<PAGE>   1

                       SECURITIES AND EXCHANGE COMMISSION
                              Washington, DC 20549
                              

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

                              
                                   FORM 10-Q

[X]  Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange
     Act of 1934.


                For the quarterly period ended June 30, 1996.


[ ]  Transition report pursuant to Section 13 or 15(d) of the Securities
     Exchange Act of 1934.


               For the transition period from ______ to ______

                         Commission file number 0-28440



                         CARDIOVASCULAR DYNAMICS, INC.
             (Exact name of Registrant as specified in its charter)

          Delaware                                           68-0328265
(State or other jurisdiction of                            (I.R.S. Employer
incorporation or organization)                          Identification Number)


            13900 Alton Parkway, Suite 122, Irvine, California 92718
                    (Address of principal executive offices)

        Registrant's telephone number, including area code (714) 457-9546

Indicate by check mark whether the Registrant:  (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exhange Act of
1934 during the preceeding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.

                            Yes    X       No
                                 -----          -----
On July 31, 1996, the registrant had outstanding 8,776,000 shares of Common
Stock of $.001 par value, which is the registrant's only class of Common Stock.



<PAGE>   2

                         CARDIOVASCULAR DYNAMICS, INC.

                                   Form 10-Q

                                 June 30, 1996

                               TABLE OF CONTENTS





<TABLE>
<CAPTION>
                                                                                  Page
                                                                                  ----
<S>                                                                               <C>

Part I.   Financial Information


Item 1.   Financial Statements (Unaudited)

            Condensed balance sheets at June 30, 1996 and December 31, 1995         3

            Condensed statements of operations for the three months and
                 six months ended June 30, 1996 and 1995                            4

             Condensed statements of cash flows for the three months and
                 six months ended June 30, 1996                                     5

             Notes to condensed financial statements                                6


Item 2.    Management's discussion and analysis of financial condition
                 and results of operations                                          8


Part II.   Other Information


Item 6.    Exhibits and Reports on Form 8-K                                        12

Signatures                                                                         13

Exhibit Index                                                                      14
</TABLE>


<PAGE>   3

                         CARDIOVASCULAR DYNAMICS, INC.

                            CONDENSED BALANCE SHEETS

                                  (Unaudited)
                    (In thousands, except per share amounts)


<TABLE>
<CAPTION>
                                                                   June 30,        December 31,
                                                                    1996               1995
                                                                  ---------        ------------
<S>                                                                 <C>            <C>
ASSETS
Current assets:
  Cash and equivalents                                              $45,097           $ 1,568
  Trade accounts receivable, net                                      1,945             1,117
  Inventories                                                         1,175               754
  Other current assets                                                  332                58
                                                                    -------           -------
      Total current assets                                           48,549             3,497
Property and equipment, net                                             578               424
Other assets                                                             46                81
                                                                    -------           -------
Total Assets                                                        $49,173           $ 4,002
                                                                    =======           =======
LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
  Accounts payable and accrued expenses                             $ 2,765           $ 1,684
  Payable to affiliate                                                2,619             2,537
  Deferred distributorship fee-current                                   50                50
                                                                    -------           -------
      Total current liabilities                                       5,434             4,271
Deferred distributorship fee revenue                                     54                79
Convertible obligation                                                  750               750

STOCKHOLDERS' EQUITY

Convertible preferred stock, $.001 par value;
  7,560,000 shares authorized, no shares and 2,000,000
  shares issued and outstanding as of June 30, 1996
  and December 31, 1995, respectively                                    --                 2
Common stock, $.001 par value; 30,000,000 authorized,
  8,266,000 shares and no shares outstanding as of
  June 30, 1996 and December 31, 1995, respectively                       9                --
Additional paid-in capital                                           50,936             5,670
Deferred compensation                                                  (438)             (345)
Accumulated deficit                                                  (7,572)           (6,425)
                                                                    -------           -------
      Total stockholders' equity                                     42,935            (1,098)
                                                                    -------           -------
Total Liabilities and Stockholders' Equipment                       $49,173           $ 4,002
                                                                    =======           =======
</TABLE>



See accompanying notes

                                       3

<PAGE>   4
                         CARDIOVASCULAR DYNAMICS, INC.

                       CONDENSED STATEMENTS OF OPERATIONS

                    (In thousands, except per share amounts)

                                  (Unaudited)


<TABLE>
<CAPTION>
                                                          Three Months Ended June 30,     Six Months Ended June 30,
                                                             1996         1995                1996         1995
                                                            ------      -------             -------      -------
<S>                                                         <C>          <C>                 <C>          <C>
Total revenue                                               $1,801      $   804             $ 3,834      $ 1,213
Cost of sales                                                  921          360               1,863          478
                                                            ------      -------             -------      -------    
Gross profit                                                   880          444               1,971          735
Operating expenses:
Charge for acquired in-process research
   and development                                              --          488                  --          488
Research, development and clinical                             802          572               1,429          986
Marketing and sales                                            710          410               1,287          665
General and administrative                                     212          248                 503          516
                                                            ------      -------             -------      -------    
          Total operating expenses                           1,724        1,718               3,219        2,655
                                                            ------      -------             -------      -------    
Loss from operations                                          (844)      (1,274)             (1,248)      (1,920)

Other income (expense):
   Interest income                                              62            1                  73           23
   Distributorship fees and other income                        12           22                  28           39
                                                            ------      -------             -------      -------    
          Total other income                                    74           23                 101           62
                                                            ------      -------             -------      -------    
Net loss                                                    $ (770)     $(1,251)            $(1,147)     $(1,858)
                                                            ======      =======             =======      =======
Net loss per share                                          $(0.13)     $ (0.28)            $ (0.22)     $ (0.42)
                                                            ======      =======             =======      =======
Shares used in the calculation of
    net loss per share                                       5,765        4,426               5,116        4,415
                                                            ======      =======             =======      =======
</TABLE>


See accompanying notes                                   

                                       4
                                       

<PAGE>   5
                         CARDIOVASCULAR DYNAMICS, INC.

                       CONDENSED STATEMENTS OF CASH FLOWS

                                  (Unaudited)
                                 (In thousands)


<TABLE>
<CAPTION>
                                                             Six months ended June 30,
                                                               1996            1995
                                                             -------         -------
<S>                                                          <C>               <C>  
Cash flows from operating activities:
   Net loss                                                  $(1,147)        $(1,858)
   Adjustments to reconcile net loss to net cash
     used in operating activities:
      Depreciation and amortization                               90              37
      Amortization of deferred compensation                       57              --
      Charge for acquired in-process research
         and development                                          --             488
      Net changes in:
         Operating assets                                     (1,488)           (186)
         Operating liabilities and deferred revenue            1,056             287
                                                             -------         -------
              Net cash used in operating activities           (1,432)         (1,232)

Cash flows from investing activities:
   Capital expenditures for property and equipment              (244)           (371)
                                                             -------         -------
              Net cash used in investing activities             (244)           (371)

Cash flows from financing activities:
   Proceeds from sale of common stock                         37,123              --
   Proceeds from sale of preferred stock                       8,000              --
   Payable to affiliate, net                                      82            (282)
                                                             -------         -------
              Net cash provided by (used in)
                     financing activities                     45,205            (282)
                                                             -------         -------
Net increase (decrease) in cash and equivalents               43,529          (1,885)
Cash and equivalents, beginning of period                      1,568           3,379
                                                             -------         -------
Cash and equivalents, end of period                          $45,097         $ 1,494
                                                             =======         =======
</TABLE>



See accompanying notes





                                       5

<PAGE>   6


                    NOTES TO CONDENSED FINANCIAL STATEMENTS

                                 JUNE 30, 1996

1.  Basis of Presentation

Cardiovascular Dynamics, Inc. ("CVD" or the "Company") designs, develops,
manufactures and markets catheters used to treat certain vascular diseases.
The accompanying condensed financial statements have been prepared in
accordance with generally accepted accounting principals for interim financial
information and with the instructions to Form 10-Q and Article 10 of Regulation
S-X.  Accordingly, they do not include all of the information and footnotes
required by generally accepted accounting principles for complete financial
statements.  In the opinion of management, all adjustments (consisting of
normal recurring accruals) considered necessary for a fair presentation have
been included.  Operating results for the three and six month periods ended
June 30, 1996 are not necessarily indicative of results that may be expected
for the year ending December 31, 1996.  For further information, refer to the
financial statements and footnotes thereto for the year ended December 31, 1995
included in the Company's Registration Statement on Form S-1.

2.  Closing of Initial Public Offering

On June 19, 1996, the Company closed its initial public offering which
consisted of 3,400,000 shares of common stock at $12.00 per share.  On July 17,
1996, the Company's underwriters exercised their overallotment option to
purchase an additional 510,000 shares of common stock at $12.00 per share.  CVD
received net offering proceeds from the sale of common stock of approximately
$42,700,000 after deducting underwriting discounts and commissions and other
expenses of the offering.

3.  Net Loss Per Share

Net loss per share is computed using the weighted average number of shares of
common stock outstanding.  Common stock equivalent shares from convertible
debt, stock options and warrants are not included as the effect is
anti-dilutive.  In accordance with Securities and Exchange Commission Staff
Accounting Bulletins, common stock and common stock equivalent shares issued by
the Company at prices below the initial public offering price during the period
beginning one year prior to the offering have been included in the calculation
as if they were outstanding for all periods presented (using the treasury stock
method and the initial public offering price of the Company's common stock).



                                       6




<PAGE>   7
              NOTES TO CONDENSED FINANCIAL STATEMENTS (CONTINUED)

                                 JUNE 30, 1996


4.  Stock Split

In May 1996, the Board of Directors approved a stock split of 2-for-1 of all
the outstanding shares of common stock.  All share and per share information
has been adjusted to give effect to the stock split in the accompanying
financial statements.

5.  Inventories

Inventories are stated at the lower of cost, determined on an average cost
basis, or market value.  Inventories consist of the following:


<TABLE>
<CAPTION>
                                       June 30, 1996     December 31, 1995          
                                       -------------     -----------------          
         <S>                          <C>                <C>                        
         Raw materials                   $  450,000           $162,000           
         Work-in-process                    589,000            330,000           
         Finished goods                     136,000            262,000           
                                         ----------           --------           
                                         $1,175,000           $754,000           
                                         ==========           ========           
</TABLE>






                                       7

<PAGE>   8

I
TEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
        RESULTS OF OPERATIONS

This Quarterly Report on Form 10-Q contains forward looking statements that
involve risks and uncertainties that could cause actual results to differ
materially from those in the forward looking statements.  For a discussion of
factors which might result in different outcomes, see the Company's Prospectus
dated June 19, 1996, in particular "Risk Factors" beginning on page 6 thereof.

Overview

Since inception in 1992, Cardiovascular Dynamics, Inc. has engaged primarily in
the research and development of products for the treatment of cardiovascular
disease.  The Company's financial results will be affected in the future by
several factors, including the timing of any FDA approval to market the
Company's products, FDA approval of IDE sites and the number of patients
permitted to be treated, future changes in government regulations and third
party reimbursement policies applicable to the Company's products, the progress
of competing technologies and the ability of the Company to develop the
manufacturing and marketing capabilities necessary to support commercial sales.
As a result of these factors, revenue levels, gross margins and operating
results may fluctuate from quarter to quarter.

On July 15, 1996, CVD and Medtronic, Inc. entered into an agreement providing
for the co-distribution by Medtronic of the Company's balloon angioplasty
catheters.  These catheters employ the Company's patented Focus Technology.
Under the Agreement, Medtronic will purchase a minimum number of angioplasty
catheters manufactured by the Company for distribution worldwide for a period
of up to three years.  Specific products to be distributed by Medtronic will
differ in individual country markets.  The Company will continue to sell Focus
Technology products through its own direct and indirect sales force network.
These products are currently sold under the names FACT(TM), CAT(TM) and ARC(TM).

Results of Operations

Second quarter of 1996 compared to the same period in 1995

Revenue for the second quarter of 1996 increased 124% to $1.8 million compared
to $0.8 million for the second quarter of 1995 representing increased sales of
the Company's Focus catheters and the introduction of additional products.



                                       8

<PAGE>   9
ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
         RESULTS OF OPERATIONS (CONTINUED)

The gross profit percentage for the second quarter of 1996 decreased to 49%
compared to 55% for the same period of 1995.  In the second quarter of 1995,
CVD's products were manufactured by Endosonics Corporation at fixed per unit
costs.  In the second quarter of 1996, the Company was manufacturing its own
products at relatively low volumes which resulted in higher per unit costs.

Research, development and clinical expenses increased by 40% to $0.8 million in
the quarter ended June 30, 1996 over the quarter ended June 30, 1995.  The
primary reason for this increase was additional spending on development of the
Company's line of peripheral vascular products.

Marketing and sales expenses rose 73% to $0.7 million, up $.3 million, in the
June 30, 1996 quarter, compared to the second quarter of 1995.  This increase
reflects the investment the Company is making to build its sales and marketing
infrastructure by adding additional personnel and developing additional
distributor relationships.

General and administrative expenses remained relatively constant in both the
three months ended June 30, 1996 and 1995.

First six months of 1996 compared to the same period of 1995

Revenue for the first half of 1996 increased 216% to $3.8 million compared to
$1.2 million for the same period of 1995 representing increased sales of the
Company's Focus catheters and the introduction of additional products.

The gross profit percentage for the first half of 1996 decreased to 51%
compared to 61% for the same period of 1995.  In the first half of 1995, CVD's
products were manufactured by Endosonics Corporation at fixed per unit costs.
Additionally, a significant portion of the total revenues in the first half of
1995 was comprised of license fees and other revenues that had no associated
cost of sales. In the second quarter of 1996, the Company was manufacturing its
own products at relatively low volumes, and the percentage of total revenues
that represented non-product revenues was less significant.

Research, development and clinical expenses increased by 45% to $1.4 million in
the first half of 1996 over the same period in 1995.  The primary reason for
this increase was additional spending on development of the Company's line of
peripheral vascular products.


                                       9

<PAGE>   10
ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
         RESULTS OF OPERATIONS (CONTINUED)

For the first half of 1996, marketing and sales expenses rose 94% to $1.3
million, up $0.6 million compared to the same period of 1995.  This increase
reflects the investment the Company is making to build its sales and marketing
infrastructure by adding addition personnel and developing additional
distributor relationships.

General and administrative expenses remained relatively constant in both the
six months ended June 30, 1996 and 1995.

