Document:

<PAGE>   1
                                                                    EXHIBIT 10.7

[VNUS LETTERHEAD]

May 25, 2000

Roger A. Stern, Ph.D.
President
Stellartech Research Corporation
1346 Bordeux Dr.
Sunnyvale, CA 94089

        Re:  Agreement Between VNUS Medical Technologies, Inc. and Stellartech
             Research Corporation

Dear Roger:

        As you know, Stellartech Research Corporation ("Stellartech") and VNUS
Medical Technologies, Inc. ("VNUS") entered into a Letter of Understanding dated
June 18, 1996, a copy of which is attached to this letter as "Exhibit A" (the
"Letter of Understanding"). The Letter of Understanding outlines the terms and
conditions under which Stellartech has developed and manufactured the RF
Generator for VNUS. The Letter of Understanding contemplated that the terms and
conditions set forth therein would serve as the basis for a final written
contract between VNUS and Stellartech. Since the date of the Letter of
Understanding, VNUS and Stellartech have worked together with respect to the
design and development of the RF Generator and Stellartech has manufactured RF
Generators for delivery to VNUS.

        The purpose of this letter is to confirm our agreement that,
notwithstanding those provisions of the Letter of Understanding which
contemplate a further written contract, the Letter of Understanding is the
parties' binding agreement with respect to the rights and obligations of the
parties in connection with the manufacture and distribution of the RF Generator.
Such agreement constitutes the entire agreement between the parties with respect
to the matter thereof and superceedes all previous agreements, negotiations,
representations and communications between the parties. The Letter of
Understanding may not be modified except by a writing signed by a duly
authorized representative of each of the parties. Furthermore, the Letter of
Understanding will be binding upon and inure to the benefit of the parties and
their heirs, executors, administrators, successors, legal representatives and
assigns.

        If you are in agreement with the foregoing, please execute and return
one copy of this letter, which thereupon will constitute the Company's
agreement with respect to this subject matter.
<PAGE>   2
Roger A. Stern, Ph.D.
May 22, 2000
Page 2

                                           Sincerely,

                                           VNUS MEDICAL TECHNOLOGIES, INC.

                                           /s/ BRIAN E. FARLEY
                                           -------------------------------------
                                           Brian E. Farley
                                           President and Chief Executive Officer

Duly executed and agreed to on May 26, 2000.

STELLARTECH RESEARCH CORPORATION

/s/ ROGER A. STERN
-------------------------------------
Roger A. Stern, Ph.D.
President

Enclosure
<PAGE>   3
[VNUS CORPORATION LETTERHEAD]

                            C O N F I D E N T I A L

June 18, 1996

Roger A. Stern, Ph.D.
President
Stellartech Research Corporation
2665 Marine Way
Mountain View, CA 94043

Dear Roger:

Here is a letter of understanding that upon agreeing to we can use to begin the
work on the RF Generator for VNUS. This letter is intended to serve as the basis
for a written contract between the two companies and reflects the changes we
agreed to this morning.

                       RF GENERATOR DEVELOPMENT AGREEMENT
              LETTER OF UNDERSTANDING BETWEEN VNUS AND STELLARTECH

BACKGROUND

VNUS Medical Technologies, Inc. (VNUS or the Company) has intentions to enter
into a development contract with Stellartech Research Corporation (Stellartech
or the Contractor) for the development of a radio frequency generator for use
with VNUS proprietary vein treatment products.

Stellartech is in the final stages of completing the development of a "generic"
RF generator that will serve as a platform for the RF generator developed for
VNUS. It is the Company's understanding that the design of the generic RF
generator will be completed by early July and that approximately one month
later, the comprehensive testing of the hardware and software validation will be
completed and submitted to Stellartech RA/QA for later submission to FDA in a
510(k). Furthermore, it is the Company's understanding that the generic RF
generator will be designed and tested by a recognized testing agency at the
Contractor's expense and in accordance with TUV, LEC601-2-2 requirements.
Stellartech assumes all costs associated in assuring the platform generic RF
generator will pass this testing and achieve both USA and international
regulatory agency approvals. It is the Company's understanding that the 510(k)
submission for the generic RF generator will be filed after the VNUS IDE filing
due to the higher priority of the VNUS IDE filing milestone. VNUS' choice of
working with Stellartech is based highly upon Stellartech's ability to deliver
both a functional prototype and IDE ready product with test data in a timely
manner.

TERMS TO BE INCLUDED INTO A WRITTEN CONTRACT

Stellartech will modify the Stellartech generic RF generator in order to meet
the needs of VNUS. These needs will be initially spelled out in a requirements
specification and written contract to be supplied by VNUS.

<PAGE>   4
In the event that the Stellartech work on the generic RF generator is either not
completed in the time frame described above, Stellartech will promptly take
action at its sole cost, to complete the design and development.

VNUS agrees to pay Stellartech for the modification of the generic RF generator
and completion of an IDE-ready documentation package as per the estimate
provided in the June 14, 1996 letter from Roger Stern. The total cost of this
project is expected to be $144,300 for completion of milestones 1, 2, and 3 as
described below.

The key milestones are as follows:

     1. Delivery of prototype 1 (without temperature measurement) and any
        available documentation to VNUS by 8/8/96

     2. Completion of prototype 2 (with temperature measurement and control
        capability) by 9/1/96. Unit stays at Stellartech but is accessible to
        VNUS for testing.

     3. Delivery to VNUS of an IDE-ready package containing all safety testing,
        and as much design verification and qualification information as
        possible by 9/30/96.

     4. Delivery of one clinical-ready and fully tested unit and documentation
        package to VNUS by 10/21/96.

     5. In the event of a deficiency letter from FDA on the IDE filing: Delivery
        to VNUS, information and data necessary to successfully address any RF
        generator-related deficiencies -- within 30 days of receipt of
        deficiency information.

     6. Delivery of up to nine additional clinical-ready, tested units by
        12/2/96.

Costs for milestones 4, 5, and 6 are not included in the $144,300 estimate. The
cost of completing milestone 6, (delivery of up to nine additional clinical
units) will be at a rate of $_____ for each unit purchased.

VNUS will have a royalty-free world-wide license to the design of the RF
generator developed per this agreement. In exchange for this license,
Stellartech will be the sole manufacturer of the RF generator for a period of
three years after regulatory approval to sell the device commercially in the
United States. VNUS may acquire the rights to manufacture the VNUS RF generator
for $_______ or by purchasing from Stellartech a cumulative total of ___ units.
Furthermore, Stellartech agrees to provide these units at a transfer price of no
more than $_____ ea. for purchases of 15 per month. The $_____ transfer price
can be adjusted in the future to reflect specific changes to costs of components
and direct labor. Furthermore, if VNUS orders more or less than approximately 15
units per month, there will be a materials and direct labor adjustment to the
transfer price to reflect the change in volume. Once sales begin, VNUS agrees to
provide Stellartech a production forecast, and a fixed order on a quarterly
basis. Stellartech agrees to complete delivery of the fixed order of units
within 90 days of order receipt. If delivery times for certain components make
it difficult to meet a 90 day delivery schedule, Stellartech will provide to
VNUS an advance notification of this issue so these long lead-time components
can be stocked in inventory.

Stellartech agrees to provide a twelve month warranty on units it manufactures
and will service these units at no cost to VNUS for repairs due to normal use or
storage.
<PAGE>   5

VNUS will provide to Stellartech an option to purchase 5,000 shares of VNUS
Common stock at the next VNUS Board meeting following the completion of a
written contract. This option will be exercisable at the fair market value of
the stock as determined by the VNUS Board of Directors at the date of the grant.

Additional stock options will be granted for the successful completion of the
milestones by the dates specified above.

    Milestone 1 - 1,000 shares, or 500 shares if late by no more than one week
    Milestone 2 - 2,000 shares, or 1,000 shares if late by no more than one week
    Milestone 3 - 5,000 shares, No bonus for late delivery
    Milestone 4 - 2,000 shares, or 1,000 shares if late by no more than one week
    Milestone 5 - 3,000 shares for beating milestone 5 by 10 days; 2,000 shares
                               for meeting milestone 5 on time. Bonus applies
                               only in the event there are no deficiencies from
                               RF generator-related matters in the second IDE
                               submission
    Milestone 6 - 1,000 shares, or 750 if no more than one week late;
                               500 shares if no more than two weeks late;
                               250 shares if no more than three weeks late

Early delivery of Milestone 3 will result in an additional 2,000 shares for each
week of early delivery.

Stellartech intends to produce an RF Generator with temperature measurement and
control but since it does not currently own an RF generator design with
temperature monitoring and control and VNUS is funding this development.
Stellartech may not sell a VNUS RF generator that contains the same temperature
measurement/control board, or front panel board, or software, or documentation
set without prior VNUS written consent. Furthermore, Stellartech agrees not to
make minor changes to the VNUS RF generator strictly for the purpose of
avoiding conflict with this provision.

For the period of time during which VNUS and Stellartech have a business
relationship, Stellartech agrees not to work with companies competitive to VNUS.
Companies competitive to VNUS are defined as those companies working in the
field: "treatment of venous disease."

Stellartech will deliver to VNUS a full set of documentation including, but not
limited to product engineering specifications, design history files, schematics,
bill of materials, material specifications and certifications, a vendor list,
assembly instructions if any, design verification test plan with complementary
data and report, safety and EMI/RFI test protocol with data and report, and
appropriate sections of an instruction manual. Furthermore, VNUS will receive
from Stellartech a documentation package that is suitable for submitting to FDA
for an IDE filing. It is understood that the full set of documentation may not
be delivered to VNUS until after the IDE is filed.

Stellartech and VNUS agree to conduct design reviews on the VNUS RF generator.
In addition, Stellartech agrees to submit to VNUS prior to testing, protocols
used to define the
<PAGE>   6
testing procedures done in conjunction with data intended to be submitted to a
regulatory agency.

Stellartech will assist VNUS in obtaining an IDE approval for the VNUS vein
treatment system by providing to VNUS a full set of appropriate documentation
and test data on the VNUS RF generator.

Stellartech agrees to assist VNUS in obtaining a CE mark for the VNUS vein
treatment system by supplying the appropriate information on the VNUS RF
generator developed by Stellartech.

Stellartech will not subcontract out any design-related work without VNUS' prior
written consent. Stellartech agrees to allow VNUS the opportunity to meet and
approve the primary senior engineer and technician assigned by Stellartech to
this project. Stellartech agrees that it will not change the primary project
engineer or technician on the VNUS project without prior written VNUS consent.

Stellartech agrees to notify VNUS in writing of proposed changes to the RF
generator, thereby allowing an assessment of the impact of the proposed changes
on the system.

Stellartech warrants that it is registered with and in good standing with the
Federal Government to manufacture medical devices. Furthermore, it is on track
to obtaining a license from the state of California to manufacture medical
devices. Stellartech furthermore agrees to conduct its business in a manner
that maintains its good standing with regulatory agencies.

If Stellartech loses its ability to manufacture the VNUS RF generator, (to be
defined in written contract) VNUS will acquire, at no cost, the rights to have
the RF generator manufactured elsewhere and Stellartech will assist in providing
any documentation or consulting (at standard Stellartech rates) required to
support this activity.

Roger A. Stern, Ph.D., will provide consulting services to VNUS in the areas
of  RF generators, temperature-based measurements of RF in medical devices,
thermal effects in biological tissue, regulatory considerations with the use of
RF and thermal technologies, plus general insights relative to the VNUS methods
of treating venous disease.

Roger, I look forward to working with you and Stellartech on this project.

Sincerely,

/s/ BRIAN E. FARLEY                  6-18-96
-----------------------
Brian E. Farley
President

These terms are agreed to for the purposes of providing a basis for a written
contract.

/s/ ROGER A. STERN                   6/19/96
-----------------------           ------------
Roger A. Stern, Ph.D.             Date<PAGE>   1
                                                                    EXHIBIT 10.8

                          LOAN AND SECURITY AGREEMENT

Agreement No. 20001                                    Dated as of June 25, 1998
                                 by and between

                      LIGHTHOUSE CAPITAL PARTNERS II, L.P.,
                                    as lender

                                       and

                         VNUS MEDICAL TECHNOLOGIES, INC.
                             a Delaware corporation
                            238 East Caribbean Drive
                              Sunnyvale, CA 94089,
                                   as borrower

                             COMMITMENT: $2,000,000

<TABLE>
<S>                                                       <C>
Repayment Period:                                         36 months
Final Payment Percentage:                                 12%
Loan Factor:                                              3.109%
</TABLE>

<TABLE>
<S>                           <C>                       <C>
Warrant:                      Class of stock:           Series C Preferred Stock
                              Number of shares:         44,118
                              Price per share:          $1.70
</TABLE>

      The terms and information set forth on this cover page are a part of the
attached Loan and Security Agreement, dated as of the date first written above
(this "Agreement"), entered into by and between Lighthouse Capital Partners II,
L.P. ("Lender") and the borrower ("Borrower") set forth above. The terms and
conditions of the Loan Agreement agreed to between Lender and Borrower are as
follows:

<PAGE>   2

      THIS LOAN AND SECURITY AGREEMENT ("Agreement") is entered into as of June
25, 1998, by and between LIGHTHOUSE CAPITAL PARTNERS II, L.P. ("Lender"), as
lender and VNUS MEDICAL TECHNOLOGIES, INC., a Delaware corporation ("Borrower").

                                    RECITALS

      Borrower wishes to borrow money from time to time from Lender and Lender
desires to lend money to Borrower. This Agreement sets forth the terms on which
Lender will lend to Borrower and Borrower will repay the loan to Lender.

                                    AGREEMENT

      The parties agree as follows:

      1.    DEFINITIONS AND CONSTRUCTION

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

                "Advance" means each extension of credit by Lender to Borrower
under this Agreement.

