    Doc    ntery         Documentary stamp
                    [if applicable] debtor's location was changed to this
state, or lb) In accordance with other statutory provisions [additional data
may be required] I [I -tariumtewc paid L] tax not applicable
                S. REQUIRED SIGNATUREIS)
B. U This FINANCING STATEMENT Is to be filed (for recordl
                            Fusim edical Teclimlogies, Inc., a Delaware
corporation "'
recorded) In the REAL ESTATE RECORDS
                                             M
Attach Addendum                                    [if applicable)

9. Check to REQUEST SEARCH CERTIFICATEIS) an Dobtor(a)

ADDITIONAL FEEI
                            By:
Vp MI-Iz5r-r-r-                                            (optional)
FIAII Debtor*F] Debtor IFIDebtar 2

REORDER F

tr6, Inc.
                11) FILING OFFICER COPY- NATIONAL FINANCING STATEMENT (FORM
UCCl) (TRANS) (REV. 12/18/95)
ne          ES

@ @ ox -








                                                                        Exmrr A
                                                                            TO
                                                             UCC-1 FINANCING
STATEMENT
                                                                        BETWEEN
                                                 Mm MEDICAL TEcHNOLOGIES, INC.,
As DEBToR
                                                                            AND
                                                         ImmRIAL BANK, As
SEcuRED PARTY




                   ITEM 4:


                            1.       Description of Collateral. The Collateral
shall consist of all of Debtor's right, title and interest
                   in, to and under the following, wherever located and whether
now owned or hereafter owned or acquired in which
                   Debtor now has or hereafter acquires any right or interest
(collectively, the 'Collateral"):

                                     a.        All Accounts of Debtor;


                                     h.        All Chattel Paper of Debtor;

                                     C.        All Contracts of Debtor;

                                     d.        All Deposit Accounts of Debtor;

                                     e.        All Documents of Debtor;


                                     f.        All l3quipment of Debtor;

                                     9.        All Fixtures of Debtor;

                                     h.        All General Intangibles of
Debtor;

                                     i.        All Instruments of Debtor;


                                     j.        All ]Inventory of Debtor;

                                     k.        All ]Investment Property of
Debtor;

                                     1.        All ]Licenses of Debtor;


                                     M.        All property of Debtor held by
Secured Party or any other party for whom Secured Party
                   is acting as agent hereunder, including, without limitation,
all property of every description now or hereafter in the
                   possession or custody of or irk transit to Secured Party or
such other party for any purpose, including, without
                   limitation, safekeeping, collection or pledge, for the
account of Debtor, or as to which Debtor may have any right
                   or power;


                                     n.        All other goods and personal
property of Debtor, whether tangible or intangible and
                   whether now or hereafter    owned or existing, leased,
consigned by or to, or acquired by, Debtor and wherever
                   located; and

                                     0.        To the extent not otherwise
included, all Proceeds of each of the foregoing and all
                   accessions to, substitutions and replacements for, and
rents, profits and products of each of the foregoing.





                   21410254
                   110597







                    DEBTOR:                             FusioN MEDICAL
TECHNOLOGIES, NC.
                    SECURED PARTY:                      ImPERiAL BANK
                    UCC- I Financing Statement
                    Item 4 (continued)
                    Page 2 of 4


                             2.       Defined Terms. Unless otherwise defined
herein, the following terms shall have the following
                    meanings (such meanings being equally applicable to both
the singular and plural forms of the terms defined).

                             "Accounts' means any 'account,' as such term is
defined in Section 9106 of the UCC, now owned or
                    hereafter acquired by Debtor or in which Debtor now holds
or hereafter acquires any interest and, in any event,
                    shall include, without limitation, all accounts receivable,
book debts and other forms of obligations (other than forms
                    of obligations evidenced by Chattel Paper, Documents or
Instruments) now owned or hereafter received or acquired
                    by or belonging or owing to Debtor (including, without
limitation, under any trade name, style or division thereof)
                    whether arising out of goods sold or services rendered by
Debtor or from any other transaction, whether or not the
                    same involves the sale of goods or services by Debtor
(including, without limitation, any such obligation which may
                    be characterized as an account or contract right under the
UCQ and all of Debtor's rights in, to and under all
                    purchase orders or receipts now owned or hereafter acquired
by it for goods or services, and all of Debtor's rights
                    to any goods represented by any of the foregoing
(including, without limitation, unpaid seller's rights of rescission,
                    replevin, reclamation and stoppage in transit and rights to
returned, reclaimed or repossessed goods), and all monies
                    due or to become due to Debtor under all purchase orders
and contracts for the sale of goods or the performance
                    of services or both by Debtor (whether or not yet earned by
performance on the part of Debtor or in connection
                    with any other transaction), now in existence or hereafter
occurring, including, without limitation, the right to
                    receive the proceeds of said purchase orders and contracts,
and all collateral security and guarantees of any kind
                    given by any Person with respect to any of the foregoing.