The Company has experienced an operating loss for each of the last three years.
The Company expects to continue to incur operating losses through at least 1997
and there can be no assurance that the Company will ever be able to achieve or
sustain profitability in the future.  CVD's results of operations have varied
significantly from quarter to quarter.  Quarterly operating results will depend
upon several factors, including the timing and amount of expenses associated
with expanding the Company's operations, the conduct of clinical trials and the
timing of regulatory approvals, new product introductions both in the United
States and internationally, the mix between pilot production of new products
and full-scale manufacturing  of existing products, the mix between domestic
and export sales, variations in foreign exchange rates, changes in third-party
payors' reimbursement policies and healthcare reform.  The Company does not
operate with a significant backlog of customer orders, and therefore revenues
in any quarter are significantly dependent on orders received within that
quarter.  In addition, the Company cannot predict ordering rates by
distributors, some of whom place infrequent stocking orders.  The Company's
expenses are relatively fixed and difficult to adjust in response to
fluctuating revenues.  As a result of these and other factors, the Company
expects to continue to experience significant fluctuations in quarterly
operating results, and there can be no assurance that the Company will be able
to achieve or maintain profitability in the future.

Liquidity and Capital Resources

On June 19, 1996, the Company closed its initial public offering which
consisted of 3,400,000 shares of common stock at $12.00 per share.  On July 17,
1996, the Company's underwriters exercised their overallotment option to
purchase an additional 510,000 shares of common stock at $12.00 per share.  CVD
received net offering proceeds from the sale of common stock of approximately
$42.7 million after deducting underwriting discounts and commissions and other
expenses of the offering.



                                       10

<PAGE>   11
ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
         RESULTS OF OPERATIONS (CONTINUED)

The Company had working capital of $43.1 million at June 30, 1996 as compared
to negative working capital of $0.8 million as of December 31, 1995.  From
inception through June 30, 1996, the Company raised approximately $11.4 million
from the private sales of preferred and common stock and $2.6 million in
working capital from Endosonics Corporation (CVD's former parent company).  The
Company intends to repay Endosonics Corporation during the third quarter of
1996.

Cash flows used in operations were $1.4 million for the first half of 1996 as
compared to $1.2 million for the same period of 1995.

On June 30, 1996, CVD had cash and cash equivalents of $45.1 million.  The
Company expects to incur substantial costs related to, among other things,
clinical testing, product development, marketing and sales expenses, and
increased working capital, prior to achieving positive cash flow from
operations.  The Company anticipates that its existing capital resources will
be sufficient to fund its operations through 1997.  CVD's future capital
requirements will depend on many factors, including its research and
development programs, the scope and results of clinical trials, the regulatory
approval process, the costs involved in intellectual property rights
enforcement or litigation, competitive products, the establishment of
manufacturing capacity, the establishment of sales and marketing capabilities,
and the establishment of collaborative relationships with other parties.  The
Company may need to raise funds through additional financings, including
private or public equity offerings and collaborative arrangements with existing
or new corporate partners.  There can be no assurance that funds will be raised
on favorable terms, or at all.  If adequate funds are not available, the
Company may be required to delay, scale back or eliminate one or more of its
development programs or obtain funds through arrangements with collaborative
partners or others that may require the Company to grant rights to certain
technologies or products that the Company would not otherwise grant.





                                       11

<PAGE>   12

 
                                   Part II.

                               OTHER INFORMATION


Item 4.  Submission of Matters to a Vote of Security-Holders

By written consent in lieu of the 1996 Annual Meeting of Stockholders, on May
1, 1996, the stockholders of the Company unanimously approved the following
resolutions:

(a)      Amendment of the Amended and Restated Certificaate of Incorporation of
the Company to effect a 2-for-1 stock split and authorization of 5,000,000
shares of undesignated Preferred Stock;

(b)      Amendment of the Amended and Restated Bylaws of the Company in
connection with the Initial Public Offering of the Company's Common Stock;

(c)      Increase the number of shares authorized under the Company's Stock
Option Plan from 400,000 shares to an aggregate of 1,200,000 shares (on a
post-split basis); and

(d)      Adoption of a 1996 Stock Option/Stock Issuance Plan and Employee Stock
Purchase Plan.



Item 6.  Exhibits and Reports on Form 8-K

(a)      The following exhibits are filed herewith:

         Exhibit 10.1 *           Supply Agreement
         Exhibit 10.2 *           OEM Agreement
         Exhibit 27               Financial Data Schedule
         
*  Confidential Treatment Requested


(b)      No reports on Form 8-K were filed during the quarter.





                                       12

<PAGE>   13

                                   SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by
undersigned thereto duly authorized.

                                         CARDIOVASCULAR DYNAMICS, INC.


Date:  August 13, 1996                   /s/  MICHAEL R. HENSON            
                                         -------------------------------------
                                         Michael R. Henson
                                         President and Chief Executive Officer
                                         (Principal Executive Officer)


Date:  August 13, 1996                   /s/  DANA P. NICKELL                
                                         --------------------------------------
                                         Dana P. Nickell
                                         Vice President-Finance and Chief
                                         Financial Officer (Principal Financial
                                         and Accounting Officer)



                                       13


<PAGE>   14

                                 EXHIBIT INDEX



10.1 *  Supply Agreement

10.2 *  OEM Agreement

27      Financial Data Schedule

_________________________

*  Confidential Treatment Requested





                                       14





<PAGE>   1
                                                                    EXHIBIT 10.1

                                SUPPLY AGREEMENT


                 THIS SUPPLY AGREEMENT (the "Agreement") is made and entered
into as of the 15th day of July, 1996 (the "Effective Date"), between
CARDIOVASCULAR DYNAMICS, INC. ("CVD" as defined below), a California
corporation, and MEDTRONIC, INC. (as defined below, "Medtronic"), a Minnesota
corporation.

                                  WITNESSETH:

                 WHEREAS, CVD is engaged in the business of developing and
manufacturing medical devices including angioplasty balloon catheters and
related devices and components; and

                 WHEREAS, Medtronic is engaged in the business of developing,
manufacturing, and marketing of a variety of medical devices worldwide; and

                 WHEREAS, Medtronic and CVD have entered into an OEM Agreement
(hereafter "OEM Agreement") with the same effective date as this Supply
Agreement whereby CVD manufactures and sells balloon catheters to Medtronic;
and

                 WHEREAS, CVD and Medtronic desire to enter into this Supply
Agreement whereby CVD will manufacture selected components for Medtronic.

                 NOW THEREFORE, in consideration of the representations,
warranties, covenants and agreements contained herein, and for other valuable
consideration, the receipt and adequacy of which is hereby acknowledged, the
parties mutually agree
 as follows:

                                   ARTICLE 1
                                  DEFINITIONS
                                  -----------
                                  
                 1.1)     Specific Definitions.  The Capitalized Terms in this
Agreement shall have the same definitions as set forth in the OEM Agreement
between the parties.  In addition to the defined terms in the OEM Agreement, the
following terms have the meanings set forth or referenced below:

                 "Component" shall mean the specific angioplasty balloon
component subassembly listed on Exhibit A hereto manufactured by CVD for
Medtronic to be used in the Field of Use.

                 "Component Product" means any product which contains a
Component manufactured by CVD under this Agreement.



<PAGE>   2
                                   ARTICLE 2
                         MANUFACTURE & SALE OF PRODUCTS
                         ------------------------------
                         
                 2.1)     Scope.  CVD hereby agrees to manufacture and sell to
Medtronic and Medtronic agrees to purchase from CVD the Components set forth on
Exhibit A, subject to the terms and conditions of this Agreement.

                 2.2)     CVD Distribution Rights. CVD represents and warrants
that no terms of any agreement with any third party would prohibit CVD from
selling Components to Medtronic for use with a Medtronic catheter platform in
any territory worldwide.

                                   ARTICLE 3
                        GENERAL OBLIGATIONS OF MEDTRONIC
                        --------------------------------
                        
                 3.1)     Marketing.  Medtronic shall use commercially
reasonable efforts to further the manufacture, promotion, marketing, sale
and/or other distribution of Component Products.

                 3.2)     Quality Control.  Medtronic agrees to follow
reasonable quality control standards with respect to the storage, preservation,
sale and use of the Components purchased under this Agreement.  In addition,
Medtronic and CVD shall each maintain inventory and sales records with respect
to Components purchased under this Agreement in sufficient detail to enable
Medtronic to conduct an effective recall of products containing Components if
Medtronic determines that such a recall is required or otherwise necessary or
appropriate.

                 3.3)     Import Documentation and Government Import Approvals.
Medtronic shall be responsible for obtaining all import licenses and permits as
may be required to import the Component Products into countries as selected by
Medtronic in accordance with then prevailing laws and regulations of such
countries.  All such filings and registrations of the Component Products shall
be in the name of Medtronic.  CVD shall cooperate fully with Medtronic in its
efforts to obtain any such approvals.

                 3.4)     MDR Filings.  Medtronic will be responsible under
Food & Drug Administration ("FDA") regulations, to the extent use of the
Components results in the requirement for Medical Device Reporting ("MDR")
filings with the FDA, Medtronic will be responsible for complying with such
reporting.  Medtronic will notify CVD of any event which Medtronic deems, in
its sole discretion, requires MDR filing.  CVD will assist Medtronic with
coordinating the MDR filing.

                 3.5)     Regulatory Approvals.  Except to the extent such
approvals are already held by CVD, Medtronic shall have primary responsibility
for obtaining at its expense and in its name any necessary "device" or
"medical" regulatory approvals from the U.S. Food and Drug Administration, and
applicable regulatory agencies of such other countries in the Markets as
Medtronic deems appropriate, prerequisite to the commercial sale of Component
Products (referred to herein as "Device Approval Efforts").





                                       2.


<PAGE>   3
                                   ARTICLE 4
                           GENERAL OBLIGATIONS OF CVD
                           --------------------------
                           
                 4.1)     Development, Manufacture and Supply of Components.
CVD shall use its best efforts to design, develop, and manufacture the
Components in a manner such that the Components comply with the Specifications.
CVD shall manufacture and supply the component in the quantities ordered by
Medtronic, in accordance with the specifications agreed to by the parties and
with Medtronic's schedule for delivery.  CVD will not unreasonably refuse to
incorporate changes requested by Medtronic provided that Medtronic shall agree
to pay the incremental costs of manufacture to implement such changes.

                 4.2)     Information.  CVD shall upon request from time to
time by Medtronic provide Medtronic with all information in CVD's possession
reasonably necessary to enable Medtronic to discharge its responsibilities
hereunder, and CVD agrees further to consult with and advise Medtronic in
matters relating to the performance of the responsibilities of Medtronic
hereunder.

                 4.3)     Compliance With Laws and Regulations.  CVD shall be
responsible for compliance with present and future applicable statutes, laws,
ordinances and regulations of national, federal, state and local governments
now or hereafter in effect relating to its manufacture of Components.  Without
limitation of the foregoing, CVD represents and warrants to Medtronic that all
Components sold and delivered to Medtronic under this Agreement will have been
manufactured in accordance with FDA Good Manufacturing Practices and all other
applicable manufacturing requirements, and that continually during the term of
this Agreement no Components delivered by CVD to Medtronic shall be adulterated
or misbranded at the time of delivery within the meaning of the U.S. Food, Drug
and Cosmetic Act and regulations thereunder.  CVD shall cause Medtronic's
regulatory personnel to be provided with reasonable access from time to time to
the facilities and records of CVD for the purpose of confirming CVD's
compliance with any applicable FDA Good Manufacturing practices and all other
applicable requirements noted in this Section.





                                       3.

<PAGE>   4
                                   ARTICLE 5
                              ORDERS FOR PRODUCTS
                              -------------------
                              
                 5.1)     Purchase Orders.  Medtronic shall submit purchase
orders for Components to CVD in writing, whether by mail, telecopier, telegram,
electronic data interchange ("EDI"), or otherwise, which shall, at a minimum,
set forth the product numbers, quantities, delivery dates, and shipping
instructions and shipping addresses for all Components ordered.  All orders
shall be subject to acceptance in accordance with the terms of this Agreement
by CVD at its office.  Each purchase order shall, upon acceptance by CVD, give
rise to a contract between Medtronic and CVD for the sale of the Components
ordered and shall be subject to and governed by the terms of this Agreement.
The terms and conditions of this Agreement shall so govern and supersede any
additional or contrary terms set forth in Medtronic's purchase order or any CVD
or Medtronic acceptance, confirmation, invoice or other document unless duly
signed by an officer of Medtronic and an executive officer of CVD and expressly
stating and identifying which specific additional or contrary terms shall
supersede the terms and conditions of this Agreement.  All purchase orders
shall be submitted at least forty-five (45) days in advance of the earliest
scheduled delivery date for such order.

                 5.2)     Modification of Orders.  No purchase order shall be
modified or canceled except upon the mutual agreement of the parties.  Mutually
agreed change orders shall be subject to all provisions of this Agreement,
whether or not the change order so states.  Notwithstanding the foregoing, any
purchase order may be canceled by Medtronic as to any Components which are not
delivered within thirty (30) days of the delivery date requested by Medtronic,
and any such cancellation shall not limit or affect any contract remedies
available to Medtronic with respect thereto.  Any such cancellation by
Medtronic must be by written notice to CVD given within fifteen (15) business
days after such 30th day.

                 5.3)     Delivery Terms.  All deliveries of Components shall
be F.O.B. Medtronic's facility located at San Diego, California, Minneapolis,
Minnesota, or Kerkrade, The Netherlands, at Medtronic's request.  CVD shall
have no further responsibility for Components, and all risk of damage to or
loss or delay of Components shall pass to Medtronic, upon their delivery at the
aforesaid F.O.B point.  All Component deliveries shall be made by a common
carrier specified by Medtronic or, in the event that no carrier shall have been
specified by Medtronic on or before the date fifteen (15) days prior to the
requested shipment date, a common carrier reasonably selected by CVD.  CVD
reserves all rights with respect to delivered Components which are permitted by
law, including, without limitation, the rights of rescission, repossession,
resale and stoppage in transit until the amount due from Medtronic with respect
to delivered Components has been paid in full.

                 5.4)     Component Changes.  CVD shall not, without reasonable
prior written notice to Medtronic, alter the specifications for Components used
in the manufacture of Components.  CVD shall accomplish such changes in a
commercially reasonable time frame or as otherwise agreed by the parties in
writing.





                                       4.

<PAGE>   5
                 5.5)     Custom Components.  In the event Medtronic is
requested by a customer to provide customized Components, Medtronic shall
provide the specifications for the customized Component to CVD.  CVD will
promptly determine and provide to Medtronic the additional cost, if any, and
the feasibility of providing the customized Component.  Medtronic will
thereafter notify CVD if it intends to provide the customer with the customized
Component and place an order.