                "Advance Period" means each of the following periods: (i) June
3, 1998 through and including June 30, 1998, (ii) July 1, 1998 through and
including December 31, 1998, and (iii) January 1, 1999 through and including
April 30,1999.

                "Affiliate" means any Person that owns or controls directly or
indirectly five percent or more of the stock of another entity, any Person that
controls or is controlled by or is under common control with such Persons or any
Affiliate of such Persons or each of such Person's officers, directors, joint
venturers or partners.

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

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

                "Code" means the Uniform Commercial Code as adopted and in
effect in the State of California, as amended from time to time.

                "Collateral" means the Property described on EXHIBIT A attached
hereto.

                "Commitment" means $2,000,000.

                "Commitment Termination Date" means April 30, 1999.

                "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 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.
The amount of any Contingent Obligation shall be equal to the amount of the
obligation so guaranteed or otherwise supported.

                "Default" means any event which with the passing of time or the
giving of notice or both would become an Event of Default hereunder.

                "Default Rate" means the per annum rate of interest equal to
eighteen percent (18%) per annum, but such rate shall in no event be more than
the highest rate permitted by applicable law to be charged on commercial loans.

<PAGE>   3

                "Event of Default" has the meaning given to such term in SECTION
8.

                "Final Payment" means, with respect to each Loan, a payment (in
addition to and not in substitution for the regular monthly payments of
principal and accrued interest) due on the Maturity Date, equal to the Loan
Amount for such Loan at such time multiplied by the Final Payment Percentage.

                "Final Payment Percentage" means the percentage set forth
following such term on the cover page of this Agreement.

                "Funding Date" means any date on which an Advance is made to or
on account of Borrower under this Agreement.

                "Governmental Authority" means (a) any federal, state, county,
municipal or foreign government, or political subdivision thereof, (b) any
governmental or quasi-governmental agency, authority, board, bureau, commission,
department, instrumentality or public body, (c) any court or administrative
tribunal or (d) with respect to any Person, any arbitration tribunal or other
non-governmental authority to whose jurisdiction that Person has consented.

                "Indebtedness" means (a) all indebtedness for borrowed money or
the deferred purchase price of Property or services, including reimbursement and
other obligations with respect to surety bonds, and letters of credit, (b) all
obligations evidenced by notes, bonds, debentures or similar instruments, (c)
all capital lease obligations, and (d) all Contingent Obligations.

                "Landlord Consent" means a consent in the form of EXHIBIT C or
such other form as Lender may agree to accept.

                "Lender's Expenses" means all reasonable costs or expenses
(including reasonable attorneys' fees and expenses) incurred in connection with
the preparation, negotiation, administration, and enforcement of the Loan
Documents; and Lender's reasonable attorneys' fees and expenses incurred in
amending, modifying, enforcing or defending the Loan Documents, including in the
exercise of any rights or remedies afforded hereunder or under applicable law,
whether or not suit is brought.

                "Lien" means any pledge, bailment, lease, mortgage,
hypothecation, conditional sales and title retention agreement, charge, claim,
encumbrance or other lien in favor of any Person.

                "Loan" means the aggregate amount of all Advances of credit by
Lender to Borrower under this Agreement during an Advance Period.

                "Loan Amount" means, with respect to each Loan, as of the Loan
Commencement Date, the original principal amount of such Loan.

                "Loan Commencement Date" means each of July 1, 1998, January 1,
1999 and July 1, 1999.

                "Loan Documents" means, collectively, this Agreement, the
Warrant, the Landlord Consent(s) and all other documents, instruments and
agreements entered into between Borrower and Lender in connection with this
Agreement, all as amended or extended from time to time.

                "Loan Factor" means the percentage set forth following such term
on the cover page of this Agreement.

                "Loan Fee" means the non-refundable fee equal to $15,000,
previously paid by Borrower to Lender in consideration of Lender's written
proposal to Borrower dated March 26, 1998, which fee is to be applied as set
forth in SECTION 2.4(d).

                "Loan Terms Schedule" means, with respect to each Loan, the
"Loan Terms Schedule" prepared by Lender on or about the Loan Commencement Date
in connection with such Loan substantially in the form of EXHIBIT E.

                                        2
<PAGE>   4

                "Maturity Date" means, with respect to each Loan, the last day
of the Repayment Period for such Loan, or if earlier, the date of acceleration
of such Loan by Lender following an Event of Default.

                "Minimum Funding Amount" means $50,000.

                "Obligations" means all debt, principal, interest, fees,
charges, expenses and attorneys' fees and costs and other amounts, obligations,
covenants, and duties owing by Borrower to Lender of any kind and description
(whether pursuant to or evidenced by the Loan Documents, or by any other
agreement between Lender and Borrower, and whether or not for the payment of
money), whether direct or indirect, absolute or contingent, due or to become
due, now existing or hereafter arising, including the principal and interest and
Final Payment due with respect to the Loans, and including any debt, liability,
or obligation owing from Borrower to others that Lender may have obtained by
assignment or otherwise, and further including all interest not paid when due
and all Lender's Expenses that Borrower is required to pay or reimburse by the
Loan Documents, by law, or otherwise.

                "Payment Date" has the meaning given to that term in SECTION
2.4(a).

                "Permitted Investments" means the following:

                    (a) (i) marketable direct obligations issued or
unconditionally guaranteed by the United States or its agency or any State
maturing within one (1) year from its acquisition, (ii) commercial paper
maturing no more than one (1) year after its creation and having the highest
rating from either Standard & Poor's Corporation or Moody's Investor Service,
Inc., (iii) bank certificates of deposit issued maturing no more than one (1)
year after issue, and (iv) any investments permitted by Borrower's investment
policy, as amended from time to time;

                    (b) investments consisting of the endorsement of negotiable
instruments for deposit or collection or similar transaction in the ordinary
course of business;

                    (c) investments accepted in connection with transfers
permitted by SECTION 7.2;

                    (d) investments consisting of (i) travel advances and
employee relocation loans and other employee loans and advances in the ordinary
course of business, and (ii) loans to employees, officers or directors relating
to the purchase of equity securities of Borrower or its Subsidiaries pursuant to
employee stock purchase plans or agreements approved by Borrower's Board of
Directors;

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

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

                    (g) investment in joint ventures consisting of the licensing
of technology or the providing of technical support; and

                    (h) other Investments not otherwise permitted by SECTION 7.2
not exceeding One Hundred Thousand Dollars ($ 1 00,000) in the aggregate at any
time.

                "Permitted Liens" means the following:

                    (a) The Lien created by this Agreement;

                    (b) Any Liens existing as of the date hereof and disclosed
in SCHEDULE 1;

                                       3
<PAGE>   5

                    (c) Liens for taxes, fees, assessments or other governmental
charges or levies, either not delinquent or being contested in good faith by
appropriate proceedings, provided the same have no superior priority over
Lender's Lien in the Collateral;

                    (d) Liens to secure payment of worker's compensation,
employment insurance, old age pensions or other social security obligations of
Borrower in the ordinary course of business of Borrower; and

                    (e) Liens (i) 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, or (ii)
existing on such equipment at the time of its acquisition, provided that the
Lien is confined solely to the property so acquired and improvements thereon,
and the proceeds of such equipment;

                    (f) Liens on equipment leased by Borrower pursuant to an
operating lease in the ordinary course of business (including proceeds thereof
and accessions thereto) incurred solely for the purpose of financing the lease
of such equipment;

                    (g) Leases or subleases and licenses or sublicenses granted
in the ordinary course of Borrower's business and any interest or title of
lessor, licensor under any lease or license;

                    (h) Liens arising from judgments, decrees or attachments for
up to fifteen (15) days;

                    (i) Easements, reservations, rights-of-way, restrictions,
minor defects or irregularities in title and other similar charges or
encumbrances affecting real property that could not reasonably be expected to
have a material adverse effect;

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

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

                    (l) Liens of materialmen, mechanics, warehousemen, carriers,
or other similar Liens arising in the ordinary course of business or by
operation of law or regulation and securing obligations not yet due; and

                    (m) Liens incurred in connection with the extension, renewal
or refinancing of the indebtedness secured by Liens of the type described in
clause (b) above, provided that any extension, renewal or replacement Lien shall
be limited to the Property encumbered by the existing Lien and the principal
amount of the indebtedness being extended, renewed or refinanced does not
increase.

                "Person" means and includes any individual, any partnership, any
corporation, any business trust, any joint stock company, any limited liability
company, any unincorporated association or any other entity and any domestic or
foreign national, state or local government, any political subdivision thereof,
and any department, agency, authority or bureau of any of the foregoing.

                "Property" means any interest in any kind of property or asset,
whether real, personal or mixed, whether tangible or intangible.

                "Repayment Period" means the period beginning on the first
Payment Date and continuing for the number of calendar months set forth
following such term on the cover page of this Agreement.

                "Responsible Officer" means each of the President and the Chief
Financial Officer of Borrower.

                "Scheduled Payments" has the meaning given to such term in
SECTION 2.4(a).

                                       4
<PAGE>   6

                "Subsidiary" means any corporation of which a majority of the
outstanding capital stock entitled to vote for the election of directors
(otherwise than as the result of a default) is owned by Borrower directly or
indirectly through Subsidiaries.

                "Term" means the period from and after the date hereof until the
payment in full of all amounts and liabilities payable under this Agreement and
the other Loan Documents, including principal and interest on the Loans.

                "Warrant" means the warrant in favor of Lender to purchase
securities of Borrower substantially in the form of EXHIBIT B.

            1.2 OTHER INTERPRETIVE PROVISIONS. References in this Agreement to
"Articles," "Sections," "Exhibits," "Schedules" and "Annexes" are to recitals,
articles, sections, exhibits, schedules and annexes herein and hereto unless
otherwise indicated. References in this Agreement and each of the other Loan
Documents to any document, instrument or agreement shall include (a) all
exhibits, schedules, annexes and other attachments thereto, (b) all documents,
instruments or agreements issued or executed in replacement thereof, and (c)
such document, instrument or agreement, or replacement or predecessor thereto,
as amended, modified and supplemented from time to time and in effect at any
given time. The words "hereof," "herein" and "hereunder" and words of similar
import when used in this Agreement or any other Loan Document shall refer to
this Agreement or such other Loan Document, as the case may be, as a whole and
not to any particular provision of this Agreement or such other Loan Document,
as the case may be. The words "include" and "including" and words or similar
import when used in this Agreement or any other Loan Document shall not be
construed to be limiting or exclusive. Unless otherwise indicated in this
Agreement or any other Loan Document, all accounting terms used in this
Agreement or any other Loan Document shall be construed, and all accounting and
financial computations hereunder or thereunder shall be computed, in accordance
with generally accepted accounting principles as in effect in the United States
of America from time to time.

      2.    LOAN AND TERMS OF PAYMENT

            2.1 COMMITMENT. Subject to the terms and conditions of this
Agreement and relying upon the representations and warranties herein set forth
as and when made or deemed to be made, Lender agrees to lend to Borrower, from
time to time prior to the Commitment Termination Date, the Loans; provided that
the aggregate principal amount of the Loans shall not exceed the Commitment at
such time. If prepaid, the principal of the Loans may not be re-borrowed.

            2.2 USE OF PROCEEDS; THE LOAN.

                USE OF PROCEEDS. The proceeds of the Loan shall be used solely
for working capital purposes.

                THE LOANS. The Loans shall be repayable in consecutive monthly
installments in accordance with the terms of SECTION 2.4. Lender may, and is
hereby authorized by Borrower to, endorse in its books and records appropriate
notations regarding Lender's interest in the Loans; provided, however, that the
failure to make, or an error in making, any such notation shall not limit or
otherwise affect the Obligations of Borrower hereunder.

            2.3 PROCEDURE FOR MAKING AN ADVANCE.

                (a) NOTICE. Whenever Borrower desires that Lender make an
Advance, Borrower shall so notify Lender by telephone at least seven Business
Days in advance of the desired Funding Date, which notice shall be irrevocable.
Each such telephone notification shall be promptly confirmed by a Notice of
Borrowing in substantially the form of EXHIBIT D hereto. Lender's obligation to
make Advances shall be expressly subject to the satisfaction of the conditions
set forth in SECTIONS 3.1 and 3.2. Lender shall have the right, exercisable at
any time, to request that Borrower furnish Lender with such additional
information with respect to the Advances as Lender shall reasonably request.

                                       5
<PAGE>   7

                (b) LOAN INTEREST RATE. Borrower shall pay interest on the
unpaid principal amount of each Loan from the Loan Commencement Date until such
Loan has been paid in full, at a per annum rate of interest implicit in the Loan
Factor. All computations of interest on each Loan shall be based on a year of
360 days for actual days elapsed. Notwithstanding any other provision hereof,
the amount of interest payable hereunder shall not in any event exceed the
maximum amount permitted by the law applicable to interest charged on commercial
loans.

                (c) DISBURSEMENT. Subject to the satisfaction of the conditions
set forth in SECTIONS 3.1 and 3.2 with respect to the initial Advance and the
satisfaction of the conditions set forth in SECTION 3.2 with respect to each
subsequent Advance, Lender shall disburse the Advances.

                (d) TERMINATION OF COMMITMENT TO LEND. Notwithstanding anything
in the Loan Documents, Lender's obligation to lend the undisbursed portion of
the Commitment to Borrower hereunder shall terminate on the earlier of (i) at
the Lender's sole election, the occurrence and continuance of any Default or
Event of Default hereunder, and (ii) the Commitment Termination Date.
Notwithstanding the foregoing, Lender's obligation to lend the undisbursed
portion of the Commitment to Borrower shall terminate if, in Lender's sole
judgment, there has been a material adverse change in the general affairs,
management, results of operations, condition (financial or otherwise) or
prospects of Borrower, whether or not arising from transactions in the ordinary
course of business, or there has been any material adverse deviation by Borrower
from the business plan of Borrower presented to and not disapproved by Lender,
since the date of this Agreement.