                             "Chattel Paper' means any 'chattel paper,' as such
term is defined in Section 9105(l)(b) of the UCC,
                    now owned or hereafter acquired by Debtor or in which
Debtor now holds or hereafter acquires an interest.

                             "Contracts" means all contracts, undertakings,
franchise agreements or other agreements (other than rights
                    evidenced by Chattel Paper, Documents or Instruments) in or
under which Debtor may now or hereafter have any
                    right, tide or interest, including, without limitation, any
and all right, title and interest of Debtor under any customer
                    agreements, supply agreements, distribution agreements,
rebate agreements, processing agreements, warehousing
                    agreements or royalty agreements and shall include, without
limitation, with respect to an Account, any agreement
                    relating to the terms of payment or the terms of
performance thereof.

                             'Deposit Account' ineans any 'deposit account" as
such term is defined in Section 9105(e) of the UCC,
                    and should include, without limitation, any demand, time,
savings passbook or like account, now or hereafter
                    maintained by or for the benefit of Debtor, or in which
Debtor now holds or hereafter acquires any interest, with
                    a bank, savings and loan association, credit union or like
organization (including Secured Party) and all funds and
                    amounts therein, whether or not restricted or designated
for a particular purpose.

                             'Documents' means any "documents," as such term is
defined in Section 9105(l)(f) of the UCC, now
                    owned or hereafter acquired b, Debtor or in which Debtor
now holds or hereafter acquires an interest.
                                                    Y

                             "Equipment" means any "equipment," as such term is
defined in Section 9109(2) of the UCC, now or
                    hereafter owned or acquired by Debtor or in which Debtor
now holds or hereafter acquires an interest, and, in any
                    event, shall include, without limitation, all machinery,
equipment, furnishings, vehicles and computers and other
                    electronic data-processing and any other office equipment
of any nature whatsoever, any and all additions,
                    substitutions and replacementsof any of the foregoing,
wherever located, together with all attachments, components,
                    parts, equipment and accessories installed thereon or
affixed thereto.





                    21410254
                    110597







                   DEBTOR:                              FusiON MEDICAL
TECHNOLOGIES, INC.
                   SECURED PARTY:                       ImmRiAL BANK
                   UCC-I Financing Statement
                   Item 4 (continued)
                   Page 3 of 4


                             'Fbdures' means 'fixtures,' as such term is
defined in Section 9313(t)(a) of the UCC, now or hereafter
                   owned or acquired by Debtor or in which Debtor now holds or
hereafter acquires any interest and, in any event,
                   shall include, without limitation, regardless of where
located, all of the fixtures, systems, machinery, apparatus,
                   equipment and fittings of every kind and nature whatsoever
and all appurtenances and additions thereto and
                   substitutions or replacements thereof, now or hereafter
attached or affixed to or constituting a part of, or located
                   in or upon, real property wherever located, including,
without limitation, all heating, electrical, mechanical,
                   lighting, lifting, plumbing, ventilating, air-conditioning
and air cooling, refrigerating, food preparation, incinerating
                   and power, loading and unloading, communication, sprinkler
and other fire prevention and extinguishing, fixtures,
                   systems, machinery, apparatus and equipment, any signs,
escalators, elevators, boilers or switchboards, and all
                   engines, motors, dynamos, machinery, pipes, pumps, tanks,
conduits and ducts constituting a part of any of the
                   foregoing, together with all right, title, and interest of
Debtor in and to all extensions, improvements, betterments,
                   renewals, substitutes, and replacements of, and all
additions and appurtenances to any of the foregoing property,
                   and all conversions of the security constituted thereby,
immediately upon any acquisition or release thereof or any
                   such conversion, as the case may be.

                             'General Intangibles" means any 'general
intangibles,' as such term is defined in Section 9106 of the
                   UCC, now owned or hereafter acquired by Debtor or in which
Debtor now holds or hereafter acquires an interest,
                   and, in any event, shall include, without limitation, all
right, title and interest which Debtor may now or hereafter
                   have in or under any Contract, interests in partnerships,
joint ventures and other business associations, Licenses,
                   permits, goodwill, claims in or under insurance policies,
including unearned premiums, uncertificated securities,
                   deposit accounts (including as defined in Section 9105(e) of
the UCC), rights to receive tax refunds and other
                   payments and rights of indemnification.

                             "Instruments" means any "instrument," as such term
is defined in Section 9105(l)(i) of the UCC now
                   owned or hereafter acquired by Debtor or in which Debtor now
holds or hereafter acquires any interest, including,
                   without limitation, all notes, certificated securities, and
other evidences of indebtedness, other than instruments that
                   constitute, or are a part of a group of writings that
constitute, Chattel Paper.