                 5.6)     Medtronic's Forecasts.  Medtronic agrees to provide
CVD, at least forty five (45) days prior to first Commercial Release of a
Component Product in the first market, with a twelve-month forecast indicating
Medtronic's forecast purchases of Components during the twelve months following
first Commercial Release.  Such forecast shall be updated by Medtronic on a
quarterly basis (based upon the calendar year) for a rolling successive
twelve-month period, which updated forecast must be received by CVD no later
than thirty (30) days prior to the first day of each succeeding quarter.  Such
rolling forecasts by Medtronic shall be used for purposes of facilitating
Medtronic's marketing plans and meeting the lead times required by certain of
CVD's suppliers, but they are not legally binding on Medtronic except as set
forth in Section 5.8. Medtronic's initial forecast shall be provided no later
than August 10, 1996 or 30 days after the execution of this Agreement,
whichever is later.

                 5.7)     Purchase Commitment.  The first three months of each
quarterly forecast provided under Section 5.6 shall be a binding purchase
commitment upon Medtronic.  The remainder of the forecast for each quarter
shall not be legally binding on Medtronic.

                 Notwithstanding any other provisions of this Agreement, the
parties agree that the minimum purchase commitment for the first year of the
agreement must be [ * ] ([*]) Components.  Failure of Medtronic to purchase the
first year minimum quantity as reflected in the initial forecast to be provided
under Article 5.6 shall give CVD the right to terminate this Supply Agreement
(but not the OEM Agreement) upon written notice to Medtronic.

                 The minimum purchase commitment under this Article shall be
reduced by an amount equal to 0.5 times the amount of Components not supplied
by CVD within thirty (30) days of their scheduled delivery date, including but
not limited to a failure to deliver Components which conform to the then
current specifications for the Components ("Specifications"), and by an amount
equal to 1.5 times the amount of Components recalled or withdrawn from the
market if the Component covered by this Agreement is the cause of a recall from
the market or withdrawal from sale for reasons of product safety or quality as
determined by any applicable governmental authority or by the mutual agreement
of the parties.

                 5.8)     Capacity - Preferred Status.  Should CVD be unable to
meet its delivery obligations for Components, including amounts or delivery
dates, Medtronic shall be a preferred customer for delivery of what Components
are available and shall receive [ * ] ([*]%) of [  * ].  In addition, should
CVD be unable to meet its delivery obligations for Components, CVD will commit
[ * ] ([*]%)


                       * Confidential Treatment Requested


                                       5.

<PAGE>   6
 of [  *  ] until its delivery obligations to Medtronic are fulfilled.

                                   ARTICLE 6
                              PRICES AND PAYMENTS
                              -------------------
                              
                 6.1)     Prices.  Unless and until otherwise mutually agreed
by the parties in writing, the purchase prices per unit of Components to
Medtronic under this Agreement shall be as follows:

                 (i)      Initial Price.  The initial purchase price of a
         Component shall remain in effect for twelve (12) months from the date
         of Commercial Release (the "Initial Price Period").  The price for
         such Component during the Initial Price Period shall be as set forth
         in Exhibit B attached hereto.

                 (ii)     Adjustments to Price.

                 (a)      If the prices of comparable U.S. catheter products 
         [ * ]% during any period in which a Component Product is sold (as
         determined from IMS surveys or other reputable industry data surveys),
         then Medtronic may request that the purchase price be adjusted by an
         equivalent percentage change.  Provided, such change [ * ]% in any 12
         month period.  Such adjusted price to apply until further adjusted
         pursuant to this paragraph or agreed by the parties.

                 (b)      If CVD's cost of manufacture of Components [ * ]% CVD
         may increase its prices for Components by providing Medtronic with at
         least ninety (90) days prior written notice; provided that any price
         increases [ * ] ([*]) percent of the price in effect during the
         immediately preceding twelve (12) month period.  CVD shall provide
         Medtronic with evidence substantiating such an increase in its cost of
         production or raw materials of such product.  Increased prices shall
         not apply to purchase orders accepted prior to the effective date of
         the price increase unless such orders provide for delivery, and
         delivery is in fact made, more than one hundred and twenty (120) days
         after acceptance of the order.  In the event CVD increases its price
         under this section, Medtronic shall have the right to adjust its
         forecasts and quotas as mutually agreed by the parties to reflect such
         price changes.  Medtronic shall have the right, no more than once in
         any eighteen month period, upon written notice to CVD and during
         regular business hours, to have an independent representative audit
         the relevant books and records of CVD to verify compliance with this
         provision.  The report of such representative to Medtronic shall be
         limited to an opinion that CVD is, or is not, in compliance with this
         provision.


                       * Confidential Treatment Requested


                                       6.

<PAGE>   7

                 (c)      CVD agrees that cost savings or cost reductions made
         possible due to volume or technological improvements shall be shared
         with Medtronic and price adjustments shall be made in an amount equal
         to one-half of such savings or reduction in cost.  Medtronic shall
         have the right, no more than once in any eighteen month period, upon
         written notice to CVD and during regular business hours, to have an
         independent representative audit the relevant books and records of CVD
         to verify compliance with this provision.  The report of such
         representative to Medtronic shall be limited to an opinion that CVD
         is, or is not, in compliance with this provision.

                 (d)      CVD agrees that if Components are delivered and
         accepted by Medtronic more than [*] ([*]) days after the scheduled
         delivery date for such Components, the price of any such Components
         will be reduced by [*] ($[*]) [*].

                 6.2)     Records.  Medtronic agrees to keep accurate written
records sufficient in detail to enable the purchase volume of each Component to
be determined and verified by CVD.  Such records for each six-month period
subsequent to the Initial Price Period shall be retained by Medtronic for a
period of not less than three years after the end of such six-month period.

                 6.3)     Audit of Records.  Upon reasonable notice and during
regular business hours, Medtronic shall from time to time (but no more
frequently than once annually) make available the records referred to in
Section 6.2 for audit at CVD's expense by independent representatives selected
by CVD to verify the accuracy of the reports provided to CVD.  Such
representatives shall execute a suitable confidentiality agreement reasonably
acceptable to Medtronic prior to conducting such audit.  Such representatives
may disclose to CVD only its conclusions regarding the accuracy of Medtronic's
calculation of the purchase volume of each Component, and shall not disclose
Medtronic's confidential business information to CVD without the prior written
consent of Medtronic.

                 6.4)     Payment Terms.  Payments made by Medtronic for
Components purchased hereunder shall be due and payable in full within thirty
(30) days after the date of receipt of Components by Medtronic.

                 6.5)     Taxes.  Medtronic shall be responsible for and shall
pay, or reimburse CVD for, all taxes, duties, import deposits, assessments and
other governmental charges (except net income taxes) which relate to the import
of the Components into countries, other than the United States, which are now
or hereafter imposed under or by any governmental authority or agency.


                       * Confidential Treatment Requested


                                       7.

<PAGE>   8
                                   ARTICLE 7
                        INSPECTION, WARRANTY AND SERVICE
                        --------------------------------
                        
                 7.1)     Inspection of Component.  Medtronic shall conduct any
incoming inspection tests not later than thirty (30) days after the date of
receipt of such shipment at the shipping destination and may reject Components
that do not conform substantially to the Specifications.  Any Component not
rejected by Medtronic by written notice to CVD within such period shall be
deemed accepted, with the exception of latent defects not readily observable by
Medtronic.  In the event of any damage in or to a shipment of Components or in
the event any of the Components fail to comply with the then current
Specifications for the Component, Medtronic shall report the same to CVD and
furnish such written evidence or other documentation as CVD reasonably may deem
appropriate.  If the substantiating evidence delivered by Medtronic indicates
that such damage or non-conformity with Specifications existed at the time of
delivery of the Components at the F.O.B. point, Medtronic may return the
Components to CVD at CVD's expense, and at Medtronic's request CVD shall use
all reasonable efforts to deliver promptly replacement Components to Medtronic
in accordance with the delivery procedures set forth herein.

                 7.2)     Warranty.  CVD warrants to Medtronic that such
Components shall, when delivered at the F.O.B. point, meet the Specifications
and shall be free from defects in materials and workmanship, with such warranty
running for the period of time stipulated for each Component in Exhibit C,
attached hereto, commencing with the receipt of Components by Medtronic.

                 7.3)     Limited Warranty.  THE WARRANTIES SET FORTH ABOVE ARE
IN LIEU OF ALL OTHER WARRANTIES, EXPRESS OR IMPLIED, WHICH ARE HEREBY
DISCLAIMED AND EXCLUDED BY CVD, INCLUDING, WITHOUT LIMITATION, ANY WARRANTY OF
MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE, EXCEPT CVD SHALL
ALSO PROVIDE WITH RESPECT TO AN ORDER OF COMPONENTS SUCH OTHER ADDITIONAL
WARRANTIES, IF ANY, AS CVD CUSTOMARILY PROVIDED TO ITS CUSTOMERS OR END-USERS
OF THE COMPONENTS IMMEDIATELY PRECEDING THE DATE OF THIS AGREEMENT.
MEDTRONIC'S SOLE AND EXCLUSIVE REMEDY FOR BREACH OF THE FOREGOING WARRANTY
SHALL BE ITS RIGHTS UNDER ARTICLE 7.1 OR IF REPLACEMENT IS IMPRACTICAL, REFUND
OF THE AMOUNT PAID FOR THE NONCONFORMING COMPONENTS.


                                   ARTICLE 8
                              TERM AND TERMINATION
                              --------------------
                              
                 8.1)     Term.  This Agreement shall take effect as of the
date hereof and shall continue in force for a period of three (3) years from
the first delivery of Products under the OEM Agreement unless terminated
pursuant to the provisions hereof or extended by mutual agreement of the
parties.





                                       8.

<PAGE>   9
                 8.2)     Termination.  Notwithstanding the provisions of
Section 8.1 above, this Agreement may be terminated in accordance with the
following provisions:

                 (a)      A party may terminate this Agreement by giving notice
                 in writing to the other party if the other party is in breach
                 of any material representation, warranty or covenant of this
                 Agreement and shall have failed to cure such breach within
                 ninety (90) days of receipt of written notice thereof from the
                 first party;

                 (b)      A party may terminate this Agreement at any time by
                 giving notice in writing to the other party, which notice
                 shall be effective upon dispatch, should the other party
                 become insolvent, make an assignment for the benefit of
                 creditors, go into liquidation or receivership or otherwise
                 lose legal control of its business; or

                 (c)      A party may terminate this Agreement by giving notice
                 in writing to the other party should an event of Force Majeure
                 preventing performance by such other party continue for more
                 than one hundred eighty (180) consecutive days as provided in
                 Article 11 below; or

                 (d)      Medtronic may terminate this agreement within ninety
                 (90) days of execution in the event use of the Components in
                 Medtronic technology platforms is, in Medtronic's discretion,
                 technologically or otherwise unworkable or impractical.

                 8.3)     Rights and Obligations on Termination.  In the event
of termination of this Agreement for any reason, the parties shall have the
following rights and obligations:

                 (a)      Termination of this Agreement shall not release
                 either party from the obligation to make payment of all
                 amounts previously due and payable;

                 (b)      The terminating party shall have the right, at its
                 option, to cancel any or all purchase orders which provide for
                 delivery after the effective date of termination.  CVD hereby
                 acknowledges Medtronic's right to continue to sell Components
                 purchased from CVD to any person or entity until such time as
                 Medtronic's entire inventory of Components is sold; and

                 (c)      Without limitation of Section 13.6 hereof, the
                 parties' obligations pursuant to Articles 7, 11 and 12 hereof
                 shall survive termination of this Agreement.  Upon termination
                 all rights and licenses granted to Medtronic hereunder shall
                 terminate.

                 8.4)     License of Technology. In the event CVD is unable,
for any reason, to manufacture or deliver any quantities of any Components for
Medtronic hereunder for a period in excess of ninety (90) days, CVD agrees that
Medtronic shall be automatically granted a non- exclusive, fully paid up,
non-sublicensable, worldwide license to all patents, technology and know-how
necessary to make, use, and sell the Components for use or benefit of
Medtronic.  The license shall be for the earlier of the term of this Agreement
or until CVD





                                       9.

<PAGE>   10
can demonstrate, to Medtronic's satisfaction, its ability to manufacture and
deliver Components ordered by Medtronic.  Provided, Medtronic's license under
this section shall be limited to an annual production of Components no greater
than the amount reflected in Medtronic's most recent forecast for the following
twelve (12) month period.  Provided further, that Medtronic agrees that for any
Components produced under this paragraph by Medtronic, Medtronic will waive any
other remedy with respect to such Component.


                                   ARTICLE 9
                                 FORCE MAJEURE
                                 -------------
                                 
                 9.1)     Force Majeure.  "Force Majeure" shall mean any event
or condition, not existing as of the date of signature of this Agreement, not
reasonably foreseeable as of such date and not reasonably within the control of
either party, which prevents in whole or in material part the performance by
one of the parties of its obligations hereunder, such as act of God, act of
government, war or related actions, civil insurrection, riot, sabotage, strike,
epidemic, fire, flood, windstorm, and similar events.

                 9.2)     Notice.  Upon giving notice to the other party, a
party affected by an event of Force Majeure shall be released without any
liability on its part from the performance of its obligations under this
Agreement, except for the obligation to pay any amounts due and owing
hereunder, but only to the extent and only for the period that its performance
of such obligations is prevented by the event of Force Majeure.

                 9.3)     Suspension of Performance.  During the period that
the performance by one of the parties of its obligations under this Agreement
has been suspended by reason of an event of Force Majeure, the other party may
likewise suspend the performance of all or part of its obligations hereunder to
the extent that such suspension is commercially reasonable.

                                   ARTICLE 10
                             INTELLECTUAL PROPERTY
                             ---------------------
                             
                 10.1)    Ownership.  CVD owns and retains all right, title and
interest in and to all Intellectual Property used in the research, design,
development, manufacture or sale of the Components (the "CVD Intellectual
Property").  To the knowledge of CVD, the CVD Intellectual Property is valid
and has not been challenged in any judicial or administrative proceeding.
Neither any shareholder, employee or consultant of CVD or its Affiliates (or
the employer of any such consultant) has any rights in or to any of the CVD
Intellectual Property.  To the knowledge of CVD, no person or entity nor such
person's or entity's business or products has infringed, misused,
misappropriated or conflicted with the CVD Intellectual Property or currently
is infringing, misusing, misappropriating or conflicting with the CVD
Intellectual Property.  CVD has the right and authority to enter into this
Agreement.





                                      10.

<PAGE>   11
                                   ARTICLE 11
                       IDEAS, INVENTIONS & PATENT RIGHTS
                       ---------------------------------
                       
                 11.1)    Protect Licensed Know-How.  CVD and Medtronic each
agree to maintain the confidentiality of all non-public information regarding
the Component, including but not limited to the status of any patent
applications relating to the same.

                 11.2)    Protection of Component Technology and Improvements.
During the term of this Agreement, CVD shall promptly inform Medtronic of any
invention, improvement, upgrading or modification relating to the Components.
CVD agrees to reasonably protect the Components by, if appropriate in CVD's
reasonable judgment, obtaining and maintaining appropriate patent rights as
recommended by reputable patent counsel.

                 11.3)    Ownership of Intellectual Property.  All Intellectual
Property of Medtronic existing on the Effective Date, and any Intellectual
Property developed solely by employees of, or consultants (other than CVD and
its employees or consultants) working for, Medtronic in the course of this
Agreement, shall be and remain the property of Medtronic.  All Intellectual
Property of CVD existing on the Effective Date, and any Intellectual Property
developed solely by employees of, or consultants working for, CVD in the course
of this Agreement, shall be the property of CVD and Medtronic shall not acquire
any rights therein except as may be provided pursuant to a license agreement.
Any Intellectual Property developed jointly by employees or consultants of
Medtronic and CVD in the course of this Agreement ("Joint Inventions") shall be
jointly owned by Medtronic and CVD, with each party having an undivided
interest therein.  For purposes of this Section, Intellectual Property which is
the subject of a patent application shall be deemed to have been developed
jointly by employees or consultants of Medtronic and CVD, and thus be a Joint
Invention, if at least one employee or consultant of each of Medtronic and CVD
is required to be named as an inventor in such application in order for such
patent to be valid.

                 11.4)    Employees and Consultants.  Each Party shall ensure
that all employees, consultants and third parties who perform any portion of
its obligations under this Agreement have entered into written agreements
whereby such employee, consultant or third party either assigns all ownership
rights, or grants an exclusive worldwide fully-paid license (with the right to
sublicense), in any inventions or discoveries made or developed by such
employee, consultant or third party in the course of such development work.
Each party shall provide copies of such agreements to the other upon request.

                                   ARTICLE 12
                            LIMITATION OF LIABILITY
                            -----------------------
                            
                 12.1)    Limitation of Damages.  NOTWITHSTANDING ANYTHING ELSE
IN THIS AGREEMENT OR OTHERWISE, CVD SHALL NOT BE RESPONSIBLE OR LIABLE WITH
RESPECT TO ANY SUBJECT MATTER OF THIS AGREEMENT OR ANY PRODUCT ORDER RELATED
THERETO UNDER ANY CONTRACT, NEGLIGENCE, STRICT LIABILITY OR OTHER THEORY FOR
ANY AMOUNTS IN EXCESS, IN THE AGGREGATE, OF THE AMOUNTS PAID TO CVD FOR
COMPONENTS HEREUNDER.





                                      11.

<PAGE>   12
                                   ARTICLE 13
                                 MISCELLANEOUS
                                 -------------
                                 
                 13.1)    Non-Disclosure.  Except as permitted or required for
performance by the party receiving such Confidential Information of its rights
or duties hereunder, for a period of five (5) years after receipt thereof, each
party agrees (i) not to disclose or use any Confidential Information of the
other party obtained in connection with the performance of this Agreement, and
(ii) not to disclose or provide any of such Confidential Information of the
other party to any third party and to take appropriate measures to prevent any
such disclosure by its present and future employees, officers, agents,
subsidiaries, or consultants.

                 13.2)    Relationship.  This Agreement does not make either
party the employee, agent or legal representative of the other for any purpose
whatsoever.  Neither party is granted any right or authority to assume or to
create any obligation or responsibility, express or implied, on behalf of or in
the name of the other party.  In fulfilling its obligations pursuant to this
Agreement, each party shall be acting as an independent contractor.

                 13.3)    Assignment.  This Agreement shall be binding upon and
inure to the benefit of the parties hereto and the successors or assigns of the
parties hereto; provided, that (i) the rights and obligations of CVD herein may
not be assigned except to any person who succeeds to substantially all of the
stock, assets and/or business of CVD, and (ii) the rights and obligations of
Medtronic herein may not be assigned except to any person who succeeds to
substantially all of that portion of Medtronic's business to which this
Agreement relates.

                 13.4)    Complete Agreement.  The Exhibits to this Agreement
shall be construed as an integral part of this Agreement to the same extent as
if they had been set forth verbatim herein.  This Agreement and the Exhibits
hereto constitute the entire agreement between the parties hereto with respect
to the subject matter hereof and supersede all prior agreements whether written
or oral relating hereto.

                 13.5)    Governing Law.  This Agreement shall be governed by
and interpreted in accordance with the laws of the State of Minnesota,
including all matters of construction, validity, performance and enforcement,
without giving effect to principles of conflict of laws.

                 13.6)    Survival.  All of the representations, warranties,
and covenants made in this Agreement, and all terms and provisions hereof
intended to be observed and performed by the parties after the termination
hereof, shall survive such termination and continue thereafter in full force
and effect.

                 13.7)    Waiver, Discharge, Amendment, Etc.  The failure of
any party hereto to enforce at any time any of the provisions of this Agreement
shall in no way be construed to be a waiver of any such provision, nor in any
way to affect the validity of this Agreement or any part thereof or the right
of the party thereafter to enforce each and every such provision.  No waiver of
any breach of this Agreement shall be held to be a waiver of any other or
subsequent





                                      12.

<PAGE>   13
breach.  Any amendment to this Agreement shall be in writing and signed by the
parties hereto.

                 13.8)    Counterparts.    This Agreement may be executed in
any number of counterparts, each of which shall be deemed as original and all
of which together shall constitute one instrument.

                 13.9)    Titles and Headings; Construction.  The titles and
headings to Sections herein are inserted for the convenience of reference only
and are not intended to be a part of or to affect the meaning or interpretation
of this Agreement.  This Agreement shall be construed without regard to any
presumption or other rule requiring construction hereof against the party
causing this Agreement to be drafted.

                 13.10)   Benefit.  Nothing in this Agreement, expressed or
implied, is intended to confer on any person other than the parties to this
Agreement or their respective successors or assigns, any rights, remedies,
obligations or liabilities under or by reason of this Agreement.

                 13.11)   Notices.  All notices or other communications to a
party required or permitted hereunder shall be deemed given if in writing and
delivered personally or sent by telecopy (with confirmation of transmission) or
certified mail (return receipt requested) to such party at the following
addresses (or at such other addresses as shall be specified by like notice):

if to Medtronic to:

         Medtronic Interventional Vascular
         9410 Carroll Park Drive
         San Diego, CA 92121
         Attention: General Manager
         FAX (619) 453-0637

with a copy to:

         Medtronic, Inc.
         7000 Central Avenue N.E.
         Minneapolis, MN 55432
         Attention:  Vice President, Corporate Development
         FAX (612) 572-5404

if to CVD to:

         Cardiovascular Dynamics, Inc.
         13900 Alton Parkway, Suite 122
         Irvine, California 92718
         Attention: President and CEO
         FAX (714) 457-9561





                                      13.

<PAGE>   14
Medtronic or CVD may change their respective above-specified recipient and/or
mailing address by notice to the other party given in the manner herein
prescribed.  All notices shall be deemed given on the day when actually
delivered as provided above (if delivered personally or by telecopy) or on the
day shown on the return receipt (if delivered by mail).

                 13.12)   Illegality.  In case any provision of this Agreement
shall be invalid, illegal or unenforceable, the validity, legality and
enforceability of the remaining provisions shall not in any way be affected or
impaired thereby.

                 13.13)   Public Announcement.  Each of the parties to this
Agreement hereby agrees with the other parties hereto that, except as may be
reasonably required to comply with the requirements of applicable law, the New
York Stock Exchange, and Nasdaq, no press release or similar public
announcement or communication will be made or caused to be made concerning the
execution or performance of this Agreement unless specifically approved in
advance by Medtronic and CVD.  The foregoing shall not restrict Medtronic's or
CVD's communications with employees or customers.

                 13.14)   Execution of Further Documents.  Each party agrees to
execute and deliver without further consideration any further applications,
licenses, assignments or other documents, and to perform such other lawful acts
as the other party may reasonably require to fully secure and/or evidence the
rights or interests herein.

                 13.15)   Designated Contact.  The designated manager contact
for communication under this agreement shall be James L. Pacek, Vice President
of Marketing, for Medtronic and Jeff O'Donnell, Vice President of Marketing,
for CVD.

                 IN WITNESS WHEREOF, each of the parties has caused this Supply
Agreement to be executed in the manner appropriate to each, as of the date
first above written.


                                        CARDIOVASCULAR DYNAMICS, INC.


                                        By       /s/ Michael R. Henson
                                            --------------------------------- 
                                        Its      CHAIRMAN
                                            ---------------------------------

                                        MEDTRONIC, INC.


                                        By       /s/ B. Kristine Johnson 
                                            ---------------------------------
                                        Its      PRESIDENT, VASCULAR
                                            ---------------------------------

EXHIBITS:        A - List of Components
                 B - Initial Prices
                 C - Warranties





                                      14.

<PAGE>   15
                                SUPPLY AGREEMENT


                                   EXHIBIT A

Components Included:
- --------------------


COMPONENTS:      Focal Technology Component Sets including:

                          o       Distal Shaft Subassembly
                          o       Focal Technology
                          o       [ * ]
                          o       [ * ]
                          o       [ * ]

                          And any improvements to the foregoing.

Detailed Specifications for Components to be provided by CVD will be agreed to
by the parties and attached hereto and incorporated herein by reference.


                       * Confidential Treatment Requested




<PAGE>   16
                                SUPPLY AGREEMENT

                                   EXHIBIT B



Initial Component Pricing:
- --------------------------


COMPONENTS:      $[*]


                       * Confidential Treatment Requested




<PAGE>   17
                                SUPPLY AGREEMENT


                                   EXHIBIT C



Warranty Periods:
- -----------------


COMPONENTS:








<PAGE>   1
                                                                    EXHIBIT 10.2

                                 OEM AGREEMENT

                 THIS OEM AGREEMENT (the "Agreement") is made and entered into
as of the 15th day of July, 1996 (the "Effective Date"), between CARDIOVASCULAR
DYNAMICS, INC. ("CVD" as defined below), a California corporation, and
MEDTRONIC, INC. (as defined below, "Medtronic"), a Minnesota corporation.

                                  WITNESSETH:

                 WHEREAS, CVD is engaged in the business of developing and
manufacturing medical devices including angioplasty balloon catheters and
related devices and components (as defined below, the "Products"); and

                 WHEREAS, Medtronic is engaged in the business of developing,
manufacturing, and marketing of a variety of medical devices worldwide; and

                 WHEREAS, CVD and Medtronic desire to enter into this Agreement
whereby CVD will manufacture finished products and Medtronic will distribute
and sell products.

                 NOW THEREFORE, in consideration of the representations,
warranties, covenants and agreements contained herein, and for other valuable
consideration, the receipt and adequacy of which is hereby acknowledged, the
parties mutually agree as follows:

                                   ARTICLE 1
                                  DEFINITIONS
                                  -----------
                                  
                 1.1)     Specific Definitions.  As used in this Agreement, the
following terms have the meanings set forth or referenced below:

"Affiliate"
 of a specified person (natural or juridical) means a person that
directly, or indirectly through one or more intermediaries, controls, or is
controlled by, or is under common control with, the person specified.
"Control" shall mean ownership of more than 50% of the shares of stock entitled
to vote for the election of directors in the case of a corporation, and more
than 50% of the voting power in the case of a business entity other than a
corporation.

"Commercial Release" of a Product means receipt of all necessary regulatory
approvals for full commercial sale of such Product in a market.

"Confidential Information" means know-how, trade secrets, and unpublished
information disclosed (whether before or during the term of this Agreement) by
one of the parties (the



<PAGE>   2
"disclosing party") to the other party (the "receiving party") or generated
under this Agreement, excluding information which:

                 (a)      was already in the possession of receiving party
                 prior to its receipt from the disclosing party (provided that
                 the receiving party is able to provide the disclosing party
                 with reasonable documentary proof thereof);

                 (b)      is or becomes part of the public domain by reason of
                 acts not attributable to the receiving party;

                 (c)      is or becomes available to receiving party without
                 restriction from a source other than the disclosing party
                 which source, to the best of receiving party's knowledge, has
                 rightfully obtained such information and has no obligation of
                 nondisclosure or confidentiality to the disclosure party with
                 respect thereto;

                 (d)      has been independently developed by the receiving
                 party without breach of this Agreement or use of any
                 Confidential Information of the other party; or

                 (e)      has been or must be publicly disclosed by reason of
                 legal, accounting or regulatory requirements beyond the
                 reasonable control, and despite the reasonable efforts of the
                 receiving party; provided that the receiving party uses
                 diligent efforts to limit disclosure and to obtain
                 confidential treatment or a protective order.

                 All Confidential Information disclosed by one party to the
other under this Agreement shall be in writing and bear a legend "Company
Proprietary," "Company Confidential" or words of similar import or, if
disclosed in any manner other than writing, shall be preceded by an oral
statement indicating that the information is Company proprietary or
confidential, and shall be followed by transmittal of a reasonably detailed
written summary of the information provided to the receiving party with
identification as Confidential Information designated as above within thirty
(30) days.

"FDA Good Manufacturing Practices" means as defined in 21 Code of Federal
Regulations Part 820.

"Field of Use" means the design, manufacture, distribution or sale of catheters
for use in the practice of interventional cardiology including the use in
coronary applications but specifically not including peripheral or any other
applications.  Provided, the Field of Use specifically does not include the
ability to mount a stent on a Product or package an unmounted stent with a
Product.

"Knowledge" means actual knowledge of a fact or the knowledge which such person
or its officers or employees could reasonably be expected to have based on
reasonable investigation and inquiry.


                                       2.




<PAGE>   3
"Intellectual Property" means all patents, trade names, trademarks, service
marks, copyrights, and applications or registrations for any of the foregoing,
inventions, discoveries, know-how, trade secrets, data, information,
technology, processes, formulas, drawings, designs, computer programs,
licenses, and all amendments, modifications, and improvements to any of the
foregoing.

"CVD", means Cardiovascular Dynamics, Inc. and its Affiliates.

"Market" means each of the countries or groups of countries were Products may
be sold by Medtronic.

"Medtronic" means Medtronic, Inc. and its Affiliates.

"Prime Rate" means, for any calendar quarter, the prime commercial lending rate
quoted by Norwest Bank Minnesota, N.A. as in effect on the first day of such
quarter.

"Product" or "Products" means the balloon catheters listed on Exhibit A, any
improvements thereto, or hereafter jointly developed by the parties and added
to Exhibit A by mutual agreement to be used in the Field of Use.  For purposes
hereof an "improvement" shall include, without limitation, design improvements,
quality improvements, or product line extensions (changes in size and shapes or
configurations).

"Product Liability" means any liability, claim or expense, including but not
limited to attorneys' fees and medical expenses, arising in whole or in part
out of a breach of any express or implied product warranty, strict liability in
tort, negligent manufacture of product, negligent provision of services,
product recall, or any other allegation of liability arising from the design,
testing, manufacture, packaging, labeling (including instructions for use), or
sale of products.

"Specifications" means the current specifications for the Products, as may be
amended from time to time hereafter by written agreement of the parties hereto.

"Term" has the meaning set forth in Section 10.

                 1.2)     Other Terms.  Other terms may be defined elsewhere in
the text of this Agreement and shall have the meaning indicated throughout this
Agreement.

                 1.3)     Other Definitional Provisions.

                 (a)      The words "hereof," "herein," and "hereunder" and
                 words of similar import, when used in this Agreement, shall
                 refer to this Agreement as a whole and not to any particular
                 provisions of this Agreement.





                                       3.

<PAGE>   4
                 (b)      The terms defined in the singular shall have a
                 comparable meaning when used in the plural, and vice versa.

                 (c)      References to an "Exhibit" are, unless otherwise
                 specified, to one of the Exhibits attached to or referenced in
                 this Agreement, and references to an "Article" or a "Section"
                 are, unless otherwise specified, to one of the Articles or
                 Sections of this Agreement.

                 (d)      The term "person" includes any individual,
                 partnership, joint venture, corporation, trust, unincorporated
                 organization or government or any department or agency
                 thereof.

                 (e)      The term "Dollars" or "$" shall refer to the currency
                 of the United States of America.

                 (f)      All references to time shall refer to Minneapolis,
                 Minnesota time.

                                   ARTICLE 2
                         MANUFACTURE & SALE OF PRODUCTS
                         ------------------------------
                         
                 2.1)     Scope.   CVD hereby agrees to manufacture Product and
sell to Medtronic and Medtronic agrees to purchase from CVD the Products set
forth on Exhibit A together with any improvements or replacements added to
Exhibit A, subject to all the terms and conditions of this Agreement.  CVD
represents and warrants to Medtronic that it will not enter into any other
agreements permitting the sale of the Products in violation of the terms of
this Agreement.

                 2.2)     Co-exclusivity.  Medtronic's rights under this
Agreement shall be co-exclusive in the Field of Use together with CVD, and
worldwide (except in markets where CVD already has a distributor relationship
as identified on Exhibit D) with respect to each Product during the term of
this Agreement and any renewals thereof.  In markets where CVD currently has a
distributor as identified in Exhibit D, Medtronic may sell Products only if the
Product is packaged together with other Medtronic products that contain
proprietary or patented Medtronic technology.

Medtronic's distribution rights will remain co-exclusive with respect to such
Product unless and until Medtronic fails to meet the purchase Quota for such
Product pursuant to Article 6. Such period during which Medtronic's rights for
a particular Product are co-exclusive is referred to as the "Co-Exclusive
Period".  CVD covenants that during the term hereof CVD will not enter into any
additional agreements for the sale or distribution of Products in the Field of
Use except as permitted in Section 2.5 below.

                 2.3)     Subdistributors.  During the Co-exclusive Period for
a particular Product Medtronic may appoint subdistributors for the sale or
distribution of Products in such Market.





                                       4.

<PAGE>   5
Notwithstanding such appointment of subdistributors or delegation of
performance to its Affiliates, Medtronic shall remain fully responsible for the
performance of all of its covenants and obligations hereunder and the
compliance with these terms by such subdistributors.  All sales by such
subdistributors shall be counted toward Medtronic's purchase quotas under
Article 6.

                 2.4)     CVD Distributors. CVD represents and warrants that
Exhibit D contains a true and complete list of territories areas where CVD has
existing Distributors as of the date of this Agreement.  Notwithstanding any
provisions to the contrary, CVD has the right, at its discretion, to renew any
distribution agreement currently in force and to appoint new distributors for
any country in the territory.  Provided, prior to such renewal or new
appointment CVD shall give notice to Medtronic and provide the opportunity for
Medtronic to offer a proposal to obtain such distribution rights under terms to
be agreed by the parties.

                                   ARTICLE 3
                        GENERAL OBLIGATIONS OF MEDTRONIC
                        --------------------------------
                        
                 3.1)     Marketing.  Medtronic shall use commercially
reasonable efforts to further the promotion, marketing, sale and/or other
distribution of Products in Markets in which Medtronic's rights are
co-exclusive.  Without limiting the generality of the foregoing, Medtronic
shall have the following obligations with respect to the marketing and
distribution of Products in which Medtronic's distribution rights are
co-exclusive:

                 (a)      To maintain adequate sales channels to sell and
support the Products;

                 (b)      To promote the Products:

                 (c)      To inform CVD in writing within a reasonable period
of time of all incidents of injury or Product malfunction which are known to
Medtronic and involve patients and which would require Medical Device Reporting
("MDR") filings with the FDA; and

                 (d)      To work jointly with CVD in the preparation of
mutually agreeable Product literature and labeling and operations and technical
manuals.  CVD shall have primary responsibility for the preparation of
promotional and advertising materials for the Product in English and
appropriate foreign languages.  Medtronic shall bear the incremental costs of
preparation of such materials with Medtronic's name or requested changes.

                 3.2)     Quality Control.  Medtronic agrees to follow
reasonable quality control standards with respect to the storage, preservation,
sale and use of the Products purchased under this Agreement.  Medtronic shall
make no representations or warranties concerning such Products other than as
made to Medtronic by CVD or as otherwise may be agreed by the





                                       5.

<PAGE>   6
parties.  In addition, Medtronic and CVD shall each maintain inventory and
sales records with respect to Products purchased under this Agreement in
sufficient detail to enable Medtronic to conduct an effective recall of
Products if Medtronic determines that such a recall is required or otherwise
necessary or appropriate.

                 3.3)     MDR Filings.  As set forth in Section 4 below, CVD
will be responsible for complying with MDR or similar reporting.  Medtronic
will notify CVD of any event which Medtronic deems, in its sole discretion,
requires MDR filing.  Medtronic will assist CVD with coordinating the MDR
filing.

                 3.4)     Regulatory Approvals.  As set forth in Section 4
below, CVD shall have primary responsibility for obtaining at its expense and
in its name any necessary "device" or "medical" regulatory approvals from the
U.S. Food and Drug Administration, and applicable regulatory agencies of such
other countries.  Medtronic shall cooperate fully with CVD in its efforts to
obtain any such approvals.  To the extent such approvals are requested by
Medtronic, Medtronic agrees to pay any incremental costs of such filings or
approvals.

                 3.5)     Information.  Medtronic shall upon request from time
to time by CVD provide CVD with information in Medtronic's possession
reasonably necessary to enable CVD to discharge its responsibilities hereunder,
and Medtronic agrees further to consult with and advise CVD in matters relating
to the performance of the responsibilities of CVD hereunder.


                                   ARTICLE 4
                           GENERAL OBLIGATIONS OF CVD
                           --------------------------
                           
                 4.1)     Development, Manufacture and Supply of Products.

                 (a)      CVD shall use its best efforts to design and develop
the Products, in a form such that the Products comply with the Specifications.
CVD shall make all reasonable efforts at its expense to have the initial
Product offerings available to Medtronic in sufficient quantities for a product
launch.  CVD agrees to provide to Medtronic [    *    ] ([*]) catheters by 
[  *  ], [  *  ] ([*]) catheters by [  *  ] and thereafter on delivery schedules
reasonably requested by Medtronic.

                 (b)      CVD shall manufacture and supply the Product in
accordance with the Specifications agreed to by the parties.  CVD shall be
responsible for packaging and sterilization of Products purchased under this
Agreement in accordance with Specifications which are mutually satisfactory to
the parties.  CVD will not unreasonably refuse to incorporate packaging changes
requested by Medtronic at Medtronic's expense.  CVD will package Product under
CVD's or Medtronic's name at the request of Medtronic upon receipt of any
Product approvals that may be necessary.  Provided, CVD shall have a reasonable
amount of time to implement such changes and to sell existing inventory.


                       * Confidential Treatment Requested


                                       6.

<PAGE>   7
                 4.2)     Training.  CVD shall provide adequate sales and
Product training to Medtronic's personnel in San Diego, California,
Minneapolis, Minnesota or at such other U.S. location designated by Medtronic
for up to ten (10) business days per year during the term of this Agreement,
and at a mutually agreeable location in Europe for up to an additional ten (10)
business days per year during the term of this Agreement.  Each party shall
bear its own salary, travel and per diem expenses incurred in connection with
providing and receiving such training.

                 4.3)     Literature, Labeling, Manuals and Packaging.  CVD
shall be responsible for all labeling of the Product and shall reasonably
cooperate and assist Medtronic in the preparation of Product literature,
operations and technical manuals, packaging, and labeling for additional
products as designated by Medtronic.

                 4.4)     Information.  CVD shall upon request from time to
time by Medtronic provide Medtronic with all information in CVD's possession
reasonably necessary to enable Medtronic to discharge its responsibilities
hereunder, and CVD agrees further to consult with and advise Medtronic in
matters relating to the performance of the responsibilities of Medtronic
hereunder.

                 4.5)     Compliance With Laws and Regulations.  CVD shall be
responsible for compliance with present and future applicable statutes, laws,
ordinances and regulations of national, federal, state and local governments
now or hereafter in effect relating to its manufacture of Products.  Without
limitation of the foregoing, CVD represents and warrants to Medtronic that all
Products sold and delivered to Medtronic under this Agreement will have been
manufactured in accordance with FDA Good Manufacturing Practices and all other
applicable manufacturing requirements, and that continually during the term of
this Agreement no Products delivered by CVD to Medtronic shall be adulterated
or misbranded at the time of delivery within the meaning of the U.S. Food, Drug
and Cosmetic Act and regulations thereunder.  CVD shall cause Medtronic's
regulatory personnel to be provided with reasonable access from time to time to
the facilities and records of CVD for the purpose of confirming CVD' compliance
with any applicable FDA Good Manufacturing Practices and all other applicable
requirements noted in this Section.

                 4.6)     Certifications.  CVD agrees use commercially
reasonable efforts to pursue ISO and CE Mark certifications and approvals on
Products as requested by Medtronic.  The parties agree to cooperate in the
procurement of such certifications and approvals.

                 4.7)     Import Documentation and Government Import Approvals
in the Markets.  CVD shall be responsible for obtaining all import licenses and
permits as may be required to import the Products into countries as selected by
Medtronic in accordance with then prevailing laws and regulations of such
countries to the extent the products do not currently have import approval.
All such filings and registrations of the Products shall be in the names of CVD
and Medtronic jointly, to the extent feasible, in accordance with prevailing
laws and regulations.  Medtronic shall cooperate fully with CVD in its efforts
to obtain any such approvals.





                                       7.

<PAGE>   8
                 4.8)     MDR Filings.  CVD will be responsible for complying
with the Food & Drug Administration ("FDA") regulations for Medical Device
Reporting ("MDR") filings with the FDA.  Medtronic will notify CVD of any event
which Medtronic deems, in its sole discretion, requires MDR filing.  Medtronic
will assist CVD with coordinating the MDR filing.

                 4.9)     Regulatory Approvals.  CVD shall have primary
responsibility for obtaining at its expense and in its name any necessary
"device" or "medical" regulatory approvals from the U.S. Food and Drug
Administration, and applicable regulatory agencies of such other countries in
the Markets as Medtronic deems appropriate, prerequisite to the commercial sale
of the Products (referred to herein as "Device Approval Efforts").  Such Device
Approval Efforts shall include the preparation and filing of any required
Investigational Device Exemption, Pre-Market Approval or Section 510(k) filings
and the establishment and oversight of any required clinical investigations and
clinical follow-up relating to future commercial sale of the Products.
Medtronic shall cooperate fully with CVD in its efforts to obtain any such
approvals.  Medtronic shall be responsible for any incremental costs of such
filings to the extent such filings are required by this Agreement or due to
changes in Products or labeling requested by Medtronic.

                                   ARTICLE 5
                              ORDERS FOR PRODUCTS
                              -------------------
                              
                 5.1)     Purchase Orders.  Medtronic shall submit purchase
orders for Products to CVD in writing, whether by mail, telecopier, telegram,
electronic data interchange ("EDI"), or otherwise, which shall, at a minimum,
set forth the product numbers, quantities, delivery dates, and shipping
instructions and shipping addresses for all Products ordered.  All orders shall
be subject to acceptance in accordance with the terms of this Agreement by CVD
at its office.  Each purchase order shall, upon acceptance by CVD, give rise to
a contract between Medtronic and CVD for the sale of the Products ordered and
shall be subject to and governed by the terms of this Agreement.  The terms and
conditions of this Agreement shall so govern and supersede any additional or
contrary terms set forth in Medtronic's purchase order or any CVD or Medtronic
acceptance, confirmation, invoice or other document unless duly signed by an
officer of Medtronic and an executive officer of CVD and expressly stating and
identifying which specific additional or contrary terms shall supersede the
terms and conditions of this Agreement.  All purchase orders shall be submitted
at least thirty (30) days in advance of the earliest scheduled delivery date
for such order.

                 5.2)     Modification of Orders.  No purchase order shall be
modified or canceled except upon the mutual agreement of the parties.  Mutually
agreed change orders shall be subject to all provisions of this Agreement,
whether or not the change order so states.  Notwithstanding the foregoing, any
purchase order may be canceled by Medtronic as to any Products which are not
delivered within thirty (30) days of the delivery date requested by Medtronic
and accepted by CVD, and any such cancellation shall not limit or affect any
contract remedies available to Medtronic with respect thereto.  Any such
cancellation by





                                       8.

<PAGE>   9
Medtronic must be by written notice to CVD given within fifteen (15) business
days after such 60th day.

                 5.3)     Delivery Terms.  All deliveries of Products shall be
F.O.B. Medtronic's facility located at San Diego, California, Minneapolis,
Minnesota, or Kerkrade, The Netherlands, at Medtronic's request.  CVD shall
have no further responsibility for Products, and all risk of damage to or loss
or delay of Products shall pass to Medtronic, upon their delivery at the
aforesaid F.O.B point.  All Product deliveries shall be made by a common
carrier specified by Medtronic or, in the event that no carrier shall have been
specified by Medtronic on or before the date fifteen (15) days prior to the
requested shipment date, a common carrier reasonably selected by CVD.  CVD
reserves all rights with respect to delivered Products which are permitted by
law, including, without limitation, the rights of rescission, repossession,
resale and stoppage in transit until the amount due from Medtronic with respect
to delivered Products has been paid in full.

                 5.4)     Product Changes.  CVD shall not, without reasonable
prior written notice to Medtronic, alter the Specifications for Products used
in the manufacture of Products.  CVD shall accomplish such changes in a
commercially reasonable time frame or as otherwise agreed by the parties in
writing.

                 5.5)     Custom Products.  In the event Medtronic is requested
by a customer to provide customized Products, Medtronic shall provide the
specifications for the customized Product to CVD.  CVD will promptly determine
and provide to Medtronic the additional cost, if any, and the feasibility of
providing the customized Product.  Medtronic will thereafter notify CVD if it
intends to provide the customer with the customized Product and place an order.

                 5.6)     Medtronic's Forecasts.  Medtronic agrees to provide
CVD, at least thirty (30) days prior to first Commercial Release in the first
market, with a twelve-month forecast indicating Medtronic's forecast purchases
of Products during the twelve months following first Commercial Release.  Such
forecast shall be updated by Medtronic on a quarterly basis (based upon the
calendar year) for a rolling successive twelve-month period, which updated
forecast must be received by CVD no later than thirty (30) days prior to the
first day of each succeeding quarter.  Such rolling forecasts by Medtronic
shall be used for purposes of facilitating Medtronic's marketing plans and
meeting the lead times required by certain of CVD's suppliers, but they are not
legally binding on Medtronic except as set forth in Section 5.7.

                 5.7)     Purchase Commitment.  The first three months of each
quarterly forecast provided under Section 5.6 shall be a binding purchase
commitment upon Medtronic with regard to volume and Product mix.  Except as
provided in Article 6.1, the remainder of the forecast for each quarter shall
not be legally binding on Medtronic.





                                       9.

<PAGE>   10
                 5.8)     Capacity  -  Preferred Status.  Should CVD be unable
to meet its delivery obligations for any Products, including amounts or
delivery dates, Medtronic shall be a preferred customer for delivery of what
Products are available and shall receive [   *   ] ([*]%) of [ * ].  In
addition, should CVD be unable to meet its delivery obligations for Products,
CVD will commit [ * ] ([*]%) of [   *   ] until its delivery obligations to
Medtronic are fulfilled.

                                   ARTICLE 6
                          MINIMUM PURCHASE REQUIREMENT
                          ----------------------------

                 6.1)     Determination of Quota.  During each year of this
Agreement, Medtronic shall purchase at least the quantities of Product (the
"Quota") as follows:

                 o        Year 1, Medtronic agrees to a Quota of [ * ] ([*])
                 Products.  Medtronic agrees, within 10 days of execution of
                 this Agreement, to issue an irrevocable binding purchase order
                 for [ * ] of Products.  Medtronic further agrees during the
                 remainder of Year 1 to issue binding purchase orders for 
                 [  *  ] subject to the forecast provisions of Article 5.7.

                 o        Year 2, Medtronic agrees to a Quota of the lesser of
                 (a) [ * ] ([*]) [ * ] (as defined in the Supply Agreement
                 between the parties even with the date hereof) or (b) [ * ]
                 ([*]%) of the Quota for the prior year as adjusted pursuant to
                 Article 6.2 of whatever mix is forecasted and ordered by
                 Medtronic. During Year 2, Medtronic agrees to issue binding
                 purchase orders for at least the Quota of Products and/or
                 Components.

                 o        Year 3, Medtronic agrees to a Quota of the lesser of
                 (a) [ * ] ([*]) [ * ] or (b) [ * ] ([*]%) of the Quota for the
                 prior year as adjusted pursuant to Article 6.2 of whatever mix
                 is forecasted and ordered by Medtronic.  During Year 3,
                 Medtronic agrees to issue binding purchase orders for at least
                 the Quota of Products and/or Components.

Within thirty (30) days prior to the beginning of Years 2 and 3, Medtronic
shall provide written notice to CVD of its election to commit to the Quota
purchases for the following year as set forth above.  If Medtronic elects not
to commit to the Quota, CVD shall have the rights set forth in Article 6.3.


                       * Confidential Treatment Requested


                                      10.

<PAGE>   11
In the event Medtronic's final forecast for any year does not reflect orders
equal to the above Quotas, CVD may manufacture and deliver to Medtronic, in
addition to orders received, such quantities of Product or Components equal to
the difference between the actual orders received from Medtronic and the Quota
for such year.  The mix of Products and Components provided pursuant to this
provision shall be of the same Product and Component mix as is reflected in
Medtronic's most recent forecast.  Medtronic agrees to purchase such Product
and Component to fulfill its commitment obligations under this Article 6.1.

During each annual period of any renewal of this Agreement, Medtronic and CVD
shall negotiate a mutually agreed upon and reasonable annual Quota of each
Product and/or Component on a worldwide basis.  During the Term of this
Agreement or any extension thereof, Medtronic shall place orders with CVD for
at least the aggregate worldwide Quota of such Product.

                 6.2)     Reductions in Quota.  Notwithstanding Medtronic's
obligations pursuant to Sections 6.1, the worldwide quota for any period shall
be reduced (a) in the case of subpart (i) below by an amount equal to 0.5 times
the amount of Products not supplied by CVD against purchase orders issued by
Medtronic, (b) in the case of subpart (ii) below, by an amount equal to 1.5
times the amount of Product affected by such recall or withdrawal, and (c) in
the case of subpart (iii) below, by a pro rata amount of the Quota for the
applicable period based upon the number of days of such period which have
transpired prior to the removal of the restriction on sale referenced in such
subpart:

                 (i)      If CVD fails for any reason to deliver ordered
                 Products within thirty (30) days of the date scheduled for
                 delivery thereof (including but not limited to a failure to
                 deliver Products which conform to the then current
                 specifications for the Product) and a further reduction if CVD
                 fails to deliver Products for any additional thirty (30) day
                 period(s) following the initial failure to deliver;

                 (ii)     If a Product covered by this Agreement is recalled
                 from the market or withdrawn from sale for reasons of product
                 safety or quality as determined by any applicable governmental
                 authority or by the mutual agreement of the parties; or

                 (iii)    If Medtronic is restricted in the sale of Products in
                 such Market by any applicable regulatory authority because
                 approval (including but not limited to U. S. Food, Drug and
                 Cosmetic Act Section 5 1 O(K) authorization or PMA approval)
                 to sell the Product is pending, denied or revoked.

                 6.3)     Termination of Exclusivity.  In the event Medtronic
does not commit in writing under Article 6.1 to purchase the Quota for Years 2
and 3, CVD's exclusive remedy shall be to elect to convert Medtronic's
co-exclusive rights to non-exclusive rights.  Any election by CVD to so convert
(referred to herein as the "Conversion Notice") Medtronic's coexclusive rights
to non-exclusive rights must be made in writing by CVD within thirty (30) days
following the commitment notice under Article 6. 1. In the event Medtronic's
rights hereunder are converted to non-exclusive: (a) the Products included on
Exhibit A as of the





                                      11.

<PAGE>   12
date of such conversion shall be frozen and no additional Products or
improvements will be provided to Medtronic under this Agreement or the Supply
Agreement unless agreed in writing by CVD; and (b) Medtronic may only order
such quantity of Product as are required to meet any existing contractual
commitments to Medtronic customers until termination of this Agreement or until
such contractual commitments terminate, whichever is sooner.

                                   ARTICLE 7
                              PRICES AND PAYMENTS
                              -------------------
                              
                 7.1)     Prices.  Unless and until otherwise mutually agreed
by the parties in writing, the purchase prices per unit of Product to Medtronic
under this Agreement shall be as follows:

                          (i)     Initial Price.  The initial purchase price of
                          Products shall remain in effect for twelve (12)
                          months from the date of Commercial Release (the
                          "Initial Price Period") unless adjusted hereunder.
                          The price for such Product during the Initial Price
                          Period shall be as set forth in Exhibit B attached
                          hereto.

                          (ii)    Adjustments to Price.  The per unit price of
                          Product after the first twelve months from the date
                          of Commercial Release will be reviewed and adjusted
                          at the end of each twelve (12) month period while
                          this Agreement is in effect as follows:

                                  (a)      If the prices of comparable U.S.
                                           catheter products [ * ] during any
                                           period in which Product is sold (as
                                           determined from IMS surveys or other
                                           reputable industry data surveys),
                                           then Medtronic may request that the
                                           purchase price be adjusted by an
                                           equivalent percentage change.
                                           Provided, such change [ * ] in any
                                           12 month period. Such adjusted price
                                           to apply until further adjusted
                                           pursuant to this paragraph or agreed
                                           by the parties.

                                  (b)      If CVD's cost of manufacture of
                                           Products [ * ] CVD may increase its
                                           prices for Products by providing
                                           Medtronic with at least ninety (90)
                                           days prior written notice; provided
                                           that any price increases [*] of the
                                           price in effect during the
                                           immediately preceding twelve (12)
                                           month period.  CVD shall provide
                                           Medtronic with evidence
                                           substantiating such an increase in
                                           its cost of production or raw
                                           materials of such product.
                                           Increased prices shall not apply to
                                           purchase orders accepted prior to
                                           the effective date of the price
                                           increase unless such orders provide
                                           for delivery, and delivery is in
                                           fact made, more than one hundred and
                                           twenty (120) days after acceptance
                                           of the order.  In the event CVD
                                           increases its price under this
                                           section, Medtronic shall have the
                                           right to adjust its


                       * Confidential Treatment Requested


                                      12.

<PAGE>   13
                                           forecasts and quotas as mutually
                                           agreed by the parties to reflect such
                                           price changes.  Medtronic shall have
                                           the right, no more than once in any
                                           eighteen month period, upon written
                                           notice to CVD and during regular
                                           business hours, to have an
                                           independent representative audit the
                                           relevant books and records of CVD to
                                           verify compliance with this
                                           provision.  The report of such
                                           representative to Medtronic shall be
                                           limited to an opinion that CVD is, or
                                           is not, in compliance with this
                                           provision.

                                  (c)      CVD agrees that cost savings or cost
                                           reductions made possible due to
                                           volume or technological improvements
                                           shall be shared with Medtronic and
                                           price adjustments shall be made in
                                           an amount equal to one-half of such
                                           savings or reduction in cost.
                                           Medtronic shall have the right, no
                                           more than once in any eighteen month
                                           period, upon written notice to CVD
                                           and during regular business hours,
                                           to have an independent
                                           representative audit the relevant
                                           books and records of CVD to verify
                                           compliance with this provision.  The
                                           report of such representative to
                                           Medtronic shall be limited to an
                                           opinion that CVD is, or is not, in
                                           compliance with this provision.

                                  (d)      CVD agrees that if Products are
                                           delivered and accepted by Medtronic
                                           more than [*] ([*]) [ * ] after the
                                           scheduled delivery date for such
                                           Products, the price of any such
                                           Products will be [ * ].

                 7.2)     Records.  Medtronic agrees to keep accurate written
records sufficient in detail to enable the purchase volume of each Product to
be determined and verified by CVD.  Such records for each six-month period
subsequent to the Initial Price Period shall be retained by Medtronic for a
period of not less than three years after the end of such six-month period.

                 7.3)     Audit of Records.  Upon reasonable notice and during
regular business hours, Medtronic shall from time to time (but no more
frequently than once annually) make available the records referred to in
Section 7.2 for audit at CVD's expense by independent representatives selected
by CVD to verify the accuracy of the reports provided to CVD.  Such
representatives shall execute a suitable confidentiality agreement reasonably
acceptable to Medtronic prior to conducting such audit.  Such representatives
may disclose to CVD only its conclusions regarding the accuracy of Medtronic's
calculation of the purchase volume of each Product, and shall not disclose
Medtronic's confidential business information to CVD without the prior written
consent of Medtronic.

                 7.4)     Payment Terms & Advance Payment.  Payments made by
Medtronic for Products purchased hereunder shall be due and payable in full
within thirty (30) after the date of receipt by Medtronic.  Provided, Medtronic
agrees to provide an advance payment of [ * ] ($[*]) within ten (10)


                       * Confidential Treatment Requested


                                      13.

<PAGE>   14
business days from execution of this Agreement.  Medtronic's purchases
hereunder shall be charged against such advance payment until such payment is
depleted.  Thereafter, payment shall be made in accordance with the terms
hereof.

                 7.5)     Taxes.  Medtronic shall be responsible for and shall
pay, or reimburse CVD for, all taxes, duties, import deposits, assessments and
other governmental charges (except net income taxes) which relate to the import
of the Products into countries, other than the United States, which are now or
hereafter imposed under or by any governmental authority or agency.


                                   ARTICLE 8
                        INSPECTION, WARRANTY AND SERVICE
                        --------------------------------
                        
                 8.1)     Inspection of Product.  Medtronic shall conduct any
incoming inspection tests not later than thirty (30) days after the date of
receipt of such shipment at the shipping destination and may reject Products
that do not conform substantially with the Specifications.  Any Product not
rejected by Medtronic by written notice to CVD within such period shall be
deemed accepted, with the exception of latent defects not readily observable by
Medtronic.  In the event of any damage in or to a shipment of Product or in the
event any of the Products fail to comply with the then current Specifications
for the Product, Medtronic shall report the same to CVD and furnish such
written evidence or other documentation as CVD reasonably may deem appropriate.
If the substantiating evidence delivered by Medtronic indicates that such
damage or non-conformity with Specifications existed at the time of delivery of
the Products at the F.O.B. point, Medtronic may return the Products to CVD at
CVD's expense, and at Medtronic's request CVD shall use all reasonable efforts
to deliver promptly replacement Products to Medtronic in accordance with the
delivery procedures set forth herein.

                 8.2)     Warranty.  CVD warrants to Medtronic and to
Medtronic's customers that such Products shall, when delivered at the F.O.B.
point, meet the Specifications and shall be free from defects in materials and
workmanship, with such warranty to Medtronic's customers running for the period
of time stipulated for each Product in Exhibit C, attached hereto, commencing
with the date of receipt by Medtronic.

                 8.3)     Limited Warranty.  THE WARRANTIES SET FORTH ABOVE ARE
IN LIEU OF ALL OTHER WARRANTIES, EXPRESS OR IMPLIED, WHICH ARE HEREBY
DISCLAIMED AND EXCLUDED BY CVD, INCLUDING, WITHOUT LIMITATION, ANY WARRANTY OF
MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE, EXCEPT CVD SHALL
ALSO PROVIDE WITH RESPECT TO AN ORDER OF PRODUCT SUCH OTHER ADDITIONAL
WARRANTIES, IF ANY, AS CVD CUSTOMARILY PROVIDED TO ITS CUSTOMERS OR END-USERS
OF THE PRODUCTS IMMEDIATELY PRECEDING THE DATE OF THIS AGREEMENT.  MEDTRONIC'S
SOLE AND EXCLUSIVE REMEDY FOR BREACH OF THE FOREGOING WARRANTY SHALL BE ITS
RIGHTS UNDER ARTICLE 8.1 OR IF REPLACEMENT IS IMPRACTICAL, REFUND OF THE AMOUNT
PAID FOR THE NONCONFORMING PRODUCTS.





                                      14.

<PAGE>   15

                                   ARTICLE 9
                                INDEMNIFICATION
                                ---------------
                                
                 9.1)     CVD's Liability.  CVD shall indemnify, defend and
hold harmless Medtronic and each of its subsidiaries, officers, directors,
employees, shareholders and distributors from and against and in respect of any
and all demands, claims, actions or causes of action, assessments, losses,
damages, liabilities, interest and penalties, costs and expenses (including,
without limitation, reasonable legal fees and disbursements incurred in
connection therewith and in seeking indemnification therefor, and any amounts
or expenses required to be paid or incurred in connection with any action,
suit, proceeding, claim, appeal, demand, assessment or judgment)
("Indemnifiable Losses"), resulting from, arising out of, or imposed upon or
incurred by any person to be indemnified hereunder by reason of claims of
intellectual property infringement resulting from the distribution and sale of
the Products within the Field of Use, but in any event excluding claims
relating to: (a) Products or components made in accordance with Medtronic's
specifications; (b) Products or components modified by Medtronic after
shipment; (c) Products or components combined with other products, processes or
materials by Medtronic where the alleged claim relates to such combination; and
(d) matters for which Medtronic is responsible under Section 9.2 below.  CVD
shall maintain product liability insurance or self-insurance in such amounts as
ordinary good business practice for its type of business would make advisable
and shall provide Medtronic with evidence of this coverage.

                 9.2)     Medtronic's Liability.  Medtronic shall indemnify,
defend and hold harmless CVD and each of its subsidiaries, officers, directors,
employees, shareholders and suppliers from and against and in respect of any
and all demands, claims, actions or causes of action, assessments, losses,
damages, liabilities, interest and penalties, costs and expenses (including,
without limitation, reasonable legal fees and disbursements incurred in
connection therewith and in seeking indemnification therefor, and any amounts
or expenses required to be paid or incurred in connection with any action,
suit, proceeding, claim, appeal, demand, assessment or judgment)
("Indemnifiable Losses"), resulting from, arising out of, or imposed upon or
incurred by any person to be indemnified hereunder by reason of (i) failure to
disclose limitations on warranties set forth herein on behalf of CVD or product
claims whether written or oral, made or alleged to be made, by Medtronic in its
advertising, publicity, promotion, or sale of any Products where such product
claims were not provided by or approved by CVD, or (ii) negligent handling by
Medtronic of the Product, but in any event excluding matters for which CVD is
responsible under Section 9.1 above.

                 9.3)     Third Party Claims.  If a claim by a third party is
made against any indemnified party, and if the indemnified party intends to
seek indemnity with respect thereto under this Article 9, such indemnified
party shall promptly notify the indemnifying party of such claim; provided,
however, that failure to give timely notice shall not affect the rights of the
indemnified party so long as the failure to give timely notice does not
materially adversely





                                      15.

<PAGE>   16
affect the indemnifying party's ability to defend such claim against a third
party.  The indemnifying party shall be entitled to settle or assume the
defense of such claim, including the employment of counsel satisfactory to the
indemnified party, as provided below.  If the indemnifying party elects to
settle or defend such claim, it shall notify the indemnified party within
thirty (30) days (but in no event less than twenty (20) days before any
pleading, filing or response on behalf of the indemnified party is due) of its
intent to do so.  If the indemnifying party elects not to settle or defend such
claim or fails to notify the indemnified party of its election within thirty
(30) days (or such shorter period provided above) after receipt of the
indemnified party's notice of a claim of indemnity hereunder, the indemnified
party shall have the right to contest, settle or compromise the claim without
prejudice to any rights to indemnification hereunder.  Regardless of which
party is controlling the settlement or defense of any claim, (i) both the
indemnified party and indemnifying party shall act in good faith, (ii) the
indemnifying party shall not thereby permit to exist any lien, encumbrance or
other adverse charge upon any asset of any indemnified party or of its
subsidiaries, (iii) the indemnifying party shall permit the indemnified party
to participate in such settlement or defense through counsel chosen by the
indemnified party, provided that all fees, costs and expenses of such counsel
in an action controlled by the indemnifying party shall be borne by the
indemnified party, unless the indemnifying party and indemnified party have
different available defenses to such third party claim, in which case such
fees, costs and expenses shall be borne by the indemnifying party, (iv) no
entry of judgment or settlement of a claim may be agreed to without the written
consent of both the indemnified party and the indemnifying party, which
consents shall not be unreasonably withheld, and (v) the indemnifying party
shall agree promptly to reimburse the indemnified party for the full amount of
such claim pursuant to this Article 9. So long as the indemnifying party is
reasonably contesting any such claim in good faith as permitted herein, the
indemnified party shall not pay or settle any such claim.  The controlling
party shall deliver, or cause to be delivered, to the other party copies of all
correspondence, pleadings, motions, briefs, appeals or other written statements
relating to or submitted in connection with the settlement or defense of any
such claim, and timely notices of, and the right to participate pursuant to
(iii) above in any hearing or other court proceeding relating to such claim.

                 9.4)     Cooperation as to Indemnified Liability.  Each party
hereto shall cooperate fully with the other parties with respect to access to
books, records, or other documentation within such party's control, if deemed
reasonably necessary or appropriate by any party in the defense of any claim
which may give rise to indemnification hereunder.

                                   ARTICLE 10
                          TERM, TERMINATION & LICENSE
                          ---------------------------
                          
                 10.1)    Term.  This Agreement shall take effect as of the
date hereof and shall continue in force for a period of three (3) years from
the date of first delivery of a Product hereunder unless terminated pursuant to
the provisions hereof or extended by mutual agreement of the parties.





                                      16.

<PAGE>   17
                 10.2)    Termination.  Notwithstanding the provisions of
Section 10.1 above, this Agreement may be terminated in accordance with the
following provisions:

                 (a)      A party may terminate this Agreement by giving notice
                 in writing to the other party if the other party is in breach
                 of any material representation, warranty or covenant of this
                 Agreement and shall have failed to cure such breach within
                 ninety (90) days of receipt of written notice thereof from the
                 first party;

                 (b)      A party may terminate this Agreement at any time by
                 giving notice in writing to the other party, which notice
                 shall be effective upon dispatch, should the other party
                 become insolvent, make an assignment for the benefit of
                 creditors, go into liquidation or receivership or otherwise
                 lose legal control of its business; or

                 (c)      A party may terminate this Agreement by giving notice
                 in writing to the other party should an event of Force Majeure
                 preventing performance by such other party continue for more
                 than one hundred eighty (180) consecutive days as provided in
                 Article 11 below.

                 10.3)    Rights and Obligations on Termination.  In the event
of termination of this Agreement for any reason, the parties shall have the
following rights and obligations:

                 (a)      Termination of this Agreement shall not release
                 either party from the obligation to make payment of all
                 amounts previously due and payable;

                 (b)      The terminating party shall have the right, at its
                 option, to cancel any or all purchase orders which provide for
                 delivery after the effective date of termination.  CVD hereby
                 acknowledges Medtronic's right to continue to sell Products
                 purchased from CVD to any person or entity until such time as
                 Medtronic's entire inventory of Products is sold; and

                 (c)      Without limitation of Section 15.6 hereof, the
                 parties' obligations pursuant to Articles 8, 9, 13 and 14
                 hereof shall survive termination of this Agreement.

                 (d)      Upon termination all rights and licenses granted to
                 Medtronic hereunder shall terminate.

                 10.4)    License of Technology.  In the event CVD is unable,
for any reason, to manufacture or deliver any quantities of any Product for
Medtronic hereunder for a period excess of ninety (90) days, CVD agrees that
Medtronic shall be automatically granted a nonexclusive, fully paid up,
non-sublicensable, worldwide license to all patents, technology and know-how
necessary to make, use, or sell the Products for use or benefit of Medtronic.
The license shall be for the earlier of the term hereof or until CVD can
demonstrate, to Medtronic's satisfaction, its ability to manufacture and
deliver Product ordered by Medtronic.  Provided, Medtronic's license under this
section shall be limited to an annual production of Product no greater than the
amount reflected in Medtronic's most recent forecast for the





                                      17.

<PAGE>   18
following twelve (12) month period.  Provided further, Medtronic agrees that
for any Products manufactured by Medtronic under this paragraph, Medtronic will
waive any other remedy with respect to such Product.

                                   ARTICLE 11
                                 FORCE MAJEURE
                                 -------------
                                 
                 11.1)    Force Majeure.  "Force Majeure" shall mean any event
or condition, not existing as of the date of signature of this Agreement, not
reasonably foreseeable as of such date and not reasonably within the control of
either party, which prevents in whole or in material part the performance by
one of the parties of its obligations hereunder, such as act of God, act of
government, war or related actions, civil insurrection, riot, sabotage, strike,
epidemic, fire, flood, windstorm, and similar events.

                 11.2)    Notice.  Upon giving notice to the other party, a
party affected by an event of Force Majeure shall be released without any
liability on its part from the performance of its obligations under this
Agreement, except for the obligation to pay any amounts due and owing
hereunder, but only to the extent and only for the period that its performance
of such obligations is prevented by the event of Force Majeure.

                 11.3)    Suspension of Performance.  During the period that
the performance by one of the parties of its obligations under this Agreement
has been suspended by reason of an event of Force Majeure, the other party may
likewise suspend the performance of all or part of its obligations hereunder to
the extent that such suspension is commercially reasonable.

                                   ARTICLE 12
                             INTELLECTUAL PROPERTY
                             ---------------------
                             
                 12.1)    Trademark License.  Medtronic shall have a
non-exclusive, non-sublicenseable license to use all trademarks, trade names
and logotypes of CVD relating to the Products in connection with the sale or
other distribution, promotion, advertising and/or maintenance of the Products.
Medtronic agrees to use and protect CVD's trademarks to the same extent and in
the same manner that it uses and protects its own intellectual property and to
comply with all reasonable quality control guidelines provided by CVD with
respect to such trademarks.  Medtronic shall acquire no right, title or
interest in such CVD trademarks, trade names and logotypes, other than as
provided for above, and Medtronic shall not use any CVD trademarks, trade names
and logotypes as part of Medtronic's corporate or trade name or permit any
third party under Medtronic's control to do so without the prior written
consent of CVD.  Medtronic shall in addition have the right to promote and sell
the Products under trademarks, trade names and logotypes of Medtronic selected
by Medtronic, which trademarks, trade names and logotypes shall be and shall
remain the property of Medtronic.





                                      18.

<PAGE>   19
All rights under this Section 12.1 shall terminate upon termination of this
Agreement under Article 10, subject to Section 10.3(b).

                 12.2)    Ownership.  CVD owns and retains all right, title,
and interest in and to all Intellectual Property used in the research, design,
development, manufacture or sale of the Products (the "CVD Intellectual
Property").  To the knowledge of CVD, the CVD Intellectual Property is valid
and has not been challenged in any judicial or administrative proceeding.
Neither any shareholder, employee or consultant of CVD or its Affiliates (or
the employer of any such consultant) has any rights in or to any of the CVD
Intellectual Property.  To the knowledge of CVD, no person or entity nor such
person's or entity's business or products has infringed, misused,
misappropriated or conflicted with the CVD Intellectual Property or currently
is infringing, misusing, misappropriating or conflicting with the CVD
Intellectual Property.  CVD has the right and authority to enter into this
Agreement.


                                   ARTICLE 13
                       IDEAS, INVENTIONS & PATENT RIGHTS
                       ---------------------------------
                       
                 13.1)    Protect Licensed Know-How.  CVD and Medtronic each
agree to maintain the confidentiality of all non-public information regarding
the Product, including but not limited to the status of any patent applications
relating to the same.

                 13.2)    Protection of Product Technology and Improvements.
During the term of this Agreement, CVD shall promptly inform Medtronic of any
invention, improvement, upgrading or modification relating to the Products.
CVD agrees to reasonably protect the Products by, if appropriate in CVD's
reasonable judgment, obtaining and maintaining appropriate patent rights as
recommended by reputable patent counsel.

                 13.3)    Ownership of Intellectual Property.   All
Intellectual Property of Medtronic existing on the Effective Date, and any
Intellectual Property developed solely by employees of, or consultants (other
than CVD and its employees or consultants) working for, Medtronic in the course
of this Agreement, shall be and remain the property of Medtronic.  All
Intellectual Property of CVD existing on the Effective Date, and any
Intellectual Property developed solely by employees of, or consultants working
for, CVD in the course of this Agreement, shall be the property of CVD and
Medtronic shall not acquire any rights therein except as may be provided
pursuant to a license agreement.  Any Intellectual Property developed jointly
by employees or consultants of Medtronic and CVD in the course of this
Agreement ("Joint Inventions") shall be jointly owned by Medtronic and CVD,
with each party having an undivided interest therein.

                 13.4)    Prosecution of Patents on Joint Inventions.  If
either CVD or Medtronic proposes to file an application for any U.S.  or
foreign patent, copyright registration, or any continuation or modification
thereof, with respect to any Joint Invention, then such party proposing to file
such registration ("the first party") shall notify the other party ("the second
party") in writing and the parties shall mutually agree upon those territories
in which to file for such protection.  All such filing shall be in the name of
CVD and Medtronic and shall name the appropriate inventors





                                      19.

<PAGE>   20
from each party.  The parties shall share the filing and prosecution costs on
an equal basis.  If the second party elects not to participate in such action,
the first party shall be entitled to control such action

                 13.5)    Employees and Consultants.  Each party shall ensure
that all employees, consultants and third parties who perform any portion of
its obligations under this Agreement have entered into written agreements
whereby such employee, consultant, or third party either assigns all ownership
rights, or grants an exclusive worldwide fully-paid license (with the right to
sublicense), in any inventions or discoveries made or developed by such
employee, consultant or third party in the course of such development work.
Each party shall provide copies of such agreements to the other upon request.

                 13.6)    Prosecution of Infringement of Patent Technology.

                 (a)      Each of Medtronic and CVD shall promptly notify the
                 other if it knows or has reason to believe that rights to the
                 Product are being infringed or misappropriated by a third
                 party within the Field of Use or that such infringement or
                 misappropriation is threatened.  CVD shall, after learning of
                 and investigating such alleged infringement or
                 misappropriation, send notice to Medtronic electing to do one
                 of the following: (i) prosecute such alleged infringement or
                 misappropriation for CVD's own account; (ii) offer Medtronic
                 the choice of participating in such prosecution, or (iii)
                 decline to prosecute such alleged infringement or
                 misappropriation.

                 (b)      In the event CVD elects to prosecute such alleged
                 infringement or misappropriation for its own account pursuant
                 to (a)(i) above, CVD shall be solely responsible for payment
                 of all of its own costs of prosecution and of negotiating
                 settlement, and shall retain all proceeds from such
                 prosecution.  CVD shall have the right to join Medtronic as a
                 party plaintiff to any such proceeding if CVD believes it is
                 necessary to successfully prosecute such infringement or
                 misappropriation.  Medtronic shall cooperate, at CVD's
                 expense, in connection with the initiation and prosecution by
                 CVD of such suit.

                 (c)      In the event CVD offers Medtronic the choice of
                 participating in such prosecution pursuant to (ii) above, upon
                 receipt of CVD's notice, Medtronic shall have 30 calendar days
                 in which to notify CVD in writing of Medtronic's election to
                 participate in the prosecution of such alleged infringement.
                 If Medtronic elects to participate, Medtronic shall be
                 obligated to pay its own costs and expenses incurred by it in
                 such prosecution and shall be entitled to receive 50 percent
                 of all proceeds realized from CVD's and Medtronic's
                 prosecuting of such matter.

                 (d)      In the event CVD elects not to prosecute pursuant to
                 (iii) above, Medtronic shall be entitled to prosecute such
                 alleged infringement for its own account, shall be solely
                 responsible for all costs of prosecution and for negotiating
                 settlement, and shall retain all proceeds from such
                 prosecution.  Medtronic shall have the right at its own
                 expense to join CVD as a party plaintiff to any such
                 proceeding if Medtronic believes it is necessary to
                 successfully prosecute such infringement.  CVD shall cooperate
                 in connection with the initiation and prosecution by Medtronic
                 of such suit.





                                      20.

<PAGE>   21
                                   ARTICLE 14
                            LIMITATION OF LIABILITY
                            -----------------------
                                       
                 14.1)    Limitation of Damages.  NOTWITHSTANDING ANYTHING ELSE
IN THIS AGREEMENT OR OTHERWISE, CVD SHALL NOT BE RESPONSIBLE OR LIABLE WITH
RESPECT TO ANY SUBJECT MATTER OF THIS AGREEMENT OR ANY PRODUCT ORDER RELATED
THERETO UNDER ANY CONTRACT, NEGLIGENCE, STRICT LIABILITY OR OTHER THEORY FOR
ANY AMOUNTS IN EXCESS, IN THE AGGREGATE, OF THE AMOUNTS PAID TO CVD FOR
PRODUCTS HEREUNDER.


                                   ARTICLE 15
                                 MISCELLANEOUS
                                 -------------
                                 
                 15.1)    Non-Disclosure.  Except as permitted or required for
performance by the party receiving such Confidential Information of its rights
or duties hereunder, for a period of five (5) years after receipt thereof, each
party agrees (i) not to disclose or use any Confidential Information of the
other party obtained in connection with the performance of this Agreement, and
(ii) not to disclose or provide any of such Confidential Information of the
other party to any third party and to take appropriate measures to prevent any
such disclosure by its present and future employees, officers, agents,
subsidiaries, or consultants.

                 15.2)    Relationship.  This Agreement does not make either
party the employee, agent or legal representative of the other for any purpose
whatsoever.  Neither party is granted any right or authority to assume or to
create any obligation or responsibility, express or implied, on behalf of or in
the name of the other party.  In fulfilling its obligations pursuant to this
Agreement, each party shall be acting as an independent contractor.

                 15.3)    Assignment.  This Agreement shall be binding upon and
inure to the benefit of the parties hereto and the successors or assigns of the
parties hereto; provided, that (i) the rights and obligations of CVD herein may
not be assigned except to any person who succeeds to substantially all of the
stock, assets and/or business of CVD, and (ii) the rights and obligations of
Medtronic herein may not be assigned except to any person who succeeds to
substantially all of that portion of Medtronic's business to which this
Agreement relates.

                 15.4)    Complete Agreement.  The Exhibits to this Agreement
shall be construed as an integral part of this Agreement to the same extent as
if they had been set forth verbatim herein.  This Agreement and the Exhibits
hereto constitute the entire agreement between the parties hereto with respect
to the subject matter hereof and supersede all prior agreements whether written
or oral relating hereto.





                                      21.

<PAGE>   22

                 15.5)    Governing Law.  This Agreement shall be governed by
and interpreted in accordance with the laws of the State of Minnesota,
including all matters of construction validity, performance and enforcement,
without giving effect to principles of conflict of laws.

                 15.6)    Survival.  All of the representations, warranties,
and covenants made in this Agreement, and all terms and provisions hereof
intended to be observed and performed by the parties after the termination
hereof, shall survive such termination and continue thereafter in full force
and effect.

                 15.7)    Waiver, Discharge, Amendment, Etc.  The failure of
any party hereto to enforce at any time any of the provisions of this Agreement
shall in no way be construed to be a waiver of any such provision, nor in any
way to affect the validity of this Agreement or any part thereof or the right
of the party thereafter to enforce each and every such provision.  No waiver of
any breach of this Agreement shall be held to be a waiver of any other or
subsequent breach.  Any amendment to this Agreement shall be in writing and
signed by the parties hereto.

                 15.8)    Counterparts.  This Agreement may be executed in any
number of counterparts, each of which shall be deemed as original and all of
which together shall constitute one instrument.

                 15.9)    Titles and Headings Construction.  The titles and
headings to Sections herein are inserted for the convenience of reference only
and are not intended to be a part of or to affect the meaning or interpretation
of this Agreement.  This Agreement shall be construed without regard to any
presumption or other rule requiring construction hereof against the party
causing this Agreement to be drafted.

                 15.10)   Benefit.  Nothing in this Agreement, expressed or
implied, is intended to confer on any person other than the parties to this
Agreement or their respective successors or assigns, any rights, remedies,
obligations or liabilities under or by reason of this Agreement.

                 15.11)   Notices.  All notices or other communications to a
party required or permitted hereunder shall be deemed given if in writing and
delivered personally or sent by telecopy (with confirmation of transmission) or
certified mail (return receipt requested) to such party at the following
addresses (or at such other addresses as shall be specified by like notice):

if to Medtronic to:

                 Medtronic Interventional Vascular
                 9410 Carroll Park Drive
                 San Diego, CA 92121
                 Attention: General Manager
                 FAX (619) 453-0637





                                      22.

<PAGE>   23
with a copy to:

                 Medtronic, Inc.
                 7000 Central Avenue N.E.
                 Minneapolis, MN 55432
                 Attention:  Vice President, Corporate Development
                 FAX (612) 572-5404

if to CVD to:

                 Cardiovascular Dynamics, Inc.
                 13900 Alton Parkway, Suite 122
                 Irvine, California 92718
                 Attention: President & CEO
                 FAX (714) 457-9561

Medtronic or CVD may change their respective above-specified recipient and/or
mailing address by notice to the other party given in the manner herein
prescribed.  All notices shall be deemed given on the day when actually
delivered as provided above (if delivered personally or by telecopy) or on the
day shown on the return receipt (if delivered by mail).

                 15.12)   Illegality.  In case any provision of this Agreement
shall be invalid, illegal or unenforceable, the validity, legality and
enforceability of the remaining provisions shall not in any way be affected or
impaired thereby.

                 15.13)   Public Announcement.  Each of the parties to this
Agreement hereby agrees with the other parties hereto that, except as may be
reasonably required to comply with the requirements of applicable law, the New
York Stock Exchange, or NASDAQ, no press release or similar public announcement
or communication will be made or caused to be made concerning the execution or
performance of this Agreement unless specifically approved in advance by
Medtronic and CVD.  The foregoing shall not restrict Medtronic's or CVD's
communications with employees or customers.

                 15.14)   Execution of Further Documents.  Each party agrees to
execute and deliver without further consideration any further applications,
licenses, assignments or other documents, and to perform such other lawful acts
as the other party may reasonably require to fully secure and/or evidence the
rights or interests herein.

                 15.15)   Transaction Approvals.  This Agreement and its
effectiveness are contingent and conditioned upon the approval of Medtronic's
and CVD's appropriate management authorities (including, if required, the
approval of the Board of Directors, which approval may be granted or denied in
the discretion of the Board of Directors).  If the foregoing condition is not
satisfied within ten business days of the date hereof, then this Agreement
shall be null and void in all respects.





                                      23.

<PAGE>   24
                 15.16)   Designated Contact.  The designated manager contact
for communication under this agreement shall be James L. Pacek, Vice President
of Marketing, for Medtronic and Jeff O'Donnell, Vice President of Marketing,
for CVD.  The designated contacts of the parties shall meet from time to time
to discuss the performance of this agreement, adding additional products to the
Agreement, and opportunities for additional collaboration between the parties.

                 IN WITNESS WHEREOF, each of the parties has caused this OEM
Agreement to be executed in the manner appropriate to each, as of the date
first above written.

                                       CARDIOVASCULAR DYNAMICS, INC.


                                       By       /s/ Michael R. Henson      
                                           ---------------------------------
                                       Its     Chairman                   
                                           ---------------------------------

                                       Dated:   July 15, 1996            
                                              ------------------------------


                                       MEDTRONIC, INC.


                                       By       /s/ B. Kristine Johnson     
                                           ---------------------------------
                                       Its     President Vascular        
                                           ---------------------------------

                                       Dated:   July 15, 1996             
                                              ------------------------------

EXHIBITS:        A - List of Products
                 B - Initial Prices
                 C - Warranty Periods
                 D - CVD Distributors





                                      24.

<PAGE>   25
                                 OEM AGREEMENT



                                   EXHIBIT A

Products Included:
- ------------------

<TABLE>
<CAPTION>
                                A              B              C              D
    --------------------------------------------------------------------------------
                               FACT           CAT            ARC           LYNX
    --------------------------------------------------------------------------------
    <S>                       <C>            <C>            <C>            <C>
       Balloon Size           [ * ]          [ * ]          [ * ]          [ * ]
           (mm)
    --------------------------------------------------------------------------------
      Balloon Lengths         [ * ]          [ * ]          [ * ]          [ * ]
           (mm)
    --------------------------------------------------------------------------------
       Focal Lengths           [ * ]         [ * ]          [ * ]          [ * ]
           (mm)
    --------------------------------------------------------------------------------
         Rail/OTW              OTW           Rail            OTW           Rail
    --------------------------------------------------------------------------------
    Primary Indication:
    --------------------------------------------------------------------------------
      Stent Delivery            X              X                             X
    --------------------------------------------------------------------------------
           PTCA                                               X
    --------------------------------------------------------------------------------
         Projected
       Availability:
    --------------------------------------------------------------------------------
           U.S.                now            n/a           [ * ]           n/a
    --------------------------------------------------------------------------------
            ROW                now            now           [ * ]          [ * ]
    --------------------------------------------------------------------------------
</TABLE>


*  CVD currently developing [*] balloon sizes for 1997 availability.
*  CVD developing [*] and [*] balloon lengths with [*] and [*] focal lengths.

Detailed Specifications for Products to be provided by CVD will be agreed to by
the parties and attached hereto and incorporated herein by reference.

Regulatory approvals and/or clinical use testing may be required for all
products not released on July 15, 1996.  During the ninety (90) days following
the projected availability dates, CVD will provide to Medtronic quantities of
up to [*] catheters per month or such larger quantities as may be mutually
agreed by the parties.

Attached hereto is a non-binding summary of Products (including the products
listed above) intended by the parties to be available in the second and third
year of this Agreement.


                       * Confidential Treatment Requested

<PAGE>   26
                                 OEM AGREEMENT



                                   EXHIBIT B


Initial Product Pricing:
- ------------------------

ALL CATHETERS on EXHIBIT A:
- ---------------------------

<TABLE>
<CAPTION>
         QUANTITY*                         PRICE/UNIT
         <S>                               <C>
         [*]                               $ [*]

         [*]                               $ [*]
</TABLE>


* The quantities reflected are annual quantities.


                       * Confidential Treatment Requested

<PAGE>   27
                                 OEM AGREEMENT

                                   EXHIBIT C


Warranty Periods:
- -----------------


Catheters




<PAGE>   28
                                 OEM AGREEMENT


                                   EXHIBIT D


CVD Distributors, Territories & RI-IM (Exclusive or Non-exclusive):
- -------------------------------------------------------------------

Territories Where Medtronic is Co-Exclusive with CVD Direct Sales

                 o        United States
                 o        Belgium
                 o        Brazil
                 o        Canada
                 o        Denmark
                 o        Finland
                 o        France
                 o        Hong Kong
                 o        Israel
                 o        Luxembourg
                 o        Malaysia
                 o        Netherlands
                 o        Norway
                 o        Puerto Rico
                 o        Saudi Arabia
                 o        Singapore
                 o        Sweden
                 o        Thailand

                 Any other country without a distribution agreement effective
                 prior to July 1, 1996.


Countries where CVD has Distributor Relationship
- ------------------------------------------------

                 o        Germany
                 o        Italy
                 o        Japan
                 o        Spain
                 o        United Kingdom

                 As long as these distribution agreements remain in effect,
                 Medtronic may sell Focal technology only if it is a
                 sub-assembly of or prepackaged with a Medtronic product that
                 also contains patented technology.



<TABLE> <S> <C>

<ARTICLE> 5
<CIK> 0001013606
<NAME> CARDIOVASCULAR DYNAMICS, INC.
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
       
<S>                             <C>
<PERIOD-TYPE>                   6-MOS
<FISCAL-YEAR-END>                          DEC-31-1996
<PERIOD-START>                             JAN-01-1996
<PERIOD-END>                               JUN-30-1996
<EXCHANGE-RATE>                                      1
<CASH>                                          45,097
<SECURITIES>                                         0
<RECEIVABLES>                                    2,125
<ALLOWANCES>                                       180
<INVENTORY>                                      1,175
<CURRENT-ASSETS>                                48,549
<PP&E>                                             775
<DEPRECIATION>                                     197
<TOTAL-ASSETS>                                  49,173
<CURRENT-LIABILITIES>                            5,434
<BONDS>                                              0
<PREFERRED-MANDATORY>                                0
<PREFERRED>                                          0
<COMMON>                                             9
<OTHER-SE>                                      42,926
<TOTAL-LIABILITY-AND-EQUITY>                    49,173
<SALES>                                          3,584
<TOTAL-REVENUES>                                 3,834
<CGS>                                            1,863
<TOTAL-COSTS>                                    1,863
<OTHER-EXPENSES>                                 3,219
<LOSS-PROVISION>                                     0
<INTEREST-EXPENSE>                                   0
<INCOME-PRETAX>                                 (1,147)
<INCOME-TAX>                                         0
<INCOME-CONTINUING>                             (1,147)
<DISCONTINUED>                                       0
<EXTRAORDINARY>                                      0
<CHANGES>                                            0
<NET-INCOME>                                    (1,147)
<EPS-PRIMARY>                                     (.22)
<EPS-DILUTED>                                     (.22)
        

</TABLE>