            2.4 AMORTIZATION OF PRINCIPAL AND INTEREST; INTERIM PAYMENT.

                (a) PRINCIPAL AND INTEREST PAYMENTS ON PAYMENT DATES. Borrower
shall make payments of principal and accrued interest monthly in advance for
each Loan (collectively, "Scheduled Payments"), commencing on the Loan
Commencement Date (or commencing on the Funding Date if the Funding Date is the
Loan Commencement Date) with respect to such Loan and continuing thereafter
during the Repayment Period on the first Business Day of each month (each a
"Payment Date"), in an amount equal to the Loan Factor multiplied by the Loan
Amount for such Loan as of such Payment Date. In any event, all unpaid principal
and accrued interest shall be due and payable in full on the last Payment Date
with respect to such Loan. In addition to the foregoing, Borrower shall pay to
Lender as of the date hereof, an amount equal to the Commitment multiplied by
the Loan Factor to be applied to the last Payment Date.

                (b) INTERIM PAYMENT. In addition to the Scheduled Payments, on
the Loan Commencement Date for each Loan (unless the Funding Date is the Loan
Commencement Date) Borrower shall pay to Lender an amount (the "Interim
Payment") equal to the amount of each Advance under such Loan multiplied by the
product of (i) the quotient derived by dividing the per annum rate of interest
implicit in the Loan Factor with respect to each Loan by three hundred-sixty
(360), and (ii) the number of days from the Funding Date of each Advance until
the Loan Commencement Date with respect to the Loan.

                (c) FINAL PAYMENT. On the Maturity Date with respect to such
Loan, Borrower shall pay, in addition to the unpaid principal and accrued
interest and all other amounts due on such date with respect to such Loan, an
amount equal to the Final Payment with respect to such Loan.

                (d) LOAN FEE. The Loan Fee is non-refundable, but shall be
applied first, to the fees and expenses of Lender's counsel in connection with
the preparation and negotiation of this Agreement and the other Loan Documents,
second, to the payment of the Scheduled Payment otherwise due on the last
Payment Date, third, to the Interim Payment, and the balance, if any, shall be
applied toward the payments due from Borrower to Lender hereunder on each
Payment Date. If Borrower shall not have borrowed under this Agreement, on or
prior to the Commitment Termination Date or the earlier termination of this
Agreement, then Lender shall retain any portion of the Loan Fee not applied as
set forth in this SECTION 2.4(d).

            2.5 PREPAYMENTS.

                (a) MANDATORY PREPAYMENT UPON AN ACCELERATION. If the Advances
and/or Loans are accelerated following the occurrence of an Event of Default or
otherwise, then Borrower shall

                                       6
<PAGE>   8

immediately pay to Lender (i) all unpaid Interim Payments and/or Scheduled
Payments with respect to the Advances or Loans due prior to the date of
prepayment, (ii) the outstanding principal amount of each Advance and/or Loan,
and (iii) all other sums, if any, that shall have become due and payable
hereunder with respect to the Advances or Loans.

                (b) NO PREPAYMENT PENALTY. In addition to the provisions of
SECTION 2.5(a), Borrower may prepay without penalty or other charge; provided,
however, the prepayment amount shall be-in accordance with the schedule set
forth in EXHIBIT F to this Agreement.

            2.6 OTHER PAYMENT TERMS.

                (a) PLACE AND MANNER. Borrower shall make all payments due to
Lender by payments to Lender at the address specified in SECTION 11, in lawful
money of the United States and in same day or immediately available funds.

                (b) DATE. Whenever any payment due hereunder shall fall due on a
day other than a Business Day, such payment shall be made on the next succeeding
Business Day, and such extension of time shall be included in the computation of
interest or fees, as the case may be.

                (c) DEFAULT RATE. If either (i) any amounts required to be paid
by Borrower under this Agreement or the other Loan Documents (including
principal, interest, the Final Payment payable with respect to any Loan, and any
fees or other amounts) remain unpaid after such amounts, are due, or (ii) an
Event of Default has occurred and is continuing, Borrower shall pay interest on
the aggregate, outstanding balance hereunder from the date due or from the date
of the Event of Default, as applicable, until such past due amounts are paid in
full or until all Events of Defaults are cured, as applicable, at a per annum
rate equal to the Default Rate. All computations of such interest shall be based
on a year of 360 days for actual days elapsed.

            2.7 MINIMUM FUNDING AMOUNT. Except with the prior consent of Lender,
in Lender's sole discretion, the amount of the requested Advance shall not be
less than the Minimum Funding Amount.

            2.8 CREDITING PAYMENTS. The receipt by Lender of any wire transfer
of funds, check, or other item of payment shall be immediately applied
conditionally to reduce Obligations, but shall not be considered a payment on
account unless such wire transfer is of immediately available federal funds and
is made to the appropriate deposit account of Lender or unless and until such
check or other item of payment is honored when presented for payment.
Notwithstanding anything to the contrary contained herein, any wire transfer or
payment received by Lender after 1:00 p.m. California time shall be deemed to
have been received by Lender as of the opening of business on the immediately
following Business Day.

            2.9 TERM. This Agreement shall become effective upon acceptance by
Lender and shall continue in full force and effect for a term ending on the
Maturity Date for the last Loan made hereunder. Notwithstanding the foregoing,
Lender shall have the right to terminate this Agreement immediately and without
notice upon the occurrence of an Event of Default.

      3. CONDITIONS OF ADVANCES

            3.1 CONDITIONS PRECEDENT TO INITIAL ADVANCE. The obligation of
Lender to make the initial Advance is subject to the condition precedent that
Lender shall have received, in form and substance satisfactory to Lender, all of
the following:

                (a) This Agreement duly executed by Borrower.

                (b) The Warrant to be issued to Lender duly executed by
Borrower.

                (c) Use its best efforts to obtain a Landlord Consent from the
owner of the building in which Collateral is to be located.

                                       7
<PAGE>   9

                (d) A certificate of the secretary or assistant secretary of
Borrower with copies of the following documents attached: (i) the articles of
incorporation and bylaws of Borrower certified by Borrower as being in full
force and effect on the Funding Date, (ii) incumbency and representative
signatures, and (iii) resolutions authorizing the execution and delivery of this
Agreement and each of the other Loan Documents.

                (e) A good standing certificate from Borrower's state of
incorporation and the state in which Borrower's principal place of business is
located, together with certificates of the applicable governmental authorities
stating that Borrower is in compliance with the franchise tax laws of each such
state, each dated as of a recent date.

                (f) Evidence of the insurance coverage required by SECTION 6.8
of this Agreement.

                (g) Payment of the last Scheduled Payment an amount equal to the
Commitment multiplied by the Loan Factor.

                (h) Payment of any Lender's Expenses, in an amount not to exceed
$1,500.00.

                (i) All necessary consents of shareholders and other third
parties with respect to the execution, delivery and performance of this
Agreement, the Warrant and the other Loan Documents.

                (j) Such other documents, and completion of such other matters,
as Lender may deem necessary or appropriate.

            3.2 CONDITIONS PRECEDENT TO ALL ADVANCES. The obligation of Lender
to make each Advance, including the initial Advance, is further subject to the
following conditions:

                (a) Evidence that no Default or Event of Default shall have
occurred and be continuing.

                (b) Borrower and Lender shall have executed a Notice of
Borrowing with respect to the proposed Advance.

                (c) Lender shall have received such documents, instruments and
agreements, including UCC financing statements or amendments to UCC financing
statements, as Lender shall reasonably request to evidence the perfection and
priority of the security interests granted to Lender pursuant to SECTION 4.

                (d) Borrower shall have delivered to Lender a subordination
agreement, release, or estoppel letter, as appropriate, from any Person having
an existing Lien superior to the Lien of Lender on any item of Collateral.

                (e) Such other documents, and completion of such other matters,
as Lender may deem necessary or appropriate.

            3.3 COVENANT TO DELIVER. Borrower agrees (not as a condition but as
a covenant) to deliver to Lender each item required to be delivered to Lender as
a condition to the Advance, if such Advance is made. Borrower expressly agrees
that the extension of such Advance prior to the receipt by Lender of any such
item shall not constitute a waiver by Lender of Borrower's obligation to deliver
such item.

      4. CREATION OF SECURITY INTEREST

            4.1 GRANT OF SECURITY INTEREST. Borrower grants to Lender a valid,
first priority, continuing security interest in all presently existing and
hereafter acquired or arising Collateral in order to secure prompt, full and
complete payment of any and all Obligations and in order to secure prompt, full
and complete performance by Borrower of each of its covenants and duties under
each of the Loan Documents. Notwithstanding the foregoing, the security interest
granted herein shall not extend to and the term Collateral shall not include any
property, rights

                                       8
<PAGE>   10

or licenses to the extent that the granting of a security interest therein (i)
would be contrary to applicable law or (ii) is prohibited by or would constitute
a default under any agreement or document governing such property, rights or
licenses (but only to the extent that such prohibition is enforceable under
applicable law).

            4.2 DURATION OF SECURITY INTEREST. Lender's security interest in the
Collateral shall continue until the payment in full and the satisfaction of all
Obligations, whereupon such security interest shall terminate. Lender shall, at
Borrower's sole cost and expense, execute such further documents and take such
further actions as may be necessary to effect the release contemplated by this
SECTION 4.2, including duly executing and delivering termination statements for
filing in all relevant jurisdictions under the Code.

            4.3 POSSESSION OF COLLATERAL. So long as no Event of Default has
occurred and is continuing, Borrower shall remain in full possession, enjoyment
and control of the Collateral (except only as may be otherwise required by
Lender for perfection of its security interest therein) and shall be entitled to
manage, operate and use the same and each part thereof with the rights and
franchises appertaining thereto; provided, however, that the possession,
enjoyment, control and use of the Collateral shall at all times be subject to
the observance and performance of the terms of this Agreement.

            4.4 MARKINGS ON THE COLLATERAL. At Lender's request at any time
during the Term of the Loan (including any extension thereof), Borrower shall
place in a conspicuous location on each item of Collateral a plaque or other
marking to be supplied by Lender which reads substantially as follows:

            Lighthouse Capital Partners II, L.P. has a first priority security
interest in this item of equipment.

Such plaque or other marking shall not be removed (or if removed or damaged such
plaque or other marking shall be replaced) until the security interest in favor
of Lender in such item of Collateral is terminated pursuant to this Agreement.

            4.5 DELIVERY OF ADDITIONAL DOCUMENTATION REQUIRED. Borrower shall
from time to time execute and deliver to Lender, all financing statements and
other documents such Lender may reasonably request, in form satisfactory to
Lender, to perfect and continue Lender's first priority, perfected security
interests in the Collateral and in order to consummate fully all of the
transactions contemplated under the Loan Documents.

            4.6 RIGHT TO INSPECT. Lender (through any of its officers,
employees, or agents) shall have the right, upon reasonable prior notice, from
time to time during Borrower's usual business hours, to inspect Borrower's Books
and to make copies thereof and to check, test, and appraise the Collateral in
order to verify Borrower's financial condition or the amount, condition of, or
any other matter relating to, the Collateral.

      5. REPRESENTATIONS AND WARRANTIES

            Borrower represents, warrants and covenants as follows:

            5.1 DUE ORGANIZATION AND QUALIFICATION. Borrower is a corporation
duly existing and in good standing under the laws of its state of incorporation
and qualified and licensed to do business in, and is in good standing in, any
state in which the conduct of its business or its ownership of Property requires
that it be so qualified or in which the Collateral is located, except for such
states as to which any failure so to qualify would not reasonably be expected to
have a material adverse effect on Borrower's ability to perform its obligations
under this Agreement.

            5.2 AUTHORITY. Borrower has all necessary power and authority to
execute, deliver, and perform in accordance with the terms thereof, the Loan
Documents to which it is a party. Borrower has all requisite power and authority
to own and operate its properties and to carry on its businesses as now
conducted.

            5.3 SUBSIDIARIES. Borrower has no Subsidiaries, except those listed
in SCHEDULE 2 hereto.

            5.4 CONFLICT WITH OTHER INSTRUMENTS, ETC. Neither the execution and
delivery of any Loan Document to which Borrower is a party nor the consummation
of the transactions therein contemplated nor

                                       9
<PAGE>   11

compliance with the terms, conditions and provisions thereof will conflict with
or result in a breach of (i) any of the terms, conditions or provisions of the
articles of incorporation and the by-laws, or other organizational documents of
Borrower or (ii) any law or any regulation, order, writ, injunction or decree of
any court or governmental instrumentality or any (iii) material agreement or
instrument to which Borrower is a party or by which it or any of its properties
is bound or to which it or any of its properties is subject, or constitute a
default thereunder, except to the extent that such conflict, breach or default
could not reasonably be expected to have a material adverse effect on the
ability of Borrower to perform its obligations under this Agreement, or result
in the creation or imposition of any Lien, other than Permitted Liens.

            5.5 AUTHORIZATION; ENFORCEABILITY. The execution and delivery of
this Agreement, the granting of the security interest in the Collateral, the
incurring of the Loans, the execution and delivery of the other Loan Documents
to which Borrower is a party and the consummation of the transactions herein and
therein contemplated have each been duly authorized by all necessary action on
the part of Borrower. The Loan Documents have been duly executed and delivered
and constitute legal, valid and binding obligations of Borrower, enforceable in
accordance with their respective terms, except as the enforceability thereof may
be limited by bankruptcy, insolvency or other similar laws of general
application relating to or affecting the enforcement of creditors' rights or by
general principles of equity.

            5.6 NO PRIOR ENCUMBRANCES. Borrower has good and indefeasible title
to the Collateral, free and clear of liens, claims, security interests, or
encumbrances, except for the first priority lien held by the Lender, or
Permitted Liens. Borrower has not acquired any part of the Collateral from an
assignor outside the ordinary course of such assignor's business.

            5.7 NAME; LOCATION OF CHIEF EXECUTIVE OFFICE, PRINCIPAL PLACE OF
BUSINESS AND COLLATERAL. Borrower has not done business under any name other
than that specified on the signature page hereof. The chief executive office,
principal place of business, and the place where Borrower maintains its records
concerning the Collateral are presently located at the address set forth on the
cover page. The Collateral is presently located at the addresses set forth on
the cover page.

            5.8 LITIGATION. There are no actions or proceedings pending by or
against Borrower before any court or administrative agency in which an adverse
decision could have a material adverse effect on Borrower or the aggregate value
of the Collateral. Borrower does not have knowledge of any such pending or
threatened actions or proceedings. Borrower will promptly notify Lender in
writing if any action, proceeding or governmental investigation involving
Borrower is commenced that may result in damages or costs to Borrower of Fifty
Thousand Dollars ($50,000) or more.

            5.9 FINANCIAL STATEMENTS. All financial statements relating to
Borrower or any Affiliate that have been or may hereafter be delivered by
Borrower to Lender present fairly in all material respects Borrower's financial
condition as of the date thereof and Borrower's results of operations for the
period then ended.

            5.10 SOLVENCY. Borrower is solvent and able to pay its debts
(including trade debts) as they mature.

            5.11 TAXES. Borrower has filed or caused to be filed all tax returns
required to be filed, and has paid, or has made adequate provision for the
payment of, all taxes that are due and payable.

            5.12 CONSENTS AND APPROVALS. No approval, authorization or consent
of any trustee or holder of any indebtedness or obligation of Borrower or of any
other Person under any such material agreement, contract, lease or license or
similar document or instrument to which Borrower is a party or by which Borrower
is bound, is required to be obtained by Borrower in order to make or consummate
the transactions contemplated under the Loan Documents. All consents and
approvals of, filings and registrations with, and other actions in respect of,
all Governmental Authorities required to be obtained by Borrower in order to
make or consummate the transactions contemplated under the Loan Documents have
been, or prior to the time when required will have been, obtained, given, filed
or taken and are or will be in full force and effect.

                                       10
<PAGE>   12

            5.13 TRADEMARKS, PATENTS, COPYRIGHTS, FRANCHISES AND LICENSES.
Borrower possesses and owns all necessary trademarks, trade names, copyrights,
patents, patent rights, franchises and licenses which are material to the
conduct of its business as now operated.

            5.14 MATERIAL CONTRACTS. Borrower has disclosed to Lender in writing
all currently effective material contracts and material agreements (whether
written or oral) to which Borrower is a party. There are no material defaults
under any such contract or agreement by Borrower that could reasonably be
expected to have a material adverse effect on the ability of Borrower to perform
its obligations under this Agreement. Borrower has delivered to Lender true and
correct copies of all such contracts or agreements (or, with respect to oral
contracts or agreements, written descriptions of the material terms thereof).

            5.15 FULL DISCLOSURE. No representation, warranty or other statement
made by Borrower in any Loan Document, certificate or written statement
furnished to Lender contains any untrue statement of a material fact or omits to
state a material fact necessary in order to make the statements contained in
such certificates or statements not misleading.

      6. AFFIRMATIVE COVENANTS

            Borrower covenants and agrees that, until the full and complete
payment of the Obligations and the termination of the Commitments, Borrower
shall do all of the following:

            6.1 GOOD STANDING. Borrower shall maintain its corporate existence
and its good standing in its jurisdiction of incorporation and maintain
qualification in each jurisdiction in which the failure to so qualify could
reasonably be expected to have a material adverse effect on the financial
condition, operations or business of Borrower. Borrower shall maintain in force
all licenses, approvals and agreements, the loss of which could have a material
adverse effect on its ability to perform its obligations under this Agreement.

            6.2 GOVERNMENT COMPLIANCE. Borrower shall comply with all statutes,
laws, ordinances and government rules and regulations to which it is subject,
noncompliance with which could reasonably be expected to materially adversely
affect its ability to perform its obligations under this Agreement.

            6.3 FINANCIAL STATEMENTS, REPORTS, CERTIFICATES. Borrower shall
deliver to Lender: (a) as soon as available, but in any event within forty (40)
days after the end of each month, a company prepared balance sheet, income
statement and cash flow statement covering Borrower's operations during such
period, certified by a Responsible Officer; (b) as soon as available, but in any
event within one-hundred twenty (120) days after the end of Borrower's fiscal
year, audited financial statements of Borrower prepared in accordance with
generally accepted accounting principles, consistently applied, together with an
unqualified opinion, except with regard to going concern, on such financial
statements of a nationally recognized or other independent public accounting
firm reasonably acceptable to Lender; (c) promptly upon becoming available,
copies of all statements, reports and notices sent or made available generally
by Borrower to its security holders; (d) immediately upon receipt of notice
thereof, a report of any material legal actions pending or threatened against
Borrower; and (e) such other financial information as Lender may reasonably
request from time to time.

            6.4 CERTIFICATES OF COMPLIANCE. Each time financial statements are
furnished pursuant to SECTION 6.3 above, there shall be delivered to Lender a
certificate signed by a Responsible Officer (each an "Officer's Certificate")
with respect to such financial reports to the effect that: (i) no Event of
Default or Default has occurred and is continuing hereunder since the date of
this Agreement or, if later, since the date of the prior Officer's Certificate
or, if such an event or condition has occurred and is continuing, the nature and
extent thereof and the action Borrower proposes to take with respect thereto,
and (ii) Borrower is in compliance with the provisions of SECTIONS 6 AND 7,
except to the extent that such non-compliance could not reasonably be expected
to have a material adverse effect on the ability of Borrower to perform its
obligations under this Agreement.

            6.5 NOTICE OF DEFAULTS. As soon as possible, and in any event within
five (5) days after the discovery of a Default or an Event of Default provide
Lender with an Officer's Certificate of Borrower setting forth the facts
relating to or giving rise to such Default or Event of Default and the action
which Borrower proposes to take with respect thereto.

                                       11
<PAGE>   13

            6.6 TAXES. Borrower shall make due and timely payment or deposit of
all federal, state, and local taxes, assessments, or contributions required of
it by law or imposed upon any properties belonging to it, and will execute and
deliver to Lender, on demand, appropriate certificates attesting to the payment
or deposit thereof, and Borrower will make timely payment or deposit of all tax
payments and withholding taxes required of it by applicable laws, including
those laws concerning F.I.C.A., F.U.T.A., state disability, and local, state,
and federal income taxes, and will, upon request, furnish Lender with proof
satisfactory to Lender indicating that Borrower has made such payments or
deposits; provided that Borrower need not make any payment if the amount or
validity of such payment is contested in good faith by appropriate proceedings
and is adequately reserved against by Borrower.

            6.7 USE; MAINTENANCE.

                (a) Borrower, at its expense, shall make all necessary site
preparations and cause the Collateral to be operated in accordance with any
applicable manufacturer's manuals or instructions. So long as no Default or
Event of Default has occurred and is continuing, Borrower shall have the right
to quietly possess and use the Collateral as provided herein without
interference by Lender.

                (b) Borrower, at its expense, shall maintain the Collateral in
good condition, reasonable wear and tear excepted, and will comply in all
material respects with all laws, rules and regulations to which the use and
operation of the Collateral may be or become subject. Such obligation shall
extend to repair and replacement of any partial loss or damage to the
Collateral, regardless of the cause. If maintenance is mandated by manufacturer,
Borrower shall obtain and keep in effect, at all times during the Term
maintenance service contracts with suppliers approved by Lender, such approval
not to be unreasonably withheld. All parts furnished in connection with such
maintenance or repair shall immediately become part of the Collateral. All such
maintenance, repair and replacement services shall be immediately paid for and
discharged by Borrower with the result that no Lien will attach to the
Collateral.

            6.8 INSURANCE.

      Borrower shall obtain and maintain for the Term, at its own expense, (a)
"special form" insurance against loss or damage to the Collateral, and (b)
commercial general liability insurance (including contractual liability,
products liability and completed operations coverage's), reasonably satisfactory
to Lender and such other insurance against such other risks of loss and with
such terms, as shall in each case be reasonably satisfactory to or reasonably
required by Lender (as to carriers, amounts, deductibles and otherwise). The
amount of the "special form" insurance shall be the greater of (i) the
replacement value of the Collateral (as new) or (ii) the outstanding principal
amount of the Advances and all other then outstanding amounts payable under the
Loan Documents. Such amounts shall be determined to Lender's reasonable
satisfaction as of each anniversary date of this Agreement and the appropriate
amount of coverage shall be put in effect on the next succeeding renewal or
inception date of such insurance.

      The amount of such commercial general liability insurance (other than
products liability coverage and completed operations insurance) shall be at
least $2,000,000 per occurrence. The amount of such products liability and
completed operations insurance shall be at least $2,000,000 per occurrence. The
deductible with respect to the "special form" and product liability insurance
shall not exceed $25,000; otherwise there shall be no deductible with respect to
any insurance required to be maintained hereunder without the prior written
approval of Lender. Such "special form" insurance shall: (a) name Lender as sole
loss payee with respect to the Collateral, (b) provide each insurer's waiver of
its right of subrogation against Lender and Borrower, and (c) provide that such
insurance (i) shall not be invalidated by any action of, or breach of warranty
by, Borrower of a provision of any of its insurance policies, and (ii) shall
waive set-off, counterclaim or offset against Lender. Each liability policy
shall (A) name Lender as an additional insured and (B) provide that such
insurance shall have cross-liability and severability of interest endorsements
(which shall not increase the aggregate policy limits of Borrower's insurance).
All insurance policies (C) shall provide that Borrower's insurance shall be
primary without a right of contribution of Lender's insurance, if any, or any
obligation on the part of Lender to pay premiums of Borrower, and (D) shall
contain a clause requiring the insurer to give Lender at least thirty (30) days
prior written notice of its cancellation (other than cancellation for
non-payment for which ten (10) days notice shall be sufficient). Borrower shall,
on or prior to the date of and prior to each policy renewal, furnish to Lender
certificates of insurance or other evidence satisfactory to Lender that such
insurance coverage is in effect.

                                       12
<PAGE>   14

            6.9 LOSS; DAMAGE; DESTRUCTION AND SEIZURE.

                (a) Borrower shall bear the risk of the Collateral being lost,
stolen, destroyed, damaged beyond repair, rendered permanently unfit for use, or
seized by a governmental authority for any reason whatsoever at any time until
the expiration or termination of the Term.

                (b) So long as no Event of Default has occurred and is
continuing, any proceeds of insurance maintained pursuant to SECTION 6.8
received by Lender or Borrower with respect to an item of Collateral, the repair
of which is practicable, shall, at the election of Borrower, be applied either
to the repair or replacement of such Collateral or, upon Lender's receipt of
evidence of the repair or replacement of the Collateral reasonably satisfactory
to Lender, to the reimbursement of Borrower for the cost of such repair or
replacement. All replacement parts and equipment acquired by Borrower in
replacement of Collateral pursuant to this SECTION 6.9(b) shall immediately
become part of the Collateral upon acquisition by Borrower. Borrower shall take
such actions and provide such documentation as may be reasonably requested by
Lender to protect and preserve its first priority security interest and
otherwise to avoid any impairment of Lender's rights under the Loan Documents in
connection with such repair or replacement.

                6.10 FURTHER ASSURANCES. At any time and from time to time
Borrower shall execute and deliver such further instruments and take such
further action as may reasonably be requested by Lender to effect the purposes
of this Agreement.

      7. NEGATIVE COVENANTS

               Borrower covenants and agrees that until the full and complete
payment of the Obligations and termination of the Commitments, Borrower will not
do any of the following:

            7.1 CHIEF EXECUTIVE OFFICE; LOCATION OF COLLATERAL. During the
continuance of this Agreement, change the chief executive office or principal
place of business or remove or cause to be removed, except in the ordinary
course of Borrower's business, the Collateral or the records concerning the
Collateral from the premises listed on the cover page without thirty (30) days
prior written notice to Lender.

            7.2 EXTRAORDINARY TRANSACTIONS AND DISPOSAL OF ASSETS. Enter into
any transaction not in the ordinary and usual course of Borrower's business,
including the sale, lease, license or other disposition of, moving, relocation,
or transfer, whether by sale or otherwise, of Borrower's assets, other than (i)
sales of inventory in the ordinary and usual course of Borrower's business as
presently conducted and (ii) sales or other dispositions in the ordinary course
of business of assets, other than Collateral, that have become worn out or
obsolete or that are promptly being replaced. Notwithstanding anything contained
in this SECTION 7.2, Borrower may do any of the following: (i) transfer
non-exclusive licenses and similar arrangements for use of the property of
Borrower, (ii) declare and make any dividend payment or other distribution
payable to its equity securities, (iii) convert any of its convertible
securities into other securities pursuant to the terms of such convertible
securities or otherwise in exchange therefor, (iv) repurchase stock from former
contractors or employees of Borrower in accordance with the terms of repurchase,
vesting or similar agreements between Borrower and such employees, (v)
repurchases of equity securities with the proceeds from issuance of equity
securities, (vi) provided no Event of Default has occurred and is continuing or
is not caused thereby, mergers, consolidations or acquisitions, which after
giving effect thereto, Borrower is the surviving entity, (viii) enter into
Permitted Investments, (ix) capital leases or indebtedness incurred solely to
the purchase equipment which is secured in accordance with CLAUSE (e) of
Permitted Liens and is not in excess of the lesser of the purchase price of such
equipment or the fair market value of such equipment on the date of acquisition,
(x) other Indebtedness not otherwise permitted by SECTION 7.2 not exceeding One
Hundred Thousand Dollars ($100,000) in the aggregate at any time; and (xi)
extensions, refinancings, modifications, amendments, and restatements of any
items of Permitted Indebtedness (ix) an (x) above, provided that the principal
amount thereof is not increased or the terms thereof are not modified to impose
more burdensome terms upon Borrower or its Subsidiary, as the case may be.

            7.3 RESTRUCTURE. Change Borrower's name; make any material change in
Borrower's financial structure or business operations; cause, permit, or suffer
any material adverse change in Borrower's ownership; or suspend operation of
Borrower's business.

                                       13
<PAGE>   15

            7.4 LIENS. Create, incur, assume or suffer to exist any Lien or any
other encumbrance of any kind with respect to any of its Property, whether now
owned or hereafter acquired, except for Permitted Liens.

      8. EVENTS OF DEFAULT

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

            8.1 PAYMENT DEFAULT. If Borrower fails to pay when due and payable
or when declared due and payable in accordance with the Loan Documents, any
portion of the Obligations and such failure continues for three (3) days.

            8.2 CERTAIN COVENANT DEFAULTS. If Borrower fails to perform any
obligation under SECTIONS 6.8, 6.9 or 6.10, or violates any of the covenants
contained in SECTION 7 of this Agreement.

            8.3 OTHER COVENANT DEFAULTS. If Borrower fails or neglects to
perform, keep, or observe any other material term, provision, condition,
covenant, or agreement contained in this Agreement, in any of the other Loan
Documents, or in any other present or future agreement between Borrower and
Lender and as to any default under such other term, provision, condition,
covenant or agreement that can be cured, has failed to cure such default within
fifteen (15) Business Days after the occurrence of such default.

            8.4 MATERIAL ADVERSE CHANGE. If there occurs a material adverse
change in Borrower's business that could reasonably be expected to have a
material adverse effect on the ability of Borrower to perform its obligations
under this Agreement, or if there is a material impairment of the prospect of
repayment of any portion of the Obligations owing to Lender or a material
impairment of the value or priority of Lender's security interests in the
Collateral.

            8.5 ATTACHMENT. If any material portion of Borrower's assets is
attached, seized, subjected to a writ or distress warrant, or is levied upon, or
comes into the possession of any trustee, receiver or Person acting in a similar
capacity and such attachment, seizure, writ or distress warrant or levy has not
been removed, discharged or rescinded within fifteen (15) days, or if Borrower
is enjoined, restrained, or in any way prevented by court order from continuing
to conduct all or any material part of its business affairs, or if a judgment or
other claim becomes a lien or encumbrance upon any material portion of
Borrower's assets, or if a notice of lien, levy, or assessment is filed of
record with respect to any of Borrower's assets by the United States Government,
or any department, agency, or instrumentality thereof, or by any state, county,
municipal, or governmental agency, and the same is not paid within fifteen (15)
days after Borrower receives notice thereof, provided that none of the foregoing
shall constitute an Event of Default where such action or event is stayed or an
adequate bond has been posted pending a good faith contesting by Borrower.

            8.6 OTHER AGREEMENTS. If there is a default in any agreement to
which Borrower is a party with a third party or parties resulting in a right by
such third party or parties, whether or not exercised, to accelerate the
maturity of any Indebtedness in excess of Fifty Thousand Dollars ($50,000).

            8.7 JUDGMENTS. If a judgment or judgments for the payment of money
in an amount, individually or in the aggregate, of at least One Hundred Thousand
Dollars ($100,000) shall be rendered against Borrower and shall remain
unsatisfied and unstayed for a period of thirty (30) days.

            8.8 REDEMPTION OR REPURCHASE. Other than repurchases pursuant to
Section 7.2(v), Borrower shall, after the date of this Agreement, redeem or
repurchase (a) any shares of any class or series of its preferred stock or (b)
more than One Hundred Thousand Dollars ($100,000) in the aggregate of common
stock, in each case whether pursuant to a mandatory redemption or otherwise.

            8.9 MISREPRESENTATIONS. If any material misrepresentation or
material misstatement exists now or hereafter in any warranty, representation,
statement, or report made to Lender by Borrower or any officer, employee, agent,
or director of Borrower.

                                       14
<PAGE>   16

            8.10 BREACH OF WARRANT. If Borrower shall breach the terms of the
Warrant.

            8.11 ENFORCEABILITY. If any Loan Document shall in any material
respect cease to be, or Borrower shall assert that any Loan Document is not, a
legal, valid and binding obligation of Borrower enforceable in accordance with
its terms.

            8.12 INVOLUNTARY BANKRUPTCY OR INSOLVENCY. If a proceeding shall
have been instituted in a court having jurisdiction in the premises seeking a
decree or order for relief in respect of Borrower in an involuntary case under
any applicable bankruptcy, insolvency or other similar law now or hereafter in
effect, or for the appointment of a receiver, liquidator, assignee, custodian,
trustee (or similar official) of Borrower or for any substantial part of its
property, or for the winding-up or liquidation of its affairs, and such
proceeding shall remain undismissed or unstayed and in effect for a period of
forty-five (45) consecutive days or such court shall enter a decree or order
granting the relief sought in such proceeding.

            8.13 VOLUNTARY BANKRUPTCY OR INSOLVENCY. If Borrower shall commence
a voluntary case under any applicable bankruptcy, insolvency or other similar
law now or hereafter in effect, shall consent to the entry of an order for
relief in an involuntary case under any such law, or shall consent to the
appointment of or taking possession by a receiver, liquidator, assignee,
trustee, custodian (or other similar official) of Borrower or for any
substantial part of its property, or shall make a general assignment for the
benefit of creditors, or shall fail generally to pay its debts as they become
due, or shall take any corporate action in furtherance of any of the foregoing.

      9. LENDER'S RIGHTS AND REMEDIES

            9.1 RIGHTS AND REMEDIES. Upon the occurrence and continuance of any
Default or Event of Default, Lender shall have no further obligation to advance
money or extend credit to or for the benefit of Borrower. In addition, upon the
occurrence and during the continuance of an Event Of Default, Lender shall have
the rights, options, duties and remedies of a secured party as permitted by law
and, in addition to and without limitation of the foregoing, Lender may, at its
election, without notice of election and without demand, do any one or more of
the following, all of which are authorized by Borrower:

                (a) Declare all Obligations, whether evidenced by this
Agreement, by any of the other Loan Documents, or otherwise, including the
outstanding principal amount of each Advance and Loan, immediately due and
payable (provided that upon the occurrence of an Event of Default described in
SECTION 8.12 or 8.13 all Obligations shall become immediately due and payable
without any action by Lender);

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

                (c) Without notice to Borrower, set off and apply to the
Obligations any and all indebtedness at any time owing to or for the credit or
the account of Borrower;

                (d) Ship, reclaim, recover, store, finish, maintain, repair,
prepare for sale, advertise for sale, and sell (in the manner provided for
herein) the Collateral. Lender is hereby granted a license or other right,
solely pursuant to the provisions of this SECTION 9.1, to use, without charge,
Borrower's labels, patents, copyrights, rights of use of any name, trade
secrets, trade names, trademarks, service marks, and advertising matter, or any
Property of a similar nature, as it pertains to the Collateral, in completing
production of, advertising for sale,

                                       15
<PAGE>   17

and selling any Collateral and, in connection with Lender's exercise of its
rights under this SECTION 9.1, Borrower's rights under all licenses and all
franchise agreements shall inure to Lender's benefit;

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

                (f) Lender may credit bid and purchase at any public sale; and

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

            9.2 WAIVER BY BORROWER. Upon the occurrence of an Event of Default,
to the extent permitted by law, Borrower covenants that it will not at any time
insist upon or plead, or in any manner whatever claim or take any benefit or
advantage of, any stay or extension law now or at any time hereafter in force,
nor claim, take nor insist upon any benefit or advantage of or from any law now
or hereafter in force providing for the valuation or appraisement of the
Collateral or any part thereof prior to any sale or sales thereof to be made
pursuant to any provision herein contained, or to the decree, judgment or order
of any court of competent jurisdiction; nor, after such sale or sales, claim or
exercise any right under any statute now or hereafter made or enacted by any
state or otherwise to redeem the Property so sold or any part thereof, and, to
the full extent legally permitted, except as to rights expressly provided
herein, hereby expressly waives for itself and on behalf of each and every
Person, except decree or judgment creditors of Borrower acquiring any interest
in or title to the Collateral or any part thereof subsequent to the date of this
Agreement, all benefit and advantage of any such law or laws, and covenants that
it will not invoke or utilize any such law or laws or otherwise hinder, delay or
impede the execution of any power herein granted and delegated to Lender, but
will suffer and permit the execution of every such power as though no such
power, law or laws had been made or enacted.

            9.3 EFFECT OF SALE. Any sale, whether under any power of sale hereby
given or by virtue of judicial proceedings, shall operate to divest all right,
title, interest, claim and demand whatsoever, either at law or in equity, of
Borrower in and to the Property sold, and shall be a perpetual bar, both at law
and in equity, against Borrower, its successors and assigns, and against any and
all Persons claiming the Property sold or any part thereof under, by or through
Borrower, its successors or assigns.

            9.4 POWER OF ATTORNEY IN RESPECT OF THE COLLATERAL. Borrower does
hereby irrevocably appoint Lender (which appointment is coupled with an
interest) on the occurrence and continuance of a Default or an Event of Default,
the true and lawful attorney in fact of Borrower with full power of
substitution, for it and in its name: (a) to ask, demand, collect, receive,
receipt for, sue for, compound and give acquittance for any and all rents,
issues, profits, avails, distributions, income, payment draws and other sums in
which a security interest is granted under SECTION 4 with full power to settle,
adjust or compromise any claim thereunder as fully as if Lender were a Borrower
itself, (b) to receive payment of and to endorse the name of Borrower to any
items of Collateral (including checks, drafts and other orders for the payment
of money) that come into Lender's possession or under Lender's control, (c) to
make all demands, consents and waivers, or take any other action with respect
to, the Collateral, (d) in Lender's discretion to file any claim or take any
other action or proceedings, either in its own name or in the name of Borrower
or otherwise, which Lender may reasonably deem necessary or appropriate to
protect and preserve the right, title and interest of Lender in and to the
Collateral, or (e) to otherwise act with respect thereto as though Lender were
the outright owner of the Collateral.

            9.5 LENDER'S EXPENSES. If Borrower fails to pay any amounts or
furnish any required proof of payment due to third persons or entities, as
required under the terms of this Agreement, then Lender may do any or all of the
following: (a) make payment of the same or any part thereof; (b) set up such
reserves in Borrower's loan account as Lender deem necessary to protect Lender
from the exposure created by such failure; or (c) obtain and maintain insurance
policies of the type discussed in SECTION 6.8 of this Agreement, and take any
action with respect to such policies as Lender deem prudent. Any amounts paid or
deposited by Lender shall constitute Lender's Expenses, shall be immediately due
and payable, and shall bear interest at the then applicable rate hereinabove
provided, and shall be secured by the Collateral. Any payments made by Lender
shall not constitute an

                                       16
<PAGE>   18

agreement by Lender to make similar payments in the future or a waiver by
Lender of any Event of Default under this Agreement.

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

            9.7 APPLICATION OF COLLATERAL PROCEEDS. The proceeds and/or avails
of the Collateral, or any part thereof, and the proceeds and the avails of any
remedy hereunder (as well as any other amounts of any kind held by Lender at the
time of or received by Lender after, the occurrence of an Event of Default
hereunder) shall be paid to and applied as follows:

                (a) First, to the payment of out-of-pocket costs and expenses,
including all amounts expended to preserve the value of the Collateral, of
foreclosure or suit, if any, and of such sale and the exercise of any other
rights or remedies, and of all proper fees, expenses, liability and advances,
including reasonable legal expenses and attorneys' fees, incurred or made
hereunder by Lender;

                (b) Second, to the payment to Lender of the amount then owing or
unpaid on the Advances or Loans for Scheduled Payments, the unpaid principal
amount of the Advances or Loans, and all other Obligations with respect to all
Advances or Loans, and in case such proceeds shall be insufficient to pay in
full the whole amount so due, owing or unpaid upon the Advances or Loans, then
to the unpaid interest thereon, then to the unpaid principal amount of the
Advances or Loans, and then to the payment of other amounts then payable to
Lender under any of the Loan Documents; and

                (c) Third, to the payment of the surplus, if any, to Borrower,
its successors and assigns, or to whomsoever may be lawfully entitled to receive
the same.

            9.8 REINSTATEMENT OF RIGHTS. If Lender shall have proceeded to
enforce any right under this Agreement or any other Loan Document by
foreclosure, sale, entry or otherwise, and such proceedings shall have been
discontinued or abandoned for any reason or shall have been determined
adversely, then and in every such case (unless otherwise ordered by a court of
competent jurisdiction), Lender shall be restored to its former position and
rights hereunder with respect to the Property subject to the security interest
created under this Agreement.

      10. WAIVERS; INDEMNIFICATION

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

            10.2 LENDER'S LIABILITY FOR COLLATERAL. So long as Lender complies
with its obligations, if any, under Section 9207 of the Code, Lender shall not
in any way or manner be liable or responsible for: (a) the safekeeping of the
Collateral; (b) any loss or damage thereto occurring or arising in any manner or
fashion from any cause; (c) any diminution in the value thereof; or (d) any act
or default of any carrier, warehouseman, bailee, forwarding agency, or other
Person whomsoever. All risk of loss, damage or destruction of the Collateral
shall be borne by Borrower.

            10.3 INDEMNIFICATION. Whether or not the transactions contemplated
hereby shall be consummated:

                (a) GENERAL INDEMNITY. Borrower shall pay, indemnify, and hold
Lender and each of its officers, directors, employees, counsel, partners, agents
and attorneys-in-fact (each, an "Indemnified Person") harmless from and against
any and all liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, charges, reasonable expenses or reasonable
disbursements (including Lender's Expenses and reasonable

                                       17
<PAGE>   19

attorney's fees and the allocated cost of in-house counsel) of any kind or
nature whatsoever with respect to the execution, delivery, enforcement,
performance and administration of this Agreement and any other Loan Documents,
or the transactions contemplated hereby and thereby, and with respect to any
investigation, litigation or proceeding (including any case, action or
proceeding before any court or other Governmental Authority relating to
bankruptcy, reorganization, insolvency, liquidation, dissolution or relief of
debtors or any appellate proceeding) related to this Agreement, the Advances or
the Loans or the use of the proceeds thereof, whether or not any Indemnified
Person is a party thereto (all the foregoing, collectively, the "Indemnified
Liabilities"); provided, that Borrower shall have no obligation hereunder to any
Indemnified Person with respect to Indemnified Liabilities arising from the
gross negligence or willful misconduct of such Indemnified Person.

                (b) SURVIVAL; DEFENSE. The obligations in this SECTION 10.3
shall survive payment of all other Obligations. At the election of any
Indemnified Person, Borrower shall defend such Indemnified Person using legal
counsel satisfactory to such Indemnified Person in such Person's sole
discretion, at the sole cost and expense of Borrower. All amounts owing under
this SECTION 10.3 shall be paid within thirty (30) days after written demand.

      11. NOTICES

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

          If to Borrower:      VNUS Medical Technologies, Inc.
                               238 East Caribbean Drive
                               Sunnyvale, CA 94089
                               FAX:  (408) 747-1998

          If to Lender:        Lighthouse Capital Partners II, L.P.
                               100 Drake's Landing Road, Suite 260
                               Greenbrae, California 94904-3121
                               Attention:  Contract Administrator
                               FAX:  (415) 925-3387

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

      12. GENERAL PROVISIONS

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

            12.2 TIME OF ESSENCE. Time is of the essence for the performance of
all obligations set forth in this Agreement.

            12.3 SEVERABILITY OF PROVISIONS. Each provision of this Agreement
shall be severable from every other provision of this Agreement for the purpose
of determining the legal enforceability of any specific provision.

            12.4 ENTIRE AGREEMENT; CONSTRUCTION; AMENDMENTS AND WAIVERS.

                                       18
<PAGE>   20

                (a) This Agreement and each of the other Loan Documents dated as
of the date hereof, taken together, constitute and contain the entire agreement
between Borrower and Lender and supersede any and all prior agreements,
negotiations, correspondence, understandings and communications between the
parties, whether written or oral, respecting the subject matter hereof.

                (b) This Agreement is the result of negotiations between and has
been reviewed by each of Borrower and Lender executing this Agreement as of the
date hereof and their respective counsel; accordingly, this Agreement shall be
deemed to be the product of the parties hereto, and no ambiguity shall be
construed in favor of or against Borrower or Lender. Borrower and Lender agree
that they intend the literal words of this Agreement and the other Loan
Documents and that no parol evidence shall be necessary or appropriate to
establish Borrower's or Lender's actual intentions.

                (c) Any and all amendments, modifications, discharges or waivers
of, or consents to any departures from any provision of this Agreement or of any
of the other Loan Documents shall not be effective without the written consent
of Lender. Any waiver or consent with respect to any provision of the Loan
Documents shall be effective only in the specific instance and for the specific
purpose for which it was given. No notice to or demand on Borrower in any case
shall entitle Borrower to any other or further notice or demand in similar or
other circumstances. Any amendment, modification, waiver or consent effected in
accordance with this SECTION 12.4 shall be binding upon Lender and on Borrower.

            12.5 RELIANCE BY LENDER. All covenants, agreements, representations
and warranties made herein by Borrower shall, notwithstanding any investigation
by Lender, be deemed to be material to and to have been relied upon by Lender.

            12.6 NO SET-OFFS BY BORROWER. All sums payable by Borrower pursuant
to this Agreement or any of the other Loan Documents shall be payable without
notice or demand and shall be payable in United States Dollars without set-off
or reduction of any manner whatsoever.

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

            12.8 SURVIVAL. All covenants, representations and warranties made in
this Agreement shall continue in full force and effect so long as any
Obligations remain outstanding. The obligations of Borrower to indemnify Lender
with respect to the expenses, damages, losses, costs and liabilities described
in SECTION 10.3 shall survive until all applicable statute of limitations
periods with respect to actions that may be brought against Lender have run.

      13. Relationship of parties. Borrower and Lender acknowledge, understand
and agree that the relationship between the Borrower, on the one hand, and
Lender, on the other, is, and at all time shall remain solely that of a borrower
and lender. Lender shall not under any circumstances be construed to be a
partner or joint venturer of Borrower or any of its Affiliates; nor shall the
Lender under any circumstances be deemed to be in a relationship of confidence
or trust or a fiduciary relationship with Borrower or any of its Affiliates, or
to owe any fiduciary duty to Borrower or any of its Affiliates. Lender does not
undertake or assume any responsibility or duty to Borrower or any of its
Affiliates to select, review, inspect, supervise, pass judgment upon or
otherwise inform the Borrower or any of its Affiliates of any matter in
connection with its or their Property, any Collateral held by Lender or the
operations of Borrower or any of its Affiliates. Borrower and each of its
Affiliates shall rely entirely on their own judgment with respect to such
matters, and any review, inspection, supervision, exercise of judgment or supply
of information undertaken or assumed by Lender in connection with such matters
is solely for the protection of Lender and neither Borrower nor any Affiliate is
entitled to rely thereon.

                                       19
<PAGE>   21

      14. Choice of law and venue; jury trial waiver. THIS AGREEMENT SHALL BE
GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF
CALIFORNIA, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW. EACH OF BORROWER
AND LENDER HEREBY SUBMITS TO THE EXCLUSIVE JURISDICTION OF THE STATE AND FEDERAL
COURTS LOCATED IN THE COUNTY OF SANTA CLARA, STATE OF CALIFORNIA. BORROWER AND
LENDER HEREBY WAIVE THEIR RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR
CAUSE OF ACTION BASED UPON OR ARISING OUT OF ANY OF THE LOAN DOCUMENTS OR ANY OF
THE TRANSACTIONS CONTEMPLATED THEREIN, INCLUDING CONTRACT CLAIMS, TORT CLAIMS,
BREACH OF DUTY CLAIMS, AND ALL OTHER COMMON LAW OR STATUTORY CLAIMS.

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

BORROWER:                                   LENDER:

VNUS MEDICAL TECHNOLOGIES, INC.             LIGHTHOUSE CAPITAL PARTNERS II, L.P.

By:   /s/                                   By: LIGHTHOUSE MANAGEMENT
      -------------------------------           PARTNERS II, L.P., its general
Name: Brian E. Farley                           partner
      -------------------------------
Title: President and CEO                        By: LIGHTHOUSE CAPITAL PARTNERS,
      -------------------------------               INC., its general partner

                                            By:   /s/
                                                  ------------------------------
                                            Name: Richard D. Stubblefield
                                                  ------------------------------
                                            Title: Managing Director
                                                  ------------------------------

Exhibit A - Collateral
Exhibit B - Form of Warrant
Exhibit C - Form of Landlord Consent
Exhibit D - Form of Notice of Borrowing
Exhibit E - Form of Loan Terms Schedule
Exhibit F - Amortization Schedule
Exhibit G - Ancillary Documents

Schedule 1 - Existing Liens
Schedule 2 - Subsidiaries

                                       20
<PAGE>   22

                                    EXHIBIT B

THIS WARRANT HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "1933 ACT"), OR ANY APPLICABLE STATE SECURITIES LAWS, AND MAY NOT
BE SOLD OR TRANSFERRED UNLESS SUCH SALE OR TRANSFER IS IN ACCORDANCE WITH THE
REGISTRATION REQUIREMENTS OF SUCH ACT AND APPLICABLE LAWS OR SOME OTHER
EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF SUCH ACT AND APPLICABLE LAWS IS
AVAILABLE WITH RESPECT THERETO.

                        PREFERRED STOCK PURCHASE WARRANT

Warrant No. __________                                   Number of Shares 44,118
                                                        Series C Preferred Stock

                         VNUS MEDICAL TECHNOLOGIES, INC.

                            Void after June 30, 2004

      1. ISSUANCE. This Warrant is issued to LIGHTHOUSE CAPITAL PARTNERS II,
L.P. by VNUS MEDICAL TECHNOLOGIES, INC., a Delaware corporation (hereinafter
with its successors called the "Company").

      2. PURCHASE PRICE; NUMBER OF SHARES. The registered holder of this Warrant
(the "Holder"), commencing on the date hereof, is entitled upon surrender of
this Warrant with the subscription form annexed hereto duly executed, at the
principal office of the Company, to purchase from the Company at a price per
share of $1.70 (the "Purchase Price"), 44,118 fully paid and nonassessable
shares of Series C Preferred Stock, $.001 par value, of the Company (the
"Preferred Stock" or the "Shares"). Until such time as this Warrant is exercised
in full or expires, the Purchase Price and the securities issuable upon exercise
of this Warrant are subject to adjustment as hereinafter provided. The person or
persons in whose name or names any certificate representing shares of Preferred
Stock is issued hereunder shall be deemed to have become the holder of record of
the shares represented thereby as at the close of business on the date this
Warrant is exercised with respect to such shares, whether or not the transfer
books of the Company shall be closed.

      3. PAYMENT OF PURCHASE PRICE. The Purchase Price may be paid (i) in cash
or by check, (ii) by the surrender by the Holder to the Company of any
promissory notes or other obligations issued by the Company, with all such notes
and obligations so surrendered being credited against the Purchase Price in an
amount equal to the principal amount thereof plus accrued and unpaid interest to
the date of surrender, or (iii) by any combination of the foregoing.

      4. NET ISSUE ELECTION. The Holder may elect to receive, without the
payment by the Holder of any additional consideration, shares of Preferred Stock
equal to the value of this Warrant or any portion hereof by the surrender of
this Warrant or such portion to the Company, with the net issue election notice
annexed hereto duly executed, at the principal office of the Company. Thereupon,
the Company shall issue to the Holder such number of fully paid and
nonassessable shares of Preferred Stock as is computed using the following
formula:

                                     Y(A-B)
                                 X=  ------
                                        A

where:      X =   the number of shares of Preferred Stock to be issued to the
                  Holder pursuant to this SECTION 4.

            Y =   the number of shares of Preferred Stock covered by this
                  Warrant in respect of which the net issue election is made
                  pursuant to this SECTION 4.

            A =   the Fair Market Value (defined below) of one share of
                  Preferred Stock, as determined at the time the net issue
                  election is made pursuant to this SECTION 4.

<PAGE>   23

            B =   the Purchase Price in effect under this Warrant at the time
                  the net issue election is made pursuant to this SECTION 4.

"Fair Market Value" of a share of Preferred Stock (or Common Stock if the
Preferred Stock has been automatically converted into Common Stock) as of a
particular date (the "Determination Date") shall mean:

                  (i) If the net issue election is made in connection with and
contingent upon the closing of the sale of the Company's Common Stock to the
public in a public offering pursuant to a Registration Statement under the 1933
Act (a "Public Offering"), and if the Company's Registration Statement relating
to such Public Offering ("Registration Statement") has been declared effective
by the Securities and Exchange Commission, then the initial "Price to Public"
specified in the final prospectus with respect to such offering multiplied by
the number of shares of Common Stock into which each share of Preferred Stock is
then convertible.

                  (ii) If the net issue election is not made in connection with
and contingent upon a Public Offering, then as follows:

                        (a) If traded on a securities exchange or the Nasdaq
                  National Market, the fair market value of a share of Common
                  Stock shall be deemed to be the average of the closing or last
                  reported sale prices of the Common Stock on such exchange or
                  market, as reported in the Wall Street Journal over the five
                  day period ending five business days prior to the
                  Determination Date, and the fair market value of a share of
                  Preferred Stock shall be deemed to be such fair market value
                  of a share of Common Stock multiplied by the number of shares
                  of Common Stock into which each share of Preferred Stock is
                  then convertible.

                        (b) If otherwise traded in an over-the-counter market,
                  the fair market value of a share of Common Stock shall be
                  deemed to be the average of the closing ask prices of a share
                  of Common Stock over the five day period ending five business
                  days prior to the Determination Date, and the fair market
                  value of a share of Preferred Stock shall be deemed to be such
                  fair market value of a share of Common Stock multiplied by the
                  number of shares of Common Stock into which each share of
                  Preferred Stock is then convertible; and

                        (c) If there is no public market for the Common Stock,
                  then fair market value shall be determined in good faith by
                  the Company's Board of Directors.

      5. PARTIAL EXERCISE. This Warrant may be exercised in part, and the Holder
shall be entitled to receive a new warrant, which shall be dated as of the date
of this Warrant, covering the number of shares in respect of which this Warrant
shall not have been exercised.

      6. FRACTIONAL SHARES. In no event shall any fractional share of Preferred
Stock be issued upon any exercise of this Warrant. If, upon exercise of this
Warrant in its entirety, the Holder would, except as provided in this SECTION 6,
be entitled to receive a fractional share of Preferred Stock, then the Company
shall issue the next higher number of full shares of Preferred Stock, issuing a
full share with respect to such fractional share.

      7. EXPIRATION DATE; AUTOMATIC EXERCISE; ACCELERATION UPON A MERGER.

            (a) Except as otherwise provided for herein, this Warrant shall
expire at the close of business on June 30, 2004, and shall be void thereafter.

            (b) Notwithstanding the term of this Warrant fixed pursuant to
SECTION 7(a) hereof, this Warrant shall expire, if not previously exercised,
immediately upon the closing of any consolidation or merger of the Company with
another corporation or other business organization (other than a consolidation
or merger in which the Company is the surviving corporation and which does not
result in any reclassification or change of the outstanding Preferred Stock), or
any sale or conveyance to any other person of all or substantially all of the
assets of the Company, in each case where the shareholders of the Company
immediately prior to such merger, consolidation or sale of assets own (directly
or indirectly) less than 50% of the voting securities of the surviving entity or
purchaser of assets in such transaction (a "Merger").

                                       2
<PAGE>   24

            (c) Notwithstanding the foregoing, at the election of the Holder,
the Company shall purchase the unexercised portion of this Warrant for cash upon
the closing of any Merger for an amount equal to (a) the Fair Market Value of
any consideration that would have been received by Holder in consideration of
the Shares had Holder exercised the unexercised portion of this Wan-ant
immediately before the record date for determining the shareholders entitled to
participate in the proceeds of the Merger, less (b) the aggregate Purchase Price
of the Shares, but in no event less than zero, provided, however, that the
Company shall not be required to purchase any portion of the Warrant pursuant to
this SECTION 7(c) if such purchase would, in the opinion of counsel to the
Company, either (i) cause the Merger to fail to qualify as a tax-free
reorganization under the Internal Revenue Code of 1986, as amended, or (ii)
prevent the Merger from being treated as a pooling of interests under Accounting
Principles Board Opinion No. 16; provided further, however, that if the Holder
elects to have the Company purchase this Warrant but the Company does not
purchase the Warrant in accordance with the preceding proviso, then this Warrant
shall not expire upon such Merger unless the Fair Market Value of Liquid
Consideration to be received per share of Series C Preferred Stock (or Common
Stock into which such share is convertible) pursuant to such Merger is equal to
or greater than two (2) times the Purchase Price, in which case the Warrant
shall, without any further action by Holder, be exercised in a net issuance as
described in SECTION 4 hereof. "Liquid Consideration" shall mean cash or
publicly traded stock If the proceeds of the Merger is other than cash, then
Fair Market Value shall be determined in good faith by the Company's Board of
Directors.

The Company shall notify the Holder in writing at least twenty (20) business
days in advance of the closing of a Merger. Such notice shall also contain such
details of the proposed Merger as are reasonable under the circumstances. If
such closing does not take place, the Company shall promptly notify the Holder
that such proposed transaction has been terminated, and the Holder may rescind
any exercise of its rights promptly after such notice of termination of the
proposed transaction as if the exercise of the Warrant occurred after the
Company had notified the Holder that the Merger was proposed or if the exercise
were otherwise precipitated by such proposed Merger. In the event of such a
rescission, the Warrants will continue to be exercisable on the terms and
conditions contained herein.

      Notwithstanding the foregoing, this Wan-ant shall automatically be deemed
to be exercised in full pursuant to the provisions of SECTION 4 hereof, without
any further action on behalf of the Holder, immediately prior to the time this
Warrant would otherwise expire pursuant to SECTION 7(a) or 7(b).

      8. RESERVED SHARES; VALID ISSUANCE. The Company covenants that it will at
all times from and after the date hereof reserve and keep available such number
of its authorized shares of Preferred Stock and Common Stock, S.00 I par value,
of the Company (the "Common Stock"), free from all preemptive or similar rights
therein, as will be sufficient to permit, respectively, the exercise of this
Wan-ant in full and the conversion into shares of Common Stock of all shares of
Preferred Stock issuable upon such exercise. The Company further covenants that
such shares as may be issued pursuant to such exercise and/or conversion will,
upon issuance, be duly and validly issued, fully paid and nonassessable and free
from all taxes, liens and charges with respect to the issuance thereof.

      9. STOCK SPLITS AND DIVIDENDS. If after the date hereof the Company shall
subdivide the Preferred Stock, by split-up or otherwise, or combine the
Preferred Stock, or issue additional shares of Preferred Stock in payment of a
stock dividend on the Preferred Stock, the number of shares of Preferred Stock
issuable on the exercise of this Warrant shall forthwith be proportionately
increased in the case of a subdivision or stock dividend, or proportionately
decreased in the case of a combination, and the Purchase Price shall forthwith
be proportionately decreased in the case of a subdivision or stock dividend, or
proportionately increased in the case of a combination.

      10. ADJUSTMENTS FOR DILUTING ISSUANCES. The other antidilution rights
applicable to the Preferred Stock and the Common Stock of the Company are set
forth in the Restated Certificate of Incorporation, as amended from time to time
(the "Certificate"), a true and complete copy in its current form which is
attached hereto as EXHIBIT A. Such rights shall not be restated, amended or
modified in any manner which affects the Holder differently than the holders of
Series C Preferred without such Holder's prior written consent. The Company
shall promptly provide the Holder hereof with any restatement, amendment or
modification to the Certificate promptly after the same has been made.

      11. MERGERS AND RECLASSIFICATIONS. Subject to the provisions of SECTION 7
hereof, if after the date hereof the Company shall enter into any Reorganization
(as hereinafter defined), then, as a condition of such Reorganization, lawful
provisions shall be made, and duly executed documents evidencing the same from
the

                                       3
<PAGE>   25

Company or its successor shall be delivered to the Holder, so that the Holder
shall thereafter have the right to purchase, at a total price not to exceed that
payable upon the exercise of this Warrant in full, the kind and amount of shares
of stock and other securities and property receivable upon such Reorganization
by a holder of the number of shares of Preferred Stock which might have been
purchased by the Holder immediately prior to such Reorganization, and in any
such case appropriate provisions shall be made with respect to the rights and
interest of the Holder to the end that the provisions hereof (including without
limitation, provisions for the adjustment of the Purchase Price and the number
of shares issuable hereunder and the provisions relating to the net issue
election) shall thereafter be applicable in relation to any shares of stock or
other securities and property thereafter deliverable upon exercise hereof. For
the purposes of this SECTION 11, the term "Reorganization" shall include without
limitation, any reclassification, capital reorganization or change of the
Preferred Stock (other than as a result of a subdivision, combination or stock
dividend provided for in SECTION 9 hereof), or any consolidation of the Company
with, or merger of the Company into, another corporation or other business
organization (other than a merger in which the Company is the surviving
corporation and which does not result in any reclassification or change of the
outstanding Preferred Stock), or any sale or conveyance to another corporation
or other business organization of all or substantially all of the assets of the
Company.

      12. CERTIFICATE OF ADJUSTMENT. Whenever the Purchase Price is adjusted, as
herein provided, the Company shall promptly deliver to the Holder a certificate
of the Company's chief financial officer setting forth the Purchase Price after
such adjustment and setting forth a brief statement of the facts requiring such
adjustment.

      13. NOTICES OF RECORD DATE, ETC. In the event of:

            (a) any taking by the Company of a record of the holders of any
class of securities for the purpose of determining the holders thereof who are
entitled to receive any dividend or other distribution, or any right to
subscribe for, purchase, sell or otherwise acquire or dispose of any shares of
stock of any class or any other securities or property, or to receive any other
right;

            (b) any reclassification of the capital stock of the Company,
capital reorganization of the Company, consolidation or merger involving the
Company, or sale or conveyance of all or substantially all of its assets; or

            (c) any voluntary or involuntary dissolution, liquidation or
winding-up of the Company;

then in each such event the Company will provide or cause to be provided to the
Holder a written notice thereof. Such notice shall be provided at least twenty
(20) business days prior to the date specified in such notice on which any such
action is to be taken.

      14. REPRESENTATIONS, WARRANTIES AND COVENANTS. This Warrant is issued and
delivered by the Company and accepted by each Holder on the basis of the
following representations, warranties and covenants made by the Company:

            (a) The Company has all necessary authority to issue, execute and
deliver this Warrant and to perform its obligations hereunder. This Warrant has
been duly authorized issued, executed and delivered by the Company and is the
valid and binding obligation of the Company, enforceable in accordance with its
terms.

            (b) The shares of Preferred Stock issuable upon the exercise of this
Warrant have been duly authorized and reserved for issuance by the Company and,
when issued in accordance with the terms hereof, will be validly issued, fully
paid and nonassessable.

            (c) The issuance, execution and delivery of this Warrant do not, and
the issuance of the shares of Preferred Stock upon the exercise of this Warrant
in accordance with the terms hereof will not, (i) violate or contravene the
Company's Certificate or by-laws, or any law, statute, regulation, rule,
judgment or order applicable to the Company, (ii) violate, contravene or result
in a breach or default under any contract, agreement or instrument to which the
Company is a party or by which the Company or any of its assets are bound or
(iii) require the consent or approval of or the filing of any notice or
registration with any person or entity, except qualification (or taking such
action as may be necessary to secure an exemption from qualification, if
available) of the offer and sale of the Warrant, the Preferred Stock issuable
upon exercise of this Warrant, and the Common Stock issuable

                                       4
<PAGE>   26

upon conversion of such Preferred Stock under the California Corporate
Securities Law of 1968, as amended, which qualification or action, if required,
will be made or taken by the Company within the time prescribed by law.

            (d) As long as this Warrant is, or any shares of Preferred Stock
issued upon exercise of this Warrant or any shares of Common Stock issued upon
conversion of such shares of Preferred Stock are, issued and outstanding, the
Company will provide to the Holder the financial and other information described
in that certain Loan and Security Agreement between the Company and Lighthouse
Capital Partners II, L.P. dated as of June 25, 1998.

            (e) So long as this Warrant has not terminated, Holder shall be
entitled to receive such financial and other information as the Holder would be
entitled to receive under the Company's Restated Stockholder Rights Agreement
dated as of May 2, 1997 (the "Rights Agreement") if Holder were a holder of that
number of shares issuable upon full exercise of this Warrant.

            (f) As of the date hereof, the authorized capital stock of the
Company consists of (i) 30,000,000 shares of Common Stock, of which 2,884,811
shares are issued and outstanding and 15,868,990 shares are reserved for
issuance upon the exercise of this Warrant and the conversion of the Preferred
Stock, (ii) 5,582,500 shares of Series A-1, A-2 and A-3 Preferred Stock, of
which all are issued and outstanding shares, (iii) 1,691,667 shares of Series B
Preferred Stock, of which all are issued and outstanding shares, and (iv)
6,672,770 shares of Series C Preferred Stock, of which 4,694,835 shares are
issued and outstanding shares, 1,877,935 shares are reserved for issuance upon
exercise of currently outstanding warrants, and 44,118 shares are reserved for
issuance upon the exercise of this Warrant. Attached hereto as EXHIBIT B is a
capitalization table summarizing the capitalization of the Company, including,
without limitation, the current Conversion Price of each series of preferred
stock.

      15. REGISTRATION RIGHTS. The Company grants to the Holder registration
rights contained in Sections 1.2 and 1.3 of the Rights Agreement, so that (i)
the shares of Common Stock issuable upon conversion of the shares of Preferred
Stock issuable upon exercise of this Warrant shall be "Registrable Securities,"
and (ii) the Holder shall be an "Investor," for all purposes of such Rights
Agreement.

      16. This Warrant does not entitle the Holder to any voting rights or other
rights as a stockholder of the Company prior to the exercise of this Warrant.

      17. AMENDMENT. The terms of this Warrant may be amended, modified or
waived only with the written consent of the Holder.

      18. REPRESENTATIONS AND COVENANTS OF THE HOLDER. This Preferred Stock
Purchase Warrant has been entered into by the Company in reliance upon the
following representations and covenants of the Holder, which by its execution
hereof the Holder hereby confirms:

      (a) INVESTMENT PURPOSE. This Warrant, any Preferred Stock issued upon
exercise of this Warrant, and any Common Stock issued upon conversion of such
Preferred Stock are being or will be acquired for investment and not with a view
to the sale or distribution of any part thereof, and the Holder has no present
intention of selling or engaging in any public distribution of the same except
pursuant to a registration or exemption.

      (b) ACCREDITED INVESTOR. Holder is an "accredited investor" within the
meaning of the Securities and Exchange Rule 501 of Regulation D, as presently in
effect.

      (c) PRIVATE ISSUE. The Holder understands (i) that none of this Warrant,
the Preferred Stock issuable upon exercise of the Holder's rights contained
herein, and the Common Stock issuable upon conversion thereof, is registered
under the 1933 Act or qualified under applicable state securities laws on the
ground that the issuance contemplated by this Warrant will be exempt from the
registration and qualifications requirements thereof, and (ii) that the
Company's reliance on such exemption is predicated on the representations set
forth in this SECTION 18.

      (d) FINANCIAL RISK. The Holder has such knowledge and experience in
financial and business matters as to be capable of evaluating the merits and
risks of its investment and has the ability to bear the economic risks of its
investment.

                                       5
<PAGE>   27

      19. NOTICES, TRANSFERS, ETC.

            (a) Any notice or written communication required or permitted to be
given to the Holder may be given by certified mail or delivered to the Holder at
the address most recently provided by the Holder to the Company.

            (b) Subject to compliance with applicable federal and state
securities laws, this Warrant may be transferred by the Holder with respect to
any or all of the shares purchasable hereunder. Upon surrender of this Warrant
to the Company, together with the assignment notice annexed hereto duly
executed, for transfer of this Warrant as an entirety by the Holder, the Company
shall issue a new warrant of the same denomination to the assignee. Upon
surrender of this Warrant to the Company, together with the assignment hereof
properly endorsed, by the Holder for transfer with respect to a portion of the
shares of Preferred Stock purchasable hereunder, the Company shall issue a new
warrant to the assignee, in such denomination as shall be requested by the
Holder hereof, and shall issue to such Holder a new warrant covering the number
of shares in respect of which this Warrant shall not have been transferred.

            (c) In case this Warrant shall be mutilated, lost, stolen or
destroyed, the Company shall issue a new warrant of like tenor and denomination
and deliver the same (i) in exchange and substitution for and upon surrender and
cancellation of any mutilated Warrant, or (ii) in lieu of any Warrant lost,
stolen or destroyed, upon receipt of an affidavit of the Holder or other
evidence reasonably satisfactory to the Company of the loss, theft or
destruction of such Warrant.

      20. NO IMPAIRMENT. The Company will not, by amendment of its Certificate
or through any reclassification, capital reorganization, consolidation, merger,
sale or conveyance of assets, dissolution, liquidation, issue or sale of
securities or any other voluntary action, avoid or seek to avoid the observance
of performance of any of the terms of this Warrant, but will at all times in
good faith assist in the carrying out of all such terms and in the taking of all
such action as may be necessary or appropriate in order to protect the rights of
the Holder.

      21. GOVERNING LAW. The provisions and terms of this Warrant shall be
governed by and construed in accordance with the internal laws of the State of
California.

      22. SUCCESSORS AND ASSIGNS. This Warrant shall be binding upon the
Company's successors and assigns and shall inure to the benefit of the Holder's
successors, legal representatives and permitted assigns.

      23. BUSINESS DAYS. If the last or appointed day for the taking of any
action required or the expiration of any rights granted herein shall be a
Saturday or Sunday or a legal holiday in California, then such action may be
taken or right may be exercised on the next succeeding day which is not a
Saturday or Sunday or such a legal holiday.

      24. QUALIFYING PUBLIC OFFERING. If the Company shall effect a firm
commitment underwritten public offering of shares of Common Stock which results
in the conversion of the Preferred Stock into Common Stock pursuant to the
Company's Certificate in effect immediately prior to such offering, then,
effective upon such conversion, this Warrant shall change from the right to
purchase shares of Preferred Stock to the right to purchase shares of Common
Stock, and the Holder shall thereupon have the right to purchase, at a total
price equal to that payable upon the exercise of this Warrant in full, the
number of shares of Common Stock which would have been receivable by the Holder
upon the exercise of this Warrant for shares of Preferred Stock immediately
prior to such conversion of such shares of Preferred Stock into shares of Common
Stock, and in such event appropriate provisions shall be made with respect to
the rights and interest of the Holder to the end that the provisions hereof
(including, without limitation, the provisions for the adjustment of the
Purchase Price and of the number of shares purchasable upon exercise of this
Warrant and the provisions relating to the net issue election) shall thereafter
be applicable to any shares of Common Stock deliverable upon the exercise
hereof.

      25. VALUE. The Company and the Holder agree that the value of this Warrant
on the date of grant is $100.

                                       6
<PAGE>   28

                                       VNUS MEDICAL TECHNOLOGIES, INC.

                                       By:      EXHIBIT ONLY
                                             -----------------------------------
                                       Name:    Brian E. Farley
                                             -----------------------------------
                                       Title:   President and CEO
                                             -----------------------------------
[CORPORATE SEAL]

Attest:
       ----------------------

                                       7
<PAGE>   29

                                  SUBSCRIPTION

To:

      The undersigned hereby subscribes for _________________ shares of
Preferred Stock covered by this Warrant. The certificate(s) for such shares
shall be issued in the name of the undersigned or as otherwise indicated below:

                                         Signature

                                         Name for Registration

                                         Mailing Address

                            NET ISSUE ELECTION NOTICE

To:

      The undersigned hereby elects under SECTION 4 to surrender the right to
purchase ______ shares of Preferred Stock pursuant to this Warrant. The
certificate(s) for such shares issuable upon such net issue election shall be
issued in the name of the undersigned or as otherwise indicated below:

                                         Signature

                                         Name for Registration

                                         Mailing Address

<PAGE>   30

                                   ASSIGNMENT

      For value received _____________________ hereby sells, assigns and
transfers unto

--------------------------------------------------------------------------------
            [Please print or typewrite name and address of Assignee]

--------------------------------------------------------------------------------
__________ the within Warrant, and does hereby irrevocably constitute and
appoint its attorney to transfer the within Warrant on the books of the within
named Company with full power of substitution on the premises.

Dated:
      --------------------------------------
In the Presence of:

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

<PAGE>   31

                                    EXHIBIT A

                          CERTIFICATE OF INCORPORATION

                               SEE ATTACHED PAGES.

<PAGE>   32

                                    EXHIBIT B

                              CAPITALIZATION TABLE

                               SEE ATTACHED PAGES.

<PAGE>   33

                                    EXHIBIT C

RECORDING REQUESTED BY
AND WHEN RECORDED RETURN TO:

Lighthouse Capital Partners II, L.P.
100 Drake's Landing Road, Suite 260
Greenbrae, CA 94904-3121
Attn.: Contract Administration

                     CONSENT TO REMOVAL OF PERSONAL PROPERTY

KNOW ALL PERSONS BY THESE PRESENTS:

      1. The undersigned has an interest as owner and landlord in the following
described real property (the "Real Property"):

      That certain real property in the County of Santa Clara, State of
California, described as:

      SEE ATTACHMENT 1 ATTACHED HERETO FOR FULL LEGAL DESCRIPTION,

commonly known as 238 East Caribbean Drive, Sunnyvale, California 94089 (Parcel
No._______________________).

      2. VNUS MEDICAL TECHNOLOGIES, INC., a California corporation ("Borrower"),
has entered into or will enter into a Loan and Security Agreement with
LIGHTHOUSE CAPITAL PARTNERS II, L.P. ("Lender") dated as of June 25, 1998 (as
amended and supplemented from time to time, the "Agreement").

      3. Lender, as a condition to entering into the Agreement, requires that
the undersigned consent to the removal by Lender of the equipment and other
assets covered by the Agreement (hereinafter called "Equipment") from the Real
Property, no matter how it is affixed thereto, and to the other matters set
forth below.

      NOW, THEREFORE, for good and sufficient consideration, receipt of which is
hereby acknowledged, the undersigned consents to the placing of the Equipment on
the Real Property, and agrees with Lender as follows:

            1. The undersigned waives and releases each and every right which
undersigned now has, under the laws of the State of California or by virtue of
the lease for the Real Property now in effect, to levy or distrain upon for
rent, in arrears, in advance or both, or to claim or assert title to the
Equipment that is already on said Real Property, or may hereafter be delivered
or installed thereon.

            2. The Equipment shall be considered to be personal property and
shall not be considered part of the Real Property regardless of whether or by
what means it is or may become attached or affixed to the Real Property.

            3. The undersigned will permit Lender, or its agent or
representative, to enter upon the Real Property for the purpose of exercising
any right it may have under the terms of the Agreement or otherwise, including,
without limitation, the right to remove the Equipment; provided, however, that
if Lender, in removing the Equipment damages any improvements of the undersigned
on the Real Property, Lender will, at its expense, cause same to be repaired,
normal wear and tear excepted. The right of Lender to enter the Real Property
shall not terminate until thirty (30) days after Lender receives written notice
from the undersigned of the termination of the Lease

            4. This agreement shall be binding upon the heirs, successors and
assigns of the undersigned and shall inure to the benefit of Lender and its
successors and assigns.

      IN WITNESS WHEREOF, the undersigned has executed this instrument at
__________, this ______ day of __________, 1998.

                                    LANDLORD
                             -----------------------

<PAGE>   34

                             By:    EXHIBIT ONLY
                                ---------------------
                             Name:
                                  -------------------
                             Title:
                                   ------------------

       The foregoing Consent must be acknowledged before a Notary Public.

                              [ATTACH NOTARY JURAT]

                                       2
<PAGE>   35

                                  ATTACHMENT 1

                          LEGAL DESCRIPTION OF PREMISES

                          [To Be Provided By Landlord]

<PAGE>   36

                                    EXHIBIT D

                               NOTICE OF BORROWING

                                                                   June 25, 1998

Lighthouse Capital Partners II, L.P.
100 Drakes Landing Road, Suite 260
Greenbrae, CA 94904-3121

Gentlemen:

      Reference is made to the Loan and Security Agreement dated as of June 25,
1998 (as it has been and may be amended from time to time, the "Loan Agreement,"
the capitalized terms used herein as defined therein), between LIGHTHOUSE
CAPITAL PARTNERS II, L.P. and VNUS MEDICAL TECHNOLOGIES, INC. (the "Company").

      The undersigned is the Chief Financial Officer of the Company, and hereby
requests an Advance under the Loan Agreement, and in that connection certifies
as follows:

      1. The amount of the proposed Advance is $2,000,000.00. The Business Day
of the proposed Advance is July 1, 1998.

      2. The Loan Commencement Date for this Advance shall be July 1, 1998.

      3. As of this date, no Event of Default, or event which with notice or the
passage of time would constitute an Event of Default, has occurred and is
continuing, or will result from the making of the proposed Advance, and the
representations and warranties of the Company contained in SECTION 5 of the Loan
Agreement are true and correct in all material respects.

      4. No event which could reasonably be expected to have a material adverse
effect on the ability of Borrower to fulfill its obligations under the Loan
Agreement has occurred since the date of the most recent financial statements
submitted to you by the Company.

      The Company agrees to notify you promptly before the funding of the
Advance if any of the matters to which I have certified above shall not be true
and correct on the Borrowing Date.

                                            Very truly yours,

                                            Brian E. Farley
                                            President and CEO

<PAGE>   37

                                    EXHIBIT E

                               LOAN TERMS SCHEDULE

Loan Commencement Date:
                                                  ----------------
Aggregate Original Loan Amount:                   $
                                                  ----------------
Interim Payment:                                  $
                                                  ----------------
Loan Factor:                                                     %
                                                  ----------------
Scheduled Payment Amount:                         $
                                                  ----------------

<PAGE>   38

                                    EXHIBIT F

                              AMORTIZATION SCHEDULE

<PAGE>   39

                                    EXHIBIT G

                               ANCILLARY DOCUMENTS

               Certificate of Secretary-Corporate Resolution
               Insurance Requirements

<PAGE>   40

                         VNUS MEDICAL TECHNOLOGIES, INC.

                            CERTIFICATE OF SECRETARY

      The undersigned, ___________________________, hereby certifies that:

      1. He/She is the duly elected and acting Secretary of VNUS MEDICAL
TECHNOLOGIES, INC., a Delaware corporation (the "Company").

      2. That on the date hereof, each person listed below holds the office in
the Company indicated opposite his or her name and that the signature appearing
thereon is the genuine signature of each such person:

<TABLE>
<CAPTION>
NAME                           OFFICE                        SIGNATURE
----                           ------                        ---------
<S>                            <C>
Brian E. Farley                President and CEO             -------------------

-----------------------        ------------------------      -------------------
</TABLE>

      3. Attached hereto as EXHIBIT A is a true and correct copy of the
Certificate of Incorporation of the Company, as amended, as in effect as of the
date hereof.

      4. Attached hereto as EXHIBIT B is a true and correct copy of the Bylaws
of the Company, as amended, as in effect as of the date hereof.

      5. Attached hereto as EXHIBIT C is a copy of the resolutions of the Board
of Directors of the Company authorizing and approving the Company's execution,
delivery and performance of a loan commitment with Lighthouse Capital Partners
II, L.P.

IN WITNESS WHEREOF, the undersigned has executed this Certificate of Secretary
this _____ day of June, 1998.

                                         VNUS MEDICAL TECHNOLOGIES, INC.

                                         By:
                                             -----------------------------------
                                         Name:
                                              ----------------------------------
                                         Title:
                                               ---------------------------------

      I, the President and CEO of the Company, do hereby certify
that____________________is the duly qualified, elected and acting
Secretary/Assistant Secretary of the Company and that the above signature is his
or her genuine signature.

IN WITNESS WHEREOF, the undersigned has executed this Certificate of Secretary
this ____ day of June, 1998.

                                          VNUS MEDICAL TECHNOLOGIES, INC.

                                          By:      EXHIBIT ONLY
                                                --------------------------------
                                          Name:    Brian E. Farley
                                                --------------------------------
                                          Title:   President and CEO
                                                --------------------------------

<PAGE>   41

                              EVIDENCE OF INSURANCE

                         VNUS MEDICAL TECHNOLOGIES, INC.

RE:   Loan and Security Agreement No. 20001 ("Loan")

As required by SECTION 8 of the referenced Loan, please provide evidence of
insurance as outlined below:

-     "all risk" insurance against loss or damage to the collateral naming
      LIGHTHOUSE CAPITAL PARTNERS II, L.P. as LOSS PAYEE with respect to the
      collateral.

                Minimum amount of "all risk" coverage: $2,000,000

-     commercial general liability insurance in an amount of at least $2,000,000
      naming LIGHTHOUSE CAPITAL PARTNERS II, L.P. as an ADDITIONAL INSURED.

General Information:

CERTIFICATE HOLDER:

        Lighthouse Capital Partners II, L.P.
        100 Drake's Landing Road, Suite 260
        Greenbrae, CA 94904-3121
        Attn.:  Contract Administration

If you or your agent have any questions we can be reached at the above address
or by,

        phone: 415-925-3370

        fax:   415-925-3387

        e-mail:leasing@lighthse.com

Please note that the above Certificate(s) of Insurance are required PRIOR to
funding under the Loan.

<PAGE>   42

                                   SCHEDULE 1

                                 EXISTING LIENS

<TABLE>
<CAPTION>
SECURED PARTY                    FILE NUMBER    DATE FILED    STATE FILED   DESCRIPTION
-------------                    -----------    ----------    -----------   -----------
<S>                              <C>            <C>           <C>           <C>
Western Machine Center, Inc.     9529261330     10/16/95      CA            Equipment Specific
Telogy, Inc.                     9606760684     03/01/96      CA            Equipment Specific
</TABLE>

<PAGE>   43

                                   SCHEDULE 2

                                  SUBSIDIARIES

                                      NONE

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