                             "Inventory" mean   .s any 'inventory," as such
term is defined in Section 9109(4) of the UCC, wherever
                   located, now or hereafter owned or acquired by Debtor or in
which Debtor now holds or hereafter acquires any,
                   interest and, in any event, shall include, without
limitation, all inventory, merchandise, goods and other personal
                   property which are held by or on behalf of Debtor for sale
or lease or are furnished or are to be furnished under
                   a contract of service or which constitute raw materials,
work in process or materials used or consumed or to be used
                   or consumed in Debtor's business, or the processing,
packaging, promotion, delivery or shipping of the same, and
                   all finished goods, whether or not such inventory is listed
on any schedules, assignments or reports furnished to
                   Secured Party from time to time and whether or not the same
is in transit or in the constructive, actual or exclusive
                   occupancy or possession of Debtor or is held by Debtor or by
others for Debtor's account, including, without
                   limitation, all goods covered by purchase orders and
contracts with suppliers and all goods billed and held by
                   suppliers and all inventory which may be located on premises
of Debtor or of any carriers, forwarding agents,
                   truckers, warehousemen, vendors, selling agents or other
Persons.

                             'Investment Property" means any "investment
property" as such term is defined in Section 9115(l)(f) of
                   the UCC, now owned or hereafter acquired by Debtor or in
which Debtor now holds or hereafter acquires an
                   interest, including, without limitation, a security, whether
certificated or uncertificated, a security entitlement, a
                   securities account, a commodity contract or a commodity
account.





                   21410254
                   110597








                   DEBTOR:                             FUSION MEDicAL
TECHNOLOGIES, INC.
                   SECURED PARTY:                      IMPERIAL BANK
                   UCC-1 Financing Statement
                   Item 4 (continued)
                   Page 4 of 4



                            'License" means any license of rights or interests
now held or hereafter acquired by Debtor or in which
                   Debtor now holds or hereafter acquires an interest, and any
renewals or extensions thereof.

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

                            'Proceeds' means 'proceeds,' as such term is
defined in Section 9306(l) of the UCC, and, in any event,
                   shall include, without limitation, (i) any and all Accounts,
Chattel Paper, Instruments, cash or other forms of money
                   or currency or other proceeds, payable to Debtor from time
to time in respect of the Collateral; (H) any and all
                   proceeds of any insurance, indemnity, warranty or guaranty
payable to Debtor from time to time with respect to
                   any of the Collateral; (iii) any and all payments (in any
form whatsoever) made or due and payable to Debtor from
                   time to time in connection with any requisition,
confiscation, condemnation, seizure or forfeiture of all or any part
                   of the Collateral by any governmental body, authority,
bureau or agency (or any person acting under color of
                   governmental authority); (iv) all certificates, dividends,
cash, Instruments and other property received or distributed
                   in respect of or in exchange for any Investment Property;
and (v) any and all other amounts from time to time paid
                   or payable under or in connection with any of the Collateral
or any Contract.

                            "UCC' means the Uniform Cominercial Code as the
same may, from time to time, be in effect in the State
                   of California; provided, however, in the event that, by
reason of mandatory provisions of law, any or all of the
                   attachment, perfection or priority of Secured Party's
security interest in any Collateral is governed by the Uniform
                   Commercial Code as in effect in a jurisdiction other than
the State of California, the term "UCC' shall mean the
                   Uniform Commercial Code as in effect in such other
jurisdiction for purposes of the provisions hereof relating to
                   such attachment, perfection or priority and for purposes of
definitions related to such provisions.































                   21410254
                   110597





                               First Amendment to Warrant to Purchase Stock

                     This First Amendment to Warrant is entered into as of
December           1997,
               between Imperial Bank ("Bank") and Fusion Medical Technologies,
Inc. ("Company").

                     A.     Company executed and issued that certain Warrant to
Purchase Stock
               dated September 15, 1994, to Bank (the "Warrant").

                     B.     Bank and Company desire to amend the terms
provisions of the Warrant.

                     In Consideration of extensions of credit by Bank to
Company and other good and
               valuable consideration, the parties agree as follows:

                     1 .    Class of Stock is hereby amended to read in its
entirety: "Common."

                     2.     Initial Exercise Price is hereby amended to read in
its entirety: `$4.00 per
               share".


                     3.     Expiration Date is hereby amended to read in its
entirety: "September 15,
               2000".


                     4.     Except as amended hereby, the Warrant remains in
full force and effect
               and is hereby ratified and confirmed.

               FUSION MEDICAL TECHNOLOGIES, INC. "Company"

               By
                 -------------------------
               Its:



               IMPERIAL BANK "Bank"



               By:
                   ------------------------

               Its: