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Stockholders' Rights Agreement - Cardima Inc., Gabriel B. Vegh, Olympic Venture Partners III LP and OVP III Entrepreneurs Fund

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                          FOURTH AMENDED AND RESTATED
                          ---------------------------
                         STOCKHOLDERS' RIGHTS AGREEMENT
                         ------------------------------

     THIS FOURTH AMENDED AND RESTATED STOCKHOLDERS' RIGHTS AGREEMENT is made as
of the 7th day of March, 1997, by and between Cardima, Inc., a Delaware
corporation (the "Company"), Gabriel B. Vegh (the "Founder") and the investors
                  -------                          -------                   
listed on Exhibit A attached hereto (each an "Investor," and collectively, the
                                              --------                       
"Investors").
 ---------  

                                    RECITALS
                                    --------

     WHEREAS, certain investors have purchased shares of Series A Preferred
Stock of the Company (the "Series A Preferred Stock") pursuant to that certain
                           ------------------------                          
Series A Preferred Stock Purchase Agreement dated May 21, 1993 (the "Series A
                                                                     --------
Agreement"), or pursuant to certain warrants issued to such investors by the
---------                                                                  
Company, shares of Series B Preferred Stock of the Company (the "Series B
                                                                 --------
Preferred Stock") pursuant to a recapitalization approved in that certain action
---------------                                                                
by Written Consent of the Stockholders of Cardima, Inc. dated June 30, 1993, or
shares of Series C Preferred Stock of the Company (the "Series C Preferred
                                                        ------------------
Stock") pursuant to certain Series C Stock Purchase Agreements (the "Series C
                                                                     --------
Agreements") or shares of Series D Preferred Stock of the Company (the "Series D
----------                                                              --------
Preferred Stock") pursuant to that certain Series D Preferred Stock Purchase
---------------                                                            
Agreement dated December 19, 1995 (the "Series D Agreement");
                                        ------------------  

     WHEREAS, the Founder has purchased shares of Common Stock of the Company
pursuant to that certain Employee Stock Purchase Agreement dated May 4, 1993
(the "Founder's Agreement"); and
      -------------------      

     WHEREAS, certain Investors are purchasing shares of Series E Preferred
Stock of the Company (the "Series E Preferred Stock") pursuant to that certain
                           ------------------------                          
Series E Preferred Stock Purchase Agreement of even date herewith (the "Series E
                                                                        --------
Agreement") and have asked the other Investors, the Founder and the Company to
---------                                                                    
further amend and restate the Third Amended and Restated Stockholders' Rights
Agreement dated December 19, 1995, by and between certain of the Investors, the
Founder and the Company.

     NOW, THEREFORE, in consideration of the mutual promises and covenants
hereinafter set forth, the Investors, the Founder and the Company agree as
follows:

     1.  Registration Rights.  The Company covenants and agrees as follows:
         -------------------                                              

          1.1  Definitions.  For purposes of this Section 1:
               -----------                                 

               (a) The term "Act" means the Securities Act of 1933, as amended.
                             ---                                              

               (b) The term "Form S-3" means such form under the Act as in
                             --------
effect on the date hereof or any registration form under the Act subsequently
adopted by the SEC which permits inclusion or incorporation of substantial
information by reference to other documents filed by the Company with the SEC.
<PAGE>

               (c) The term "Holder" means any person owning or having the
                             ------
right to acquire Registrable Securities or any assignee thereof in accordance
with Section 1.13 hereof.

               (d) The term "1934 Act" shall mean the Securities Exchange Act of
                             --------                                          
1934, as amended.

               (e) The term "register," "registered," and "registration" refer
                             --------    ----------        ------------
to a registration effected by preparing and filing a registration statement or
similar document in compliance with the Act, and the declaration or ordering of
effectiveness of such registration statement or document.

               (f) The term "Registrable Securities" means (i) the Common Stock
                             ----------------------                           
issuable or issued upon conversion of the Series A Preferred Stock (including
shares of Series A Preferred Stock issuable upon exercise of warrants issued by
the Company), (ii) the Common Stock issuable or issued upon conversion of the
Series B Preferred Stock, (iii) the Common Stock issuable or issued upon
conversion of the Series C Preferred Stock (including shares of Series C
Preferred Stock issuable upon exercise of warrants issued by the Company), (iv)
the Common Stock issuable or issued upon conversion of the Series D Preferred
Stock (including shares of Series D Preferred Stock issuable upon exercise of
warrants issued by the Company) (v) the Common Stock issuable or issued upon
conversion of the Series E Preferred Stock (including shares of Series E
Preferred Stock issuable upon exercise of warrants issued by the Company), (vi)
the 66,666 shares of Common Stock (the "Founders Shares") issued to the Founder
                                        ---------------                       
pursuant to the Founder's Agreement provided, however, that the Founder Shares
shall not he deemed Registrable Securities and the Founder shall not be deemed a
Holder for the purposes of Sections 1.2, 1.6, 1.12, 1.14 and 2 and (vii) any
Common Stock of the Company issued as (or issuable upon the conversion or
exercise of any warrant, right or other security which is issued as) a dividend
or other distribution with respect to, or in exchange for or in replacement of
the shares referenced in (i), (ii), (iii), (iv), (v) and (vi) above, excluding
in all cases, however, any Registrable Securities sold by a person in a
transaction in which his rights under this Section 1 are not assigned.

               (g) The "number of shares of Registrable Securities then
                        -----------------------------------------------
outstanding" shall be determined by the number of shares of Common Stock
-----------
outstanding which are, and the number of shares of Common Stock issuable
pursuant to then exercisable or convertible securities which are, Registrable
Securities.

               (h) The term "SEC" shall mean the Securities and Exchange
                             ---                                       
Commission.

          1.2  Request for Registration.
               ------------------------

               (a)  If the Company shall receive at any time after the earlier
of (i) March 7, 2000, or (ii) six (6) months after the effective date of the
first registration statement for a bona fide, firm commitment underwritten
public offering of the Company's Common Stock at an offering price of at least
$10.00 per share (if prior to June 30, 1997 or $11.00 per share if on or after
July 1, 1997) and net proceeds to the Company of at least $20,000,000 (other
than a

                                      -2-
<PAGE>

registration statement relating either to the sale of securities to employees of
the Company pursuant to a stock option, stock purchase or similar plan or a SEC
Rule 145 transaction) (a "Qualified IPO"), a written request from the Holders of
                          -------------                                        
at least twenty-five percent (25%) of the Registrable Securities then
outstanding that the Company file a registration statement under the Act
covering the registration of at least fifteen percent (15%) of the Registrable
Securities then outstanding, then the Company shall:

                  (i)  within ten (10) days of the receipt thereof, give
written notice of such request to all Holders; and

                 (ii)  effect as soon as practicable, and in any event within
sixty (60) days of the receipt of such request, the registration under the Act
of all Registrable Securities which the Holders request to be registered,
subject to the limitations of subsection 1.2(b), within twenty (20) days of the
mailing of such notice by the Company in accordance with Section 3.5.

               (b)  If the Holders initiating the registration request hereunder
("Initiating Holders") intend to distribute the Registrable Securities covered
--------------------                                                         
by their request by means of an underwriting, they shall so advise the Company
as a part of their request made pursuant to subsection 1.2(a) and the Company
shall include such information in the written notice referred to in subsection
1.2(a).  The underwriter will be selected by the Company and shall be reasonably
acceptable to a majority in interest of the Initiating Holders.  In such event,
the right of any Holder to include his Registrable Securities in such
registration shall be conditioned upon such Holder's participation in such
underwriting and the inclusion of such Holder's Registrable Securities in the
underwriting (unless otherwise mutually agreed by a majority in interest of the
Initiating Holders and such Holder) to the extent provided herein.  All Holders
proposing to distribute their securities through such underwriting shall
(together with the Company as provided in subsection 1.4(e)) enter into an
underwriting agreement in customary form with the underwriter or underwriters
selected for such underwriting, the provisions of which will be consistent with
the provisions of this Agreement.  Notwithstanding any other provision of this
Section 1.2, if the underwriter advises the Initiating Holders in writing that
marketing factors require a limitation of the number of shares to be
underwritten, then the Initiating Holders shall so advise all Holders of
Registrable Securities which would otherwise be underwritten pursuant hereto,
and the number of shares of Registrable Securities that may be included in the
underwriting shall be allocated among all Holders thereof, including the
Initiating Holders, in proportion (as nearly as practicable) to the amount of
Registrable Securities of the Company owned by each Holder; provided, however,
that the number of shares of Registrable Securities to be included in such
underwriting shall not be reduced unless all other securities are first entirely
excluded from the underwriting.

               (c)  Notwithstanding the foregoing, if the Company shall furnish
to Holders requesting a registration statement pursuant to this Section 1.2, a
certificate signed by the Chief Executive Officer of the Company stating that in
the good faith judgment of the Board of Directors of the Company, it would be
seriously detrimental to the Company and its stockholders for such registration
statement to be filed and it is therefore essential to defer the

                                      -3-
<PAGE>

filing of such registration statement, the Company shall have the right to defer
taking action with respect to such filing for a period of not more than one
hundred twenty (120) days after receipt of the request of the Initiating
Holders; provided, however, that the Company may not utilize this right more
than once in any twelve (12) month period.

               (d)  In addition, the Company shall not be obligated to effect,
or to take any action to effect, any registration pursuant to this Section 1.2:

                  (i)  After the Company has received three (3) requests
pursuant to this Section 1.2, each of which either has been declared or ordered
effective or withdrawn at the request of the Investors (other than as a result
of a material adverse change to the Company);

                 (ii)  During the period starting with the date sixty (60) days
prior to the Company's good faith estimate of the date of filing of, and ending
on a date one hundred eighty (180) days after the effective date of, a
registration subject to this Section 1.2 or Section 1.3 hereof; provided that
the Company is actively employing in good faith reasonable efforts to cause such
registration statements to become effective; or

                (iii)  If the Initiating Holders propose to dispose of shares of
Registrable Securities that may be immediately registered on Form S-3 pursuant
to a request made pursuant to Section 1.12 below.

          1.3  Company Registration.  If (but without any obligation to do so)
               --------------------                                          
the Company proposes to register (including for this purpose a registration
effected by the Company for stockholders other than the Holders) any of its
stock or other securities under the Act in connection with the public offering
of such securities solely for cash (other than (a) a registration relating a
                                                                           
Qualified IPO prior to June 30, 1997, the completion of which results in the
-------------                                                              
conversion into Common Stock of all outstanding shares of Preferred Stock, (b) a
registration relating solely to the sale of securities to participants in a
Company stock plan, (c) a registration on any form which does not include
substantially the same information as would be required to be included in a
registration statement covering the sale of the Registrable Securities or (d) a
registration in which the only Common Stock being registered is Common Stock
issuable upon conversion of debt securities which are also being registered),
the Company shall, at such time, promptly give each Holder written notice of
such registration.  Upon the written request of each Holder given within twenty
(20) days after mailing of such notice by the Company in accordance with Section
3.5, the Company shall, subject to the provisions of Section 1.8, cause to be
registered under the Act all of the Registrable Securities that each such Holder
has requested to be registered.

          1.4  Obligations of the Company.  Whenever required under this Section
               --------------------------                                      
1 to effect the registration of any Registrable Securities, the Company shall,
as expeditiously as reasonably possible:

               (a)  Prepare and file with the SEC a registration statement with
respect to such Registrable Securities and use its best efforts to cause such
registration statement to become effective, and, upon the request of the Holders
of a majority of the Registrable Securities

                                      -4-
<PAGE>

registered thereunder, keep such registration statement effective for a period
of up to one hundred twenty (120) days or until the distribution contemplated in
the Registration Statement has been completed; provided, however, that (i) such
one hundred twenty (120) day period shall be extended for a period of time equal
to the period the Holder refrains from selling any securities included in such
registration at the request of an underwriter of Common Stock (or other
securities) of the Company; and (ii) in the case of any registration of
Registrable Securities on Form S-3 which are intended to be offered on a
continuous or delayed basis, such one hundred twenty (120) day period shall be
extended, if necessary, to keep the registration statement effective until all
such Registrable Securities are sold, provided that Rule 415, or any successor
rule under the Act, permits an offering on a continuous or delayed basis, and
provided further that applicable rules under the Act governing the obligation to
file a post-effective amendment permit, in lieu of filing a post-effective
amendment which (I) includes any prospectus required by Section 10(a)(3) of the
Act or (II) reflects facts or events representing a material or fundamental
change in the information set forth in the registration statement, the
incorporation by reference of information required to be included in (I) and
(II) above to be contained in periodic reports filed pursuant to Section 13 or
15(d) of the 1934 Act in the registration statement.

               (b)  Prepare and file with the SEC such amendments and
supplements to such registration statement and the prospectus used in connection
with such registration statement as may be necessary to comply with the
provisions of the Act with respect to the disposition of all securities covered
by such registration statement.

               (c)  Furnish to the Holders such numbers of copies of a
prospectus, including a preliminary prospectus, in conformity with the
requirements of the Act, and such other documents as they may reasonably request
in order to facilitate the disposition of Registrable Securities owned by them.

               (d)  Use its best efforts to register and qualify the securities
covered by such registration statement under such other securities or Blue Sky
laws of such jurisdictions as shall be reasonably requested by the Holders;
provided, that the Company shall not be required in connection therewith or as a
condition thereto to qualify to do business or to file a general consent to
service of process in any such states or jurisdictions, unless the Company is
already subject to service in such jurisdiction and except as may be required by
the Act.

               (e)  In the event of any underwritten public offering, enter
into and perform its obligations under an underwriting agreement, in usual and
customary form, with the managing underwriter of such offering. Each Holder
participating in such underwriting shall also enter into and perform its
obligations under such an agreement (provided that the terms of such agreement
are consistent with the terms of this Agreement).

               (f)  Notify each Holder of Registrable Securities covered by such
registration statement at any time when a prospectus relating thereto is
required to be delivered under the Act of the happening of any event as a result
of which the prospectus included in such registration statement, as then in
effect, includes an untrue statement of a material fact or omits to

                                      -5-
<PAGE>

state a material fact required to be stated therein or necessary to make the
statements therein not misleading in light of the circumstances then existing.

               (g)  Cause all such Registrable Securities registered pursuant
hereunder to be listed on each securities exchange or national market system on
which similar securities issued by the Company are then listed.

               (h)  Provide a transfer agent and registrar for all Registrable
Securities registered pursuant hereunder and a CUSIP number for all such
Registrable Securities, in each case not later than the effective date of such
registration.

               (i)  Furnish, at the request of any Holder requesting
registration of Registrable Securities pursuant to this Section 1, on the date
that such Registrable Securities are delivered to the underwriters for sale in
connection with a registration pursuant to this Section 1, if such securities
are being sold through underwriters, on the date that the registration statement
with respect to such securities becomes effective or the date of the closing of
the public offering of such securities if so requested by the underwriters, (i)
an opinion, dated such date, of the counsel representing the Company for the
purposes of such registration, in form and substance as is customarily given to
underwriters in an underwritten public offering, addressed to the underwriters,
if any, and to the Holders requesting registration of Registrable Securities and
(ii) a letter dated such date, from the independent certified public accountants
of the Company, in form and substance as is customarily given by independent
certified public accountants to underwriters, if any, and to the Holders
requesting registration of Registrable Securities.

          1.5  Furnish Information.
               -------------------

               (a)  It shall be a condition precedent to the obligations of the
Company to take any action pursuant to this Section 1 with respect to the
Registrable Securities of any selling Holder that such Holder shall furnish to
the Company such information regarding itself, the Registrable Securities held
by it, and the intended method of disposition of such securities as shall be
required by the Act to effect the registration of such Holder's Registrable
Securities.

               (b)  The Company shall have no obligation with respect to any
registration requested pursuant to Section 1.2 or Section 1.12 if, due to the
operation of subsection 1.5(a), the number of shares or the anticipated
aggregate offering price of the Registrable Securities to be included in the
registration does not equal or exceed the number of shares or the anticipated
aggregate offering price required to originally trigger the Company's obligation
to initiate such registration as specified in subsection 1.2(a) or subsection
1.12(b)(2), whichever is applicable.

          1.6  Expenses of Demand Registration.  All expenses, other than
               -------------------------------                          
underwriting discounts and commissions, incurred in connection with
registrations, filings or qualifications pursuant to Section 1.2, including
(without limitation) all registration, filing and qualification fees, printers'
and accounting fees, fees and disbursements of counsel for the Company
(including fees and disbursements of counsel for the Company in its capacity as
counsel to the selling Holders hereunder; if Company counsel does not make
itself available for this purpose,

                                      -6-
<PAGE>

the Company will pay the reasonable fees and disbursements of one counsel for
the selling Holders selected by Holders of a majority of the Registrable
Securities being included in the registration) shall be borne by the Company;
provided, however, that the Company shall not be required to pay for any
expenses of any registration proceeding begun pursuant to Section 1.2 if the
registration request is subsequently withdrawn at the request of the Holders of
a majority of the Registrable Securities to be registered (in which case all
Participating Holders shall bear such expenses), unless the Holders of a
majority of the Registrable Securities agree to forfeit their right to the
demand registration pursuant to Section 1.2; provided further, however, that if
at the time of such withdrawal the Holders have learned of a material adverse
change in the condition, business, or prospects of the Company from that known
to the Holders at the time of their request and have withdrawn the request with
reasonable promptness following disclosure by the Company of such material
adverse change, then the Holders shall not be required to pay any of such
expenses and shall retain their rights pursuant to Section 1.2.

          1.7  Expenses of Company Registration.  The Company shall bear and pay
               --------------------------------                                
all expenses incurred in connection with any registration, filing or
qualification of Registrable Securities with respect to the registrations
pursuant to Section 1.3 for each Holder (which right may be assigned as provided
in Section 1.13), including (without limitation) all registration, filing and
qualification fees, printers' and accounting fees, fees and disbursements of
counsel for the Company (including fees and disbursements of counsel for the
Company in its capacity as counsel to the selling Holders hereunder; if Company
counsel does not make itself available for this purpose, the Company will pay
the reasonable fees and disbursements of one counsel for the selling Holders
selected by Holders of a majority of the Registrable Securities being included
in the registration), but excluding underwriting discounts and commissions
relating to Registrable Securities.

          1.8  Underwriting Requirements.  In connection with any offering
               -------------------------                                 
involving an underwriting of shares of the Company's capital stock, the Company
shall not be required under Section 1.3 to include any of the Holders'
securities in such underwriting unless they accept the terms of the underwriting
as agreed upon between the Company and the underwriters selected by it (or by
other persons entitled to select the underwriters); provided, such terms are
consistent with the terms of this Agreement, and then only in such quantity as
the underwriters determine in their sole discretion will not, jeopardize the
success of the offering by the Company.  If the total amount of securities,
including Registrable Securities, requested by stockholders to be included in
such offering exceeds the amount of securities sold other than by the Company
that the underwriters determine in their sole discretion is compatible with the
success of the offering, then the Company shall be required to include in the
offering only that number of such securities, including Registrable Securities,
which the underwriters determine in their sole discretion will not jeopardize
the success of the offering (the securities so included to be apportioned pro
rata among the selling stockholders according to the total amount of securities
entitled to be included therein owned by each selling stockholder or in such
other proportions as shall mutually be agreed to by such selling stockholders),
but in no event shall (i) the amount of securities of the selling Holders
included in the offering be reduced below fifteen percent (15%) of the total
amount of securities included in such offering, (ii) notwithstanding (i) above,
any shares being sold by a stockholder exercising a demand registration right
similar to that granted in Section 1.2

                                      -7-
<PAGE>

be excluded from such offering. For purposes of the preceding parenthetical
concerning apportionment, for any selling stockholder which is a holder of
Registrable Securities and which is a partnership or corporation, the partners,
retired partners and stockholders of such holder, or the estates and family
members of any such partners and retired partners and any trusts for the benefit
of any of the foregoing persons shall be deemed to be a single "selling
stockholder," and any pro-rata reduction with respect to such "selling
stockholder" shall be based upon the aggregate amount of shares carrying
registration rights owned by all entities and individuals included in such
"selling stockholder," as defined in this sentence.

          1.9  Delay of Registration.  No Holder shall have any right to obtain
               ---------------------                                          
or seek an injunction restraining or otherwise delaying any such registration as
the result of any controversy that might arise with respect to the
interpretation or implementation of this Section 1.

         1.10  Indemnification. In the event any Registrable Securities are
               ---------------                                            
included in a registration statement under this Section 1:

               (a)  To the extent permitted by law, the Company will indemnify
and hold harmless each Holder, its partners, directors, officers and employees
(which persons shall be deemed to be included in the term Holder for purposes of
this subsection 1.10(a)) any underwriter (as defined in the Act) for such Holder
and each person, if any, who controls such Holder or underwriter within the
meaning of the Act or the 1934 Act, against any losses, claims, damages, or
liabilities (joint or several) to which they may become subject under the Act or
the 1934 Act, or other federal or state laws, insofar as such losses, claims,
damages, or liabilities (or actions in respect thereof) arise out of or are
based upon any of the following statements, omissions or violations
(collectively a "Violation"): (i) any untrue statement or alleged untrue
                 ---------                                              
statement of a material fact contained in such registration statement, including
any preliminary prospectus or final prospectus contained therein or any
amendments or supplements thereto, (ii) the omission or alleged omission to
state therein a material fact required to be stated therein, or necessary to
make the statements therein not misleading, or (iii) any violation or alleged
violation by the Company of the Act, the 1934 Act, any state securities law or
any rule or regulation promulgated under the Act, or the 1934 Act or any state
securities law; and the Company will pay to each such Holder, underwriter or
controlling person, as incurred, any legal or other expenses reasonably incurred
by them in connection with investigating or defending any such loss, claim,
damage, liability, or action; provided, however, that the indemnity agreement
contained in this subsection 1.10(a) shall not apply to amounts paid in
settlement of any such loss, claim, damage, liability, or action if such
settlement is effected without the consent of the Company (which consent shall
not be unreasonably withheld), nor shall the Company be liable in any such case
for any such loss, claim, damage, liability, or action to the extent that it
arises out of or is based upon a Violation which occurs in reliance upon and in
conformity with written information furnished expressly for use in connection
with such registration by any such Holder, underwriter or controlling person.

               (b)  To the extent permitted by law, each selling Holder will
indemnify and hold harmless the Company, each of its directors, each of its
officers who has signed the registration statement, each person, if any, who
controls the Company within the meaning of the

                                      -8-
<PAGE>

Act, any underwriter, any other Holder selling securities in such registration
statement and any controlling person of any such underwriter or other Holder,
against any losses, claims, damages, or liabilities (joint or several) to which
any of the foregoing persons may become subject, under the Act, or the 1934 Act
or other federal or state law, insofar as such losses, claims, damages, or
liabilities (or actions in respect thereto) arise out of or are based upon any
Violation, in each case to the extent (and only to the extent) that such
Violation occurs in reliance upon and in conformity with written information
furnished by such Holder expressly for use in connection with such registration;
and each such Holder will pay, as incurred, any legal or other expenses
reasonably incurred by any person intended to be indemnified pursuant to this
subsection 1.10(b), in connection with investigating or defending any such loss,
claim, damage, liability, or action; provided, however, that the indemnity
agreement contained in this subsection 1.10(b) shall not apply to amounts paid
in settlement of any such loss, claim, damage, liability or action if such
settlement is effected without the consent of the Holder, which consent shall
not be unreasonably withheld; provided, that, in no event shall any indemnity
under this subsection 1.10(b) exceed the net proceeds from the offering received
by such Holder.

               (c)  Promptly after receipt by an indemnified party under this
Section 1.10 of notice of the commencement of any action (including any
governmental action), such indemnified party will, if a claim in respect thereof
is to be made against any indemnifying party under this Section 1.10, deliver to
the indemnifying party a written notice of the commencement thereof and the
indemnifying party shall have the right to participate in, and, to the extent
the indemnifying party so desires, jointly with any other indemnifying party
similarly noticed, to assume the defense thereof with counsel mutually
satisfactory to the parties; provided, however, that an indemnified party
(together with all other indemnified parties which may be represented without
conflict by one counsel) shall have the right to retain one separate counsel,
with the fees and expenses to be paid by the indemnifying party, if
representation of such indemnified party by the counsel retained by the
indemnifying party would be inappropriate due to actual or potential differing
interests between such indemnified party and any other party represented by such
counsel in such proceeding. The failure to deliver written notice to the
indemnifying party within a reasonable time of the commencement of any such
action, if prejudicial to its ability to defend such action, shall relieve such
indemnifying party of any liability to the indemnified party under this Section
1.10, but the omission so to deliver written notice to the indemnifying party
will not relieve it of any liability that it may have to any indemnified party
otherwise than under this Section 1.10.

               (d)  If the indemnification provided for in this Section 1.10 is
held by a court of competent jurisdiction to be unavailable to an indemnified
party with respect to any loss, liability, claim, damage, or expense referred to
therein, then the indemnifying party, in lieu of indemnifying such indemnified
party hereunder, shall contribute to the amount paid or payable by such
indemnified party as a result of such loss, liability, claim, damage, or expense
in such proportion as is appropriate to reflect the relative fault of the
indemnifying party on the one hand and of the indemnified party on the other in
connection with the statements or omissions that resulted in such loss,
liability, claim, damage, or expense as well as any other relevant equitable
considerations. The relative fault of the indemnifying party and of the
indemnified party shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement

                                      -9-
<PAGE>

of a material fact or the omission to state a material fact relates to
information supplied by the indemnifying party or by the indemnified party and
the parties' relative intent, knowledge, access to information, and opportunity
to correct or prevent such statement or omission.

               (e)  The obligations of the Company and Holders under this
Section 1.10 shall survive the completion of any offering of Registrable
Securities in a registration statement under this Section 1, and otherwise.

         1.11  Reports Under Securities Exchange Act of 1934.  With a view to
               ---------------------------------------------                
making available to the Holders the benefits of Rule 144 promulgated under the
Act and any other rule or regulation of the SEC that may at any time permit a
Holder to sell securities of the Company to the public without registration or
pursuant to a registration on Form S-3, the Company agrees to:

               (a)  make and keep public information available, as those terms
are understood and defined in SEC Rule 144, at all times after ninety (90) days
after the effective date of the first registration statement filed by the
Company for the offering of its securities to the general public;

               (b)  take such action, including the voluntary registration of
its Common Stock under Section 12 of the 1934 Act, as is necessary to enable the
Holders to utilize Form S-3 for the sale of their Registrable Securities, such
action to be taken as soon as practicable after the end of the fiscal year in
which the first registration statement filed by the Company for the offering of
its securities to the general public is declared effective;

               (c)  file with the SEC in a timely manner all reports and other
documents required of the Company under the Act and the 1934 Act; and

               (d)  furnish to any Holder, so long as the Holder owns any
Registrable Securities, forthwith upon request (i) a written statement by the
Company that it has complied with the reporting requirements of SEC Rule 144 (at
any time after ninety (90) days after the effective date of the first
registration statement filed by the Company), the Act and the 1934 Act (at any
time after it has become subject to such reporting requirements), or that it
qualifies as a registrant whose securities may be resold pursuant to Form S-3
(at any time after it so qualifies), (ii) a copy of the most recent annual or
quarterly report of the Company and such other reports and documents so filed by
the Company, and (iii) such other information as may be reasonably requested in
availing any Holder of any rule or regulation of the SEC which permits the
selling of any such securities without registration or pursuant to such form.

         1.12  Form S-3 Registration.  In case the Company shall receive from
               ---------------------                                        
Holders of the Registrable Securities then outstanding a written request or
requests that the Company effect a registration on Form S-3 and any related
qualification or compliance with respect to all or a part of the Registrable
Securities owned by such Holder or Holders, the Company will:

               (a)  promptly give written notice of the proposed registration,
and any related qualification or compliance, to all other Holders; and

                                      -10-
<PAGE>

               (b)  as soon as practicable, effect such registration and all
such qualifications and compliances as may be so requested and as would permit
or facilitate the sale and distribution of all or such portion of such Holder's
or Holders' Registrable Securities as are specified in such request, together
with all or such portion of the Registrable Securities of any other Holder or
Holders joining in such request as are specified in a written request given
within fifteen (15) days after receipt of such written notice from the Company;
provided, however, that the Company shall not be obligated to effect any such
registration, qualification or compliance, pursuant to this section 1.12: (i) if
Form S-3 is not available for such offering by the Holders; (2) if the Holders,
together with the holders of any other securities of the Company entitled to
inclusion in such registration, propose to sell Registrable Securities and such
other securities (if any) at an aggregate price to the public (net of any
underwriters' discounts or commissions) of less than $1,000,000; (3) if the
Company shall furnish to the Holders a certificate signed by the President of
the Company stating that in the good faith judgment of the Board of Directors of
the Company, it would be seriously detrimental to the Company and its
stockholders for such Form S-3 Registration to be effected at such time, in
which event the Company shall have the right to defer the filing of the Form S-3
registration statement for a period of not more than sixty (60) days after
receipt of the request of the Holder or Holders under this Section 1.12;
provided, however, that the Company shall not utilize this right more than once
in any twelve (12) month period; (4) if the Company has, within the twelve (12)
month period preceding the date of such request, already effected two
registrations on Form S-3 for the Holders pursuant to this Section 1.12; or (5)
in any particular jurisdiction in which the Company would be required to qualify
to do business or to execute a general consent to service of process in
effecting such registration, qualification or compliance.

               (c)  Subject to the foregoing, the Company shall file a
registration statement covering the Registrable Securities and other securities
so requested to be registered as soon as practicable after receipt of the
request or requests of the Holders. All expenses incurred in connection with a
registration requested pursuant to Section 1.12, including (without limitation)
all registration, filing, qualification, printer's and accounting fees and the
reasonable fees and disbursements of counsel for the selling Holder or Holders
and counsel for the Company, but excluding any underwriters' discounts or
commissions associated with Registrable Securities, shall be borne by the
Company. Registrations effected pursuant to this Section 1.12 shall not be
counted as demands for registration or registrations effected pursuant to
Sections 1.2 or 1.3, respectively.

          1.13  Assignment of Registration Rights.  The rights to cause the
                ---------------------------------                         
Company to register Registrable Securities pursuant to this Section 1 may be
assigned (but only with all related obligations) by a Holder to a transferee or
assignee of such securities who, after such assignment or transfer holds at
least 250,000 shares of Registrable Securities (subject to appropriate
adjustment for stock splits, stock dividends, combinations and other
recapitalizations) or to a transferee or assignee of such securities who is a
partner, shareholder or affiliate of such Holder without restriction as to
minimum shareholding, provided that with respect to any assignment under this
Section 1.13 (a) the Company is, within a reasonable time after such transfer,
furnished with written notice of the name and address of such transferee or
assignee and the securities with respect to which such registration rights are
being assigned;

                                      -11-
<PAGE>

(b) such transferee or assignee agrees in writing to be bound by and subject to
the terms and conditions of this Agreement, including without limitation the
provisions of Section 1.15 below; and (c) no transfer shall be made to a person
that the Board of Directors reasonably determines is a competitor of the
Company. For the purposes of determining the number of shares of Registrable
Securities held by a transferee or assignee, the holdings of transferees and
assignees of a partnership who are partners or retired partners of such
partnership (including spouses and ancestors, lineal descendants and siblings of
such partners or spouses who acquire Registrable Securities by gift, will or
intestate succession) shall be aggregated together and with the partnership;
provided, that all assignees and transferees who would not qualify individually
for assignment of registration rights shall have a single attorney-in-fact for
the purpose of exercising any rights, receiving notices or taking any action
under this Section 1.

          1.14  Limitations on Subsequent Registration Rights.  From and after
                ---------------------------------------------                
the date of this Agreement, the Company shall not, without the prior written
consent of the Holders of a majority of the outstanding Registrable Securities,
enter into any agreement with any holder or prospective holder of any securities
of the Company which would allow such holder or prospective holder (a) to
include such securities in any registration filed under Section 1.2, 1.3 or 1.12
hereof, unless under the terms of such agreement, such holder or prospective
holder may include such securities in any such registration only to the extent
that the inclusion of his securities will not reduce the amount of the
Registrable Securities of the Holders which is included or (b) to make a demand
registration which could result in such registration statement being declared
effective prior to the earlier of either of the dates set forth in subsection
1.2(a) or within one hundred twenty (120) days of the effective date of any
registration effected pursuant to Section 1.2.

          1.15  "Market Stand-Off" Agreement.  The Founder and each Investor
                 ---------------------------                                   
hereby agree that, during the period of duration specified by the Company and an
underwriter of Common Stock or other equity securities of the Company, following
the effective date of a registration statement of the Company filed under the
Act, it shall not, to the extent requested by the Company and such underwriter,
directly or indirectly sell, offer to sell, contract to sell (including, without
limitation, any short sale), grant any option to purchase or otherwise transfer
or dispose of (other than to donees who agree to be similarly bound) any
securities of the Company held by it at any time during such period except
common stock included in such registration; provided, however, that:

               (a)  all officers and directors of the Company, and each holder
of 1% or more of the capital stock of the Company agree to be similarly bound;
and

               (b)  such market stand-off time period shall not exceed one
hundred eighty (180) days for an initial public offering and ninety (90) days
for any other offering.

          In order to enforce the foregoing covenant, the Company may impose
stop-transfer instructions with respect to the Registrable Securities of the
Founder and each Investor (and the shares or securities of every other person
subject to the foregoing restriction) until the end of such period.

                                      -12-
<PAGE>

          Notwithstanding the foregoing, the obligations described in this
Section 1.15 shall not apply to a registration relating solely to employee
benefit plans on Form S-1 or Form S-8 or similar forms which may be promulgated
in the future, or a registration relating solely to an SEC Rule 145 transaction
on Form S-4 or any similar forms which may be promulgated in the future.

         1.16  Termination of Registration Rights.
               ----------------------------------

               (a)  No Holder shall be entitled to exercise any right provided
for in this Section 1 after the later to occur of (i) five (5) years following a
Qualified IPO; or (ii) such time as such Holder shall be entitled to sell such
Holder's shares without restriction pursuant to Rule 144(k) of the Act.

               (b)  In addition, the right of any Holder to request
registration or inclusion in any registration pursuant to Section 1.3 shall
terminate at any time on or after the closing of a Qualified IPO of the Company
if all shares of Registrable Securities held by such Holder represent less than
one percent (1%) of the then outstanding shares of Common Stock.

     2.  Covenants of the Company.
         ------------------------

         2.1  Delivery of Financial Statements.  As each Investor hereby agrees
              --------------------------------                                
that such Investor shall use diligent efforts to maintain the confidentiality of
the financial information of the Company, to be provided as described in this
Section 2, and to use such financial information of the Company solely for
purposes related to such Investor's relationship with the Company, the Company
shall deliver the financial information of the Company, as described in this
Section 2, to each Investor:

              (a)  as soon as practicable, but in any event within ninety (90)
days after the end of each fiscal year of the Company, an income statement for
such fiscal year, a balance sheet of the Company and statement of stockholder's
equity as of the end of such year, and a statement of cash flow for such year,
such year-end financial reports to be in reasonable detail, prepared in
accordance with generally accepted accounting principles, together with a report
of independent public accountants of nationally recognized standing selected by
the Company;

              (b)  as soon as practicable, but in any event within forty-five
(45) days after the end of each of the first three (3) quarters of each fiscal
year of the Company, an unaudited income statement and statement of cash flow
for such fiscal quarter and an unaudited balance sheet and a statement of
stockholder's equity as of the end of such fiscal quarter and a statement
showing the number of shares of each class and series of capital stock and
securities convertible into or exercisable for shares of capital stock
outstanding at the end of the period, the number of common shares issuable upon
conversion or exercise of any outstanding securities convertible or exercisable
for common shares and the exchange ratio or exercise price applicable thereto,
all in sufficient detail as to permit the Investor to calculate its percentage
equity ownership in the Company.

                                      -13-
<PAGE>

              (c)  within thirty (30) days of the end of each month, an
unaudited income statement and statement of cash flow and balance sheet for and
as of the end of such month, in reasonable detail;

              (d)  as soon as practicable, but in any event thirty (30) days
prior to the end of each fiscal year, a budget and business plan for the next
fiscal year, prepared on a monthly basis and, as soon as prepared, any other
budgets or revised budgets prepared by the Company;

              (e)  with respect to the financial statements called for in
subsections (b) and (c) of this Section 2.1, an instrument executed by the Chief
Financial Officer or President of the Company and certifying that such
financials were prepared in accordance with generally accepted accounting
principles consistently applied with prior practice for earlier periods, all in
reasonable detail, subject to changes resulting from year-end audit adjustments,
and fairly present the financial condition of the Company and its results of
operation for the period specified;

              (f)  such other information relating to the financial condition,
business, prospects or corporate affairs of the Company as the Investor or any
assignee of the Investor may from time to time request, provided, however, that
the Company shall not be obligated under this subsection (f) or any other
subsection of Section 2.1 to provide information which it deems in good faith to
be a trade secret or similar confidential information unless the person
requesting such information has agreed to reasonable confidentiality
restrictions with respect to the use of such information.

          2.2  Inspection.  The Company shall permit each Investor, at such
               ----------                                                 
Investor's expense, to visit and inspect the Company's properties, to examine
its books of account and records and to discuss the Company's affairs, finances
and accounts with its officers, all at such reasonable times as may be requested
by the Investor; provided, however, that the Company shall not be obligated
pursuant to this Section 2.2 to provide access to any information which it
reasonably considers to be a trade secret or similar confidential information
unless the person requesting such information has agreed to reasonable
confidentiality restrictions with respect to the use of such information.

          2.3  Right of First Offer.  Subject to the terms and conditions
               --------------------                                     
specified in this paragraph 2.3, the Company hereby grants to each Major
Investor (as hereinafter defined) a right of first offer with respect to future
sales by the Company of its Shares (as hereinafter defined).  For purposes of
this Section 2.3, a "Major Investor" shall mean (i) any Investor who holds
                     --------------                                      
(whether in the form of Series A Preferred Stock or Series B Preferred Stock
Preferred Stock) at least ten percent (10%) of the original investment such
Investor makes in the Company pursuant to the Series A Agreement, (ii) any
person who acquires at least ten percent (10%) of the Preferred Stock (whether
in the form of Series A Preferred Stock or Series B Preferred Stock or the
Common Stock issued upon conversion thereof) issued pursuant to the Series A
Agreement, (iii) any person who holds at least 50,000 shares of Series C
Preferred Stock issued pursuant to the Series C Agreements, (iv) any Investor
who holds at least fifteen percent (15%) of its original investment pursuant to
the Series D or Series E Agreement (whether in the form of Series D or Series E
Preferred Stock or the Common Stock issued upon conversion thereof) or (v) any
person

                                      -14-
<PAGE>

who owns at least 250,000 shares of Series D or Series E Preferred Stock. For
purposes of this Section 2.3, Investor includes any general partners or
affiliates of an Investor. An Investor shall be entitled to apportion the right
of first offer hereby granted it among itself and its partners and affiliates in
such proportions as it deems appropriate.

          Each time the Company proposes to offer any shares of, or securities
convertible into or exercisable for any shares of, any class of its capital
stock ("Shares"), the Company shall first make an offering of such Shares to
        ------                                                             
each Major Investor in accordance with the following provisions:

          (a) The Company shall deliver a notice by certified mail ("Notice") to
                                                                     ------    
the Major Investors stating (i) its bona fide intention to offer such Shares,
(ii) the number of such Shares to be offered, and (iii) the price and terms, if
any, upon which it proposes to offer such Shares.

          (b) Within twenty (20) calendar days after giving of the Notice, each
Major Investor may elect to purchase or obtain, at the price and on the terms
specified in the Notice, up to that portion of such Shares which equals the
proportion that the number of shares of Registrable Securities then held by such
Major Investor bears to the total number of shares of Common Stock of the
Company then outstanding (assuming full conversion and exercise of all
outstanding convertible securities and options, warrants or rights to purchase
Common Stock).  The Company shall promptly, in writing, inform each Major
Investor which purchases all the shares available to it ("Fully-Exercising
                                                          ----------------
Investor") of any other Major Investor's failure to do likewise.  During the
--------                                                                   
ten-day period commencing after such information is given, each Fully-Exercising
Investor shall be entitled to obtain that portion of the Shares for which Major
Investors were entitled to subscribe but which were not subscribed for by the
Major Investors which is equal to the proportion that the number of shares of
Registrable Securities then held by such Fully-Exercising Investor bears to the
total number of shares of Registrable Securities then held by all Fully-
Exercising Investors who wish to purchase some of the unsubscribed shares.

          (c) If all Shares which Investors are entitled to obtain pursuant to
subsection 2.3(b) are not elected to be obtained as provided in subsection
2.3(b) hereof, the Company may, during the thirty (30) day period following the
expiration of the period provided in subsection 2.3(b) hereof, offer the
remaining unsubscribed portion of such Shares to any person or persons at a
price not less than, and upon terms no more favorable to the offeree than, those
specified in the Notice.  If the Company does not enter into an agreement for
the sale of the Shares within such period, or if such agreement is not
consummated within thirty (30) days of the execution thereof, the right provided
hereunder shall be deemed to be revived and such Shares shall not be offered
unless first reoffered to the Major Investors in accordance herewith.

          (d) The right of first offer in this paragraph 2.3 shall not be
applicable (i) to the issuance or sale of not to exceed 894,846 shares of Common
Stock to employees, directors or consultants for the primary purpose of
soliciting or retaining their services, or (ii) to a Qualified IPO, (iii) the
issuance of securities pursuant to the conversion of convertible securities or
the exercise of options, warrants or rights to purchase securities currently

                                      -15-
<PAGE>

outstanding or excluded under this Section 2.3(d), (iv) the issuance of
securities in connection with a bona fide business acquisition of or by the
Company, whether by merger, consolidation, sale of assets, sale or exchange of
stock or otherwise or (v) the issuance of shares of capital stock upon exercise
or conversion of warrants to purchase shares of the capital stock of this
corporation issued in connection with equipment lease financing transactions or
bank financing transactions unanimously approved by the Board of Directors,
where the issuance of such warrants is not principally for the purpose of
raising additional equity capital for the Company.

          (e) The right of first offer set forth in this Section 2.3 is for the
benefit of all Major Investors and may not be assigned or transferred by them,
except that (i) such right is assignable by each Holder to any wholly owned
subsidiary or parent of, or to any corporation or entity that is, within the
meaning of the Act, controlling, controlled by or under common control with, any
such Holder, and (ii) such right is assignable between and among any of the
Holders.

          2.4  Termination of Covenants.  The covenants set forth in this
               ------------------------                                 
Section 2, shall terminate as to Investors and be of no further force or effect
on the earlier to occur of the following:  (a) the completion of a Qualified
IPO, or (b) when there are outstanding shares of Preferred Stock representing
less than fifteen percent (15%) of the Registrable Securities outstanding on the
date of this Agreement.

     3.  Right of First Refusal on Stockholder Shares of Target.
         ------------------------------------------------------

          3.1  General.  Target may not sell, assign, transfer, or in any other
               -------                                                        
manner dispose of or alienate, or transfer or assign any interest in, any or all
of the Stockholder Shares (as such term is defined below) which now or hereafter
may be held or owned by them to any person or entity unless such party (for
purposes of this Section 3 only, referred to as "Offeror") shall have first made
                                                 -------                       
the written offer to sell as hereinafter described, and the offered Stockholder
Shares shall not have been purchased, within the time hereinafter provided.  For
purposes of this Section 3, "Stockholder Shares" shall include and be deemed to
                             ------------------                               
mean:  (i) the Series B Preferred Stock acquired by Target (the "Target Shares")
                                                                 ------------- 
pursuant to the recapitalization approved in that certain Action by Written
Consent of the Stockholders of Cardima, Inc. dated June 30, 1993, (ii) the
Common Stock issued or issuable upon conversion of the Target Shares and (iii)
any Common Stock of the Company issued as (or issuable upon the conversion or
exercise of any warrant, right or other security which is issued as) a dividend
or other distribution with respect to, or in exchange for or in replacement of,
such Target Shares or Common Stock.

          3.2  Offer by Stockholder.  The Stockholder Shares which the Offeror
               --------------------                                          
desires to sell, assign, or transfer (the "Offered Stockholder Shares") shall
                                           --------------------------       
first be offered to the Company by a written offer (the "Offer") to sell at the
                                                         -----                
price, and on the terms, set forth in subsection 3.4 below, to which shall be
attached a statement of intention to sell, assign, transfer, or otherwise
dispose of the Stockholder Shares being offered, as the case may be, the name
and address of each prospective purchaser or assignee, if any, the number of
Stockholder Shares involved in the proposed sale, assignment, or transfer, and
the price and terms of any such bona

                                      -16-
<PAGE>

fide offer. The Offer shall be signed by the Offeror and shall be delivered
pursuant to the notice provisions of Section 4.5.

          3.3  Option of Company To Purchase.  For thirty (30) days after the
               -----------------------------                                
receipt of the Offer (the "Offer Period"), the Company shall have the right, but
                           ------------                                        
not the obligation, to purchase all or some of the Offered Stockholder Shares.
If the Company elects to purchase any of the Offered Stockholder Shares, it
shall so notify the Offeror prior to the end of the Offer Period.  The notice
shall specify a date for the closing of the purchase which shall not be more
than thirty (30) days after the date of the giving of such notice.

          3.4  Purchase Price and Terms.  The purchase price of the Stockholder
               ------------------------                                       
Shares offered by the Offeror pursuant to this Section 3 to the Company shall be
equal to the price offered for the Stockholder Shares by a prospective purchaser
pursuant to a bona fide offer of purchase (if received), as set forth in the
Offer.  The terms and conditions upon which the Company shall purchase the
Stockholder Shares, if elected by the Company, shall be no less favorable to the
Company than those received by the Offeror in a bona fide offer of purchase (if
received) by a prospective purchaser.  If such bona fide offer is not received
by such a prospective purchaser, the Company shall have the right to purchase
the Stockholder Shares for an amount equal to the fair market value of such
shares as determined by the Board of Directors in its sole discretion.  In the
event the purchase price specified in the Offer is payable in property other
than cash, the Company shall have the right to pay the purchase price in the
form of cash equal in amount to the fair market value of such property as
determined in good faith by the parties.  If the Offeror and the Company cannot
agree on such fair market value within ten (10) days after the Company's receipt
of the notice by the Offeror pursuant to this Section 3, the valuation shall be
made by an appraiser of recognized standing selected by the Offeror and the
Company or, if they cannot agree on an appraiser within twenty (20) days after
receipt of such notice, each shall select an appraiser of recognized standing
and the two appraisers shall designate a third appraiser of recognized standing,
whose appraisal shall be determinative of such value, and which appraisal shall
be completed within forty-five (45) days after receipt of such notice.  The
closing for such purchase shall then be held on the later of (i) the fifteenth
15th business day following the exercise of the rights hereunder or (ii) the
fifteenth (15th) day after such cash valuation shall have been made.

          3.5  Release from Restriction.  If all of the Offered Stockholder
               ------------------------                                   
Shares are not purchased by the Company in accordance with the terms of this
Section 3, the Offeror's offer shall be deemed rejected with respect to the
remaining Offered Stockholder Shares, and subject to the provisions of this
Section 3 below, the Offeror may make a bona fide sale, assignment, transfer, or
other disposition of all, but not less than all, of the remaining Offered
Stockholder Shares to the prospective purchaser named in the statement attached
to the offer at a price not less than, and upon terms not more favorable than,
the bona fide offer, if any, described in the Offer.  If the Offeror shall fail
to make such sale, assignment, transfer, or other disposition within one hundred
twenty (120) days following the expiration of all periods of time hereinabove
provided for purchase by the Company, the remaining Offered Stockholder Shares
shall again become subject to all of the restrictions of this Agreement, and
except as otherwise provided in this Agreement, the Offeror shall not sell,
assign, transfer or otherwise dispose of or alienate the

                                      -17-
<PAGE>

Stockholder Shares without again offering said Stockholder Shares to the Company
as hereinabove provided.

          3.6  Assignment.  The Company may assign its right of first refusal
               ----------                                                   
under this Section 3 to any party or parties.

          3.7  Exclusions: Lapse.
               -----------------

               (a) The right of first refusal under this Section 3 shall not be
applicable to any sale of Stockholder Shares pursuant to Section 1 of this
Agreement.  The right of first refusal contained in this Section 3 shall not
apply to any transfer ("Permitted Transfer") of Stockholder Shares (i) pursuant
                        ------------------                                    
to an acquisition, merger or other transaction pursuant to which the Company's
stockholders of record as constituted immediately prior to such acquisition or
sale will, immediately after such acquisition or sale, hold less than 50% of the
voting power of the surviving or acquiring entity, or (ii) among Target's
Affiliates (collectively referred to herein as "Permitted Transferees");
                                                ---------------------  
provided that the right of first refusal contained in this Section 3 shall
continue to be applicable to the Stockholder Shares after any such Permitted
Transfer and provided further that the transferees of such Stockholder Shares
shall have agreed in writing to be bound by the provisions of this Agreement
affecting the Stockholder Shares so transferred.  An "Affiliate" of Target means
any other person, entity or investment fund controlling, controlled by or under
common control with Target.

               (b) The right of first refusal set forth in this Section 3 shall
lapse upon the completion of a Qualified IPO.

     4.  Right of First Refusal on Shares of the Founder and Phillip C. Radlick.
         ----------------------------------------------------------------------

          4.1  General.  Each of the Founder and Phillip C. Radlick (the
               -------                                                 
"Management Stockholders") has executed a Stock Restriction Agreement (the
------------------------                                                 
"Stock Restriction Agreement") with the Company, pursuant to which he has agreed
 ---------------------------                                                   
not to sell, assign, transfer, or in any other manner alienate, or transfer or
assign any interest in, any or all shares of capital stock in the Company held
or owned by him to any person or entity unless he shall have first made a
written offer to the Company.

          4.2  Assignment.  The Company agrees to assign any unexercised right
               ----------                                                    
of first refusal on shares of the Management Stockholders to the holders of
Series D Preferred and Series E Preferred who will be entitled to purchase such
shares pro rata based on the shares of Registrable Securities that each holder
of Series D Preferred and Series E Preferred then owns.  Any such assigned right
of first refusal on shares of the Management Stockholders shall not be
reassigned by a holder of Series D Preferred or Series E Preferred, and the
Company shall have the right to reassign any such right of first refusal which
is not exercised by the holder of Series D Preferred and Series E Preferred to
whom it was assigned.

     5.  Affirmative Covenants.  The Company covenants that until the closing of
         ---------------------                                                 
a Qualified IPO, it will use its reasonable commercial efforts to:

                                      -18-
<PAGE>

          5.1  Maintenance of Properties, etc.  Keep its properties and assets
               ------------------------------                                
in such repair, working order and condition, and from time to time make such
repairs, renewals, replacements, additions and improvements thereto, as its
management deems reasonably necessary and appropriate, and do all things
necessary to preserve, renew and keep in full force and effect and in good
standing its corporate existence and authority necessary to continue its
business.  Be qualified as a foreign corporation in each jurisdiction in which
it is required to qualify, except for such jurisdictions in which the failure to
be so qualified could not have a material adverse effect on the Company.
Preserve and maintain all patents, patent applications, copyrights, trademarks,
inventions, processes and other intellectual property, and all material licenses
to use any of the foregoing, that are necessary to the conduct of the business
of the Company and its Subsidiaries.

          5.2  Compliance with Legal Requirements.  Comply in all material
               ----------------------------------                        
respects with all requirements of law applicable to it, except where compliance
therewith shall at the time be contested in good faith by appropriate
proceedings.

          5.3  Insurance.  Keep its assets which are of an insurable character
               ---------                                                     
insured with responsible and reputable carriers against loss or damage by fire,
explosion or other hazards which may be insured against by extended coverage in
an amount sufficient to prevent it from becoming a co-insurer and in any event
not less than would be customary for a similarly situated company in a business
similarly situated, and maintain insurance against liability to persons and
property and other hazards and risks to the extent and in the manner customary
for companies in similar businesses similarly situated.  Maintain term life
insurance on the lives of each of the Management Stockholders in the amount of
$500,000 each with the proceeds payable to the Company.

          5.4  Payment of Taxes and Trade Debt.  Pay and discharge when due and
               -------------------------------                                
payable all taxes, assessments and governmental charges imposed upon its income,
profits, property or business, except for such the validity or which are in good
faith being contested by appropriate proceedings and if the Company shall have
set aside on its books adequate reserves with respect thereto.

          5.5  Independent Accountants.  Retain independent public accountants
               -----------------------                                       
of recognized national standing, reasonably acceptable to the Investors, who
shall provide a report on the Company's annual financial statements and not
change such accountants without the approval of Investors holding at least a
majority of the Registrable Securities issued or issuable in connection with a
conversion of (i) the Series D Preferred Stock and (ii) the Series E Preferred
Stock, each voting separately as a single class.

          5.6  Board of Directors.  Cause the Board of Directors of the Company
               ------------------                                             
to meet at least six (6) times each fiscal year.  The Company will pay all
direct out-of-pocket expenses reasonably incurred by the Directors in connection
with travel to and attendance at such Board meetings.  The Company will adopt
and maintain in its certificate of incorporation or bylaws provisions limiting
the monetary damages and indemnifying the directors of the Company to the
fullest extent permitted by applicable law.  At all times hereafter up to the
time of effectiveness

                                      -19-
<PAGE>

of a Qualified Public Offering, New Enterprise Associates ("NEA"), Chase Venture
                                                            ---
Capital Associates, L.P., ("Chase"), and Premier Medical Partner, L.P.
                            -----
("Premier") shall have the right to designate a representative to attend all
  -------
meetings of the Board of Directors in a nonvoting observer capacity, to receive
notice of such meetings and to receive the information provided by the Company
to the Board of Directors; provided, however, that the Company may require as a
condition precedent to NEA, Chase and Premier's rights under this Section 5.6
that each person proposing to attend any meeting of the Board of Directors and
each person to have access to any of the information provided by the Company to
the Board of Directors shall agree to hold in confidence and trust and to act in
a fiduciary manner with respect to all information so received during such
meetings or otherwise; and, provided further, that the Company reserves the
right not to provide information and to exclude such representative from any
meeting or portion thereof if delivery of such information or attendance at such
meeting by such representative would result in disclosure of trade secrets to
such representative or would adversely affect the attorney-client privilege
between the Company and its counsel or if such representative is a member of the
board of directors or otherwise attends meetings of the board of directors of
another company that is a direct competitor of the Company.

          5.7  Financial Accounting System.  Maintain a system of accounting in
               ---------------------------                                    
which correct and complete entries will be made of all dealings and transactions
in relation to their business and affairs in accordance with generally accepted
accounting principles.

          5.8  Proprietary Information Agreements.  Cause each officer and key
               ----------------------------------                            
employee of the Company or any Subsidiary now or hereafter employed to execute
and deliver to the Company a Proprietary Information and Inventions Agreement
substantially in the form previously provided to the Investors.

          5.9  Rule 144A Information.  At all times during which the Company is
               ---------------------                                          
neither subject to the reporting requirements under Sections 13 or 15(d) under
the Exchange Act, provide in written form as promptly as practicable upon
request, all information required by Rule 144A(d)(4)(i) promulgated under the
Securities Act; provided, however, that the Company may require the recipient of
                --------  -------                                              
such information to execute an agreement in which it agrees to take reasonable
precautions to ensure the confidentiality of such information.

     6.  Miscellaneous.
         -------------

          6.1  Small Business Investment Company Matters.  Each Investor
               -----------------------------------------               
executing this Agreement agrees to cooperate with the Company in all reasonable
respects in complying with the terms and provisions of the letter agreement
between the Company and Chase Venture Capital Associates, L.P. ("CVCA"), a copy
                                                                 ----         
of which is attached hereto as Exhibit B, regarding small business matters (the
                               ---------                                      
"Small Business Sideletter"); provided, however, that no Holder shall be
 -------------------------                                             
required under this Section 6.1 to take any action that would adversely affect
in any material respect such Holder's rights under this Agreement or as a
stockholder of the Company.

                                      -20-
<PAGE>

          6.2  Successors and Assigns.  Except as otherwise provided herein, the
               ----------------------                                          
terms and conditions of this Agreement shall inure to the benefit of and be
binding upon the respective successors and assigns of the parties (including
transferees of any shares of Registrable Securities).  Nothing in this
Agreement, express or implied, is intended to confer upon any party other than
the parties hereto or their respective successors and assigns any rights,
remedies, obligations, or liabilities under or by reason of this Agreement,
except as expressly provided in this Agreement.

          6.3  Governing Law.  This Agreement shall be governed by and construed
               -------------                                                   
under the laws of the State of California as applied to agreements among
California residents entered into and to be performed entirely within
California.

          6.4  Counterparts.  This Agreement may be executed in two or more
               ------------                                               
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.

          6.5  Titles and Subtitles.  The titles and subtitles used in this
               --------------------                                       
Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.

          6.6  Notices. Unless otherwise provided, any notice required or
               -------                                                  
permitted under this Agreement shall be given in writing and shall be deemed
effectively given upon personal delivery to the party to be notified or by
overnight courier or sent by telegram or fax or upon deposit with the United
States Post Office, by registered or certified mail, postage prepaid and
addressed to the party to be notified at the address indicated for such party on
the signature page hereof, or at such other address as such party may designate
by ten (10) days' advance written notice to the other parties.  If to the
Company, a copy of any notice shall be sent in the same manner to Cardima, Inc.,
47266 Benicia Street, Fremont, California, 94538, Attention:  Mr. Phillip C.
Radlick.

          6.7  Remedies and Expenses.  The parties shall have all remedies for
               ---------------------                                         
breach of this Agreement available to them provided by law or equity.  Without
limiting the generality of the foregoing, in addition to all other rights and
remedies available at law or in equity, the parties shall be entitled to obtain
specific performance of the obligations of each party to this Agreement and
immediate injunctive relief.  In the event any action or proceeding is brought
in equity to enforce the same, neither the Company nor any party will urge, as a
defense, that an adequate remedy at law exists.  If any action at law or in
equity is necessary to enforce or interpret the terms of this Agreement, the
prevailing party shall be entitled to reasonable attorneys' fees, costs and
necessary disbursements in addition to any other relief to which such party may
be entitled.

          6.8  Amendments and Waivers.  This Agreement constitutes the full and
               ----------------------                                         
entire understanding and agreement between the parties with regard to the
subjects hereof, and no party shall be liable or bound to any other party in any
manner by any warranties, representations or covenants except as specifically
set forth herein or therein.  Except as expressly provided herein, neither this
Agreement nor any term hereof may be amended, waived, discharged or terminated
other than by a written instrument signed by the party against whom enforcement
of any such

                                      -21-
<PAGE>

amendment, waiver, discharge or termination is sought; provided, however, that
Holders of at least a majority of the Registrable Securities may, with the
written consent of the Company, waive, modify or amend on behalf of all Holders,
any provisions hereof benefiting such Holders, so long as the effect thereof
will be that all such Holders will be treated equally; and provided further,
that, in the event the Company shall issue additional shares of Series E
Preferred Stock, each new holder of such Series E Preferred Stock shall become a
party to this Agreement and shall be deemed to be a "Holder" for all purposes of
this Agreement by executing and delivering an additional counterpart signature
page to this Agreement.

          6.9  Legends.  Each stock certificate issued after the date hereof
               -------                                                     
evidencing shares of the Company's capital stock subject to the provisions of
this Agreement (including any shares issued upon a transfer, stock split,
dividend, recapitalization, merger or other similar event) shall at all times
during the term of this Agreement bear the following legend:

          THE SHARES EVIDENCED BY THIS CERTIFICATE ARE SUBJECT TO, AND MAY BE
TRANSFERRED ONLY IN COMPLIANCE WITH, A STOCKHOLDERS' RIGHTS AGREEMENT, DATED AS
OF MARCH 7, 1997, AS AMENDED AND RESTATED FROM TIME TO TIME, AMONG THE HOLDERS
OF THESE SHARES AND CERTAIN OTHER HOLDERS OF THE COMPANY'S STOCK, A COPY OF
WHICH IS ON FILE AT THE PRINCIPAL EXECUTIVE OFFICE OF THE COMPANY.

          6.10  Severability.  If one or more provisions of this Agreement are
                ------------                                                 
held to be unenforceable under applicable law, such provision shall be excluded
from this Agreement and the balance of the Agreement shall be interpreted as if
such provision were so excluded and shall be enforceable in accordance with its
terms.

          6.11  Aggregation of Stock.  All shares of Registrable Securities held
                --------------------                                           
or acquired by affiliated entities or persons shall be aggregated together for
the purpose of determining the availability of any rights under this Agreement.

          6.12  Entire Agreement. Except for the side letter from the Company to
                ----------------                                               
Goldman Sachs & Co, Chase Venture Capital Associates, L.P., and Premier Medical
Partner Fund, L.P., the side letter from Chase Venture Capital Associates, L.P.
to the Company regarding Small Business Investment Company matters, and the side
letter from the Company to Integral Capital Partners II, L.P., all of even date
herewith, this Agreement and the documents referred to herein constitute the
entire agreement among the parties and no party shall be liable or bound to any
other party in any manner by any warranties, representations, or covenants
except as specifically set forth herein or therein.

                                      -22-
<PAGE>

     The foregoing Fourth Amended and Restated Stockholders' Rights Agreement is
hereby executed as of the date first above written.

                              COMPANY

                              CARDIMA, INC.


                              By: /s/ Phillip C. Radlick 
                                 ----------------------------------
                                 Phillip C. Radlick, Ph.D.

                              Title:  President and Chief Executive Officer



                              GS CAPITAL PARTNERS II, L.P.

                              BY:  GS Advisors, L.P.
                                   Its General Partner
                              BY:  GS Advisors, Inc.
                                   Its General Partner

                              By:  
                                 ----------------------------------
                                 Richard A. Friedman, President

                              GS CAPITAL PARTNERS II
                              OFFSHORE, L.P.

                              BY:  GS Advisors II (Cayman), L.P.
                                   Its General Partner
                              BY:  GS Advisors II, Inc.
                                   Its General Partner

                              By:     
                                 ----------------------------------
                                 Richard A. Friedman, President


                        SIGNATURE PAGE TO CARDIMA, INC.
                          FOURTH AMENDED AND RESTATED
                        STOCKHOLDERS' RIGHTS AGREEMENT

                                      -23-
<PAGE>

     The foregoing Fourth Amended and Restated Stockholders' Rights Agreement is
hereby executed as of the date first above written.

                              COMPANY

                              CARDIMA, INC.


                              By:  
                                 ----------------------------------
                                    Phillip C. Radlick, Ph.D.

                              Title:  President and Chief Executive Officer



                              GS CAPITAL PARTNERS II, L.P.

                              BY:  GS Advisors, L.P.
                                   Its General Partner
                              BY:  GS Advisors, Inc.
                                   Its General Partner

                              By:   /s/  C.H. SKODINSKI
                                 ----------------------------------
                              Title:  C.H. Skodinski, V.P.
                                    -------------------------------

                              GS CAPITAL PARTNERS II
                              OFFSHORE, L.P.

                              BY:  GS Advisors II (Cayman), L.P.
                                   Its General Partner
                              BY:  GS Advisors II, Inc.
                                   Its General Partner

                              By:  /s/ C.H. SKODINSKI
                                 ----------------------------------
                              Title:  C.H. Skodinski, V.P.
                                    -------------------------------


                        SIGNATURE PAGE TO CARDIMA, INC.
                          FOURTH AMENDED AND RESTATED
                        STOCKHOLDERS' RIGHTS AGREEMENT

                                      -24-
<PAGE>

          The foregoing Fourth Amended and Restated Stockholders' Rights
Agreement is hereby executed as of the date first above written.


                              GOLDMAN, SACHS & CO. VERWALTUNGS
                              GmbH

                              BY:  /s/
                                 ----------------------------------
                                 Managing Director


                              and

                                  /s/ C.H. SKODINSKI
                                  ---------------------------------
                                  C.H. Skodinski, V.P.
                                  Registered Agent


                              THE GOLDMAN SACHS GROUP, L.P.

                              BY:  The Goldman Sachs Corporation
                                 ----------------------------------
                              By:  /s/    
                                 ----------------------------------
                              Title:     
                                    -------------------------------


                        SIGNATURE PAGE TO CARDIMA, INC.
                          FOURTH AMENDED AND RESTATED
                        STOCKHOLDERS' RIGHTS AGREEMENT

                                      -25-
<PAGE>

    The foregoing Fourth Amended and Restated Stockholders' Rights Agreement is
hereby executed as of the date first above written.

                              CHASE VENTURE CAPITAL ASSOCIATES, L.P.


                              BY:  Chase Capital Partners,
                                   Its General Partner

                              By:  /s/  DAMION E. WICKER
                                  -----------------------------------
                                  Damion E. Wicker

                              Title:  General Partner
                                    ---------------------------------

                        SIGNATURE PAGE TO CARDIMA, INC.
                          FOURTH AMENDED AND RESTATED
                        STOCKHOLDERS' RIGHTS AGREEMENT

                                      -26-
<PAGE>

    The foregoing Fourth Amended and Restated Stockholders' Rights Agreement is
hereby executed as of the date first above written.

                              PREMIER MEDICAL PARTNER FUND, L.P.


                              BY:  Premier Capital Corporation
                                   Its General Partner

                              By:  /s/  ANTHONY E. MORENO
                                 -----------------------------------

                              Title:  Treasurer
                                     -------------------------------


                        SIGNATURE PAGE TO CARDIMA, INC.
                          FOURTH AMENDED AND RESTATED
                        STOCKHOLDERS' RIGHTS AGREEMENT

                                      -27-
<PAGE>

    The foregoing Fourth Amended and Restated Stockholders' Rights Agreement is
hereby executed as of the date first above written.

                              KLEINER PERKINS CAUFIELD & BYERS VI


                              By:    /s/JOSEPH S. LACOB
                                 ----------------------------------

                              Title:  General Partner
                                    -------------------------------

                        SIGNATURE PAGE TO CARDIMA, INC.
                          FOURTH AMENDED AND RESTATED
                        STOCKHOLDERS' RIGHTS AGREEMENT

                                      -28-
<PAGE>

    The foregoing Fourth Amended and Restated Stockholders' Rights Agreement is
hereby executed as of the date first above written.

                              NEW ENTERPRISE ASSOCIATES V,
                              LIMITED PARTNERSHIP


                              By: /s/NANCY DORMAN
                                 ----------------------------------
                              Its:
                                  ---------------------------------



                              CATALYST VENTURES,
                              LIMITED PARTNERSHIP

                              By: /s/NANCY DORMAN
                                 ----------------------------------
                              Its:  General Partner
                                  ---------------------------------

                        SIGNATURE PAGE TO CARDIMA, INC.
                          FOURTH AMENDED AND RESTATED
                        STOCKHOLDERS' RIGHTS AGREEMENT

                                      -29-
<PAGE>

          The foregoing Fourth Amended and Restated Stockholders' Rights
Agreement is hereby executed as of the date first above written.

                              ONSET ENTERPRISE ASSOCIATES,
                              LIMITED PARTNERSHIP


                              By: /s/
                                 ------------------------------------------

                              Title:  General Partner, OEA Management, L.P.
                                              The General Partner of
                                        ONSET Enterprise Associates, L.P.
                                       ------------------------------------

                        SIGNATURE PAGE TO CARDIMA, INC.
                          FOURTH AMENDED AND RESTATED
                        STOCKHOLDERS' RIGHTS AGREEMENT

                                      -30-
<PAGE>

    The foregoing Fourth Amended and Restated Stockholders' Rights Agreement is
hereby executed as of the date first above written.

                              TARGET THERAPEUTICS, INC.


                              By: /s/GARY BANG
                                 ----------------------------------

                              Title:   
                                    --------------------------------

                        SIGNATURE PAGE TO CARDIMA, INC.
                          FOURTH AMENDED AND RESTATED
                        STOCKHOLDERS' RIGHTS AGREEMENT

                                      -31-
<PAGE>

     The foregoing Fourth Amended and Restated Stockholders' Rights Agreement is
hereby executed as of the date first above written.

                              ATLAS VENTURE FUND II, L.P.
                              by Atlas Venture Associates II, L.P.

                              By:  /s/
                                  -------------------------------------

                              Its:  General Partner
                                   ------------------------------------


                              ATLAS EUROPE FUND BV


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


                        SIGNATURE PAGE TO CARDIMA, INC.
                          FOURTH AMENDED AND RESTATED
                        STOCKHOLDERS' RIGHTS AGREEMENT

                                      -32-
<PAGE>

     The foregoing Fourth Amended and Restated Stockholders' Rights Agreement is
hereby executed as of the date first above written.

                              ATLAS VENTURE FUND II, L.P.


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

                              Its:  General Partner
                                   ------------------------------------


                              ATLAS EUROPE FUND BV


                              By: /s/
                                 --------------------------------------
                              Its:  Managing Director
                                   ------------------------------------


                        SIGNATURE PAGE TO CARDIMA, INC.
                          FOURTH AMENDED AND RESTATED
                        STOCKHOLDERS' RIGHTS AGREEMENT

                                      -33-
<PAGE>

    The foregoing Fourth Amended and Restated Stockholders' Rights Agreement is
hereby executed as of the date first above written.


                              INTEGRAL CAPITAL PARTNERS II, L.P.


                              By:   Integral Capital Management II, L.P.

                                      its  General Partner
                                

                              By: By /s/ Pamela K. Hagenah
                                  ---------------------------------------
                                      its General Partner
                              Its:     
                                   ---------------------------------------

                              INTEGRAL CAPITAL PARTNERS INTERNATIONAL C.V.


                              By:   Integral Capital Management II, L.P.
                          
                                      its Investment General Partner
                             
                              By: ---------------------------------------   
                                  By: /s/ Pamela K. Hagenah
                                  ---------------------------------------
                                      its General Partner
                              Its:
                                   --------------------------------------
                                   


                        SIGNATURE PAGE TO CARDIMA, INC.
                          FOURTH AMENDED AND RESTATED
                        STOCKHOLDERS' RIGHTS AGREEMENT

                                      -34-
<PAGE>

    The foregoing Fourth Amended and Restated Stockholders' Rights Agreement is
hereby executed as of the date first above written.

                              /s/  GABRIEL B. VEGH
                              -------------------------
                              Gabriel B. Vegh






                        SIGNATURE PAGE TO CARDIMA, INC.
                          FOURTH AMENDED AND RESTATED
                        STOCKHOLDERS' RIGHTS AGREEMENT

                                      -35-
<PAGE>

     The foregoing Fourth Amended and Restated Stockholders' Rights Agreement is
hereby executed as of the date first above written.


                                        OLYMPIC VENTURE PARTNERS III

OLYMPIC VENTURE PARTNERS III, L.P.
By OVMC III, L.P., Its G.P.             By:
                                           ----------------------------
By /s/                                  Its:
  --------------------------------          ---------------------------
Its General Partner


                                        OVP III ENTREPRENEURS FUND


OVP III ENTREPRENEURS FUND
By OVMC III, L.P., Its G.P.             By:
                                           ----------------------------
By /s/                                  Its:
  --------------------------------          ---------------------------
Its General Partner



                        SIGNATURE PAGE TO CARDIMA, INC.
                          FOURTH AMENDED AND RESTATED
                        STOCKHOLDERS' RIGHTS AGREEMENT

                                      -36-