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Exhibit 10.1



               FUKUDA DENSHI CO., LTD. AND ENDOSONICS CORPORATION

                         JAPANESE DISTRIBUTION AGREEMENT

            THIS AGREEMENT ("Agreement"), effective on the Effective Date
(defined below), is made and entered into between EndoSonics Corporation, a
Delaware corporation, with its principal offices at 2870 Kilgore Road, Rancho
Cordova, California 95670, U.S.A. (hereinafter referred to as "EndoSonics"), and
Fukuda Denshi Co., Ltd., a corporation of Japan, with its principal offices at
3-39-4 Hongo, Bunkyo-ku, Tokyo 113, Japan (hereinafter referred to as "Fukuda").

            In consideration of the mutual promises contained herein, the
parties agree as follows:

1.          DEFINITIONS

            A. "Act" shall mean any act, statute, or regulation of any kind
governing the products in the U.S.A. including the Federal Food, Drug and
Cosmetic Act (21 U.S.C. Sections 301 392 (1993)).

            B. "Best Efforts" shall mean every necessary and prudent effort of a
party applied in a prompt, commercially reasonable manner, to the maximum extent
reasonably allowed by such party's available financial resources, taking into
account all of such party's business commitments for such financial resources.

            C. "Cardiometrics Products" shall mean those guidewire based
products for physiological testing such as WaveWire(TM) and FloWire(TM) adapted
to be utilized on the In-Vision(TM) System.

            D.          "Effective Date" shall mean August 31, 1998.

            E. "EndoSonics Products" shall mean all products for use with the
ultrasound imaging systems developed by EndoSonics during the term of this
Agreement and available for sale during the term of this Agreement.

            F. "QSR's" shall mean the good manufacturing practices for medical
devices set forth by any Act governing the products in the U.S.A. including
United States 21 C.F.R. Section 820 (1993).

            G. "IVUS Products" shall mean those EndoSonics intravascular
ultrasound products listed in Exhibit "A" attached hereto and all successor
products thereto. IVUS Products may be changed, abandoned or added by
EndoSonics, at its sole discretion, provided that EndoSonics gives one hundred
twenty (120) days' prior written notice to Fukuda.


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            H. "Sites" shall mean a hospital or other medical facility in the
Territory wherein the IVUS Products can be used.

            I. "Territory" shall mean the country of Japan.

2.          APPOINTMENT AND AUTHORITY OF FUKUDA

            A. Appointment. Subject to the terms and conditions set forth
herein, EndoSonics hereby appoints Fukuda as EndoSonics' exclusive distributor
for the IVUS Products in the Territory for the period commencing January 1, 2000
until June 30, 2007; provided, however, for the period from January 1, 2000
until December 31, 2001, Johnson & Johnson Medical KK ("JJMKK") shall be
entitled to promote and sell the IVUS Products solely to JJMKK's Sites. The
parties hereto shall determine JJMKK's Sites and other terms and conditions for
the supply to JJMKK by Fukuda on or before December 31, 1999.
Subject to the terms and conditions set forth herein, Fukuda hereby accepts such
appointment.

            Subject to the terms and conditions of this Agreement, EndoSonics
shall not appoint any other distributor, sales agent or other representative
concerning the IVUS products in the Territory during the term of this Agreement.

            B. Transition of Distribution. Fukuda hereby acknowledges that
EndoSonics and JJMKK are parties to that certain Exclusive Distribution
Agreement dated June 1, 1998 ("JJMKK Agreement") whereby JJMKK has exclusive
distribution rights to certain IVUS Products in the Territory. EndoSonics agrees
to terminate the JJMKK Agreement no later than January 1, 2000. EndoSonics, as
per Fukuda's request, will keep Fukuda advised in regard to the termination of
the JJMKK Agreement. In addition, EndoSonics will use Best Efforts to: (i)
assist Fukuda in gaining rights to distribute to additional Sites other than the
82 Sites specified in that certain Distribution Transition Agreement between
Fukuda and EndoSonics effective March 1, 1997 ("Distribution Transition
Agreement") as soon as practical before January 1, 2000; and (ii) extend to
December 31, 1999 the rights of Fukuda pursuant to the Distribution Transition
Agreement to continued distribution of the IVUS Products already installed by
Fukuda as of the Effective Date.

            C. Other Product Rights. EndoSonics hereby grants Fukuda a right of
first refusal or right of first negotiation for the exclusive distribution of
Cardiometrics Products by Fukuda in the Territory after December 31, 1999,
provided that the Cardiometrics Product are functionally compatible with the
In-Vision(TM) System at such time. In addition, EndoSonics hereby grants Fukuda
a right of first refusal for the distribution of all EndoSonics Products after
December 31, 1999 to the extent that EndoSonics may grant to Fukuda such rights.
With respect to all EndoSonics Products where Fukuda has the right of first
refusal hereunder, EndoSonics shall deliver written notice ("Notice") to Fukuda
should EndoSonics desire to appoint a distributor in the Territory for such
product. The parties shall negotiate in good faith an agreement for the
distribution of such product for a period of no more than sixty (60) days after
Fukuda receives such Notice. If the parties agree not to enter into a written
agreement within sixty (60) days from the receipt of the Notice by Fukuda, then
EndoSonics shall be free to enter into an agreement 



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with a third party for the distribution of such product in the Territory, but
the terms and conditions are substantially the same as those previously declined
by Fukuda. EndoSonics agrees that it will not appoint any distributor for any
EndoSonics Products in the Territory on or before December 31, 1999 which may
effect Fukuda's right of first refusal granted hereunder.

            D. Use of Trademarks. EndoSonics hereby grants to Fukuda a
non-exclusive license to use the EndoSonics' Trademarks (defined herein below)
for the purpose of identifying and marketing the products in the Territory. Any
use of the EndoSonics' Trademarks will be in accordance with such instructions
as EndoSonics may give Fukuda from time to time. EndoSonics shall, at its
expense, use reasonable efforts to protect and maintain all registration,
filings and issuance of EndoSonics' Trademarks in full force and effect.

            E. Fukuda Trademarks. EndoSonics shall not, without the prior
written consent of Fukuda in each instance, use in any manner whatsoever,
Fukuda's name, its trademarks, logos, symbols or other images of Fukuda or of
any party affiliated therewith.

            F. Territorial Limitation. Fukuda shall not, without the prior
written consent of EndoSonics: (i) promote, advertise, sell, distribute the
IVUS, EndoSonics and Cardiometrics Products in any country outside the
Territory; (ii) cause, directly or indirectly, the importation of the Product
into any country outside the Territory; nor (iii) establish a repair or
maintenance facility in any country outside the Territory.

            G. Conflict of Interest. Commencing on January 1, 2000, Fukuda shall
use its Best Efforts in the promotion and sale of the IVUS Products and all
other products to which it acquires exclusive distribution rights hereunder, and
Fukuda will not promote, advertise, sell nor distribute directly or indirectly
any products competitive to the IVUS Products or any other products to which it
acquires exclusive distribution rights hereunder.

            H. Independent Contractors. The relationship of EndoSonics and
Fukuda established by this Agreement is that of independent contractors, and
nothing contained in this Agreement shall be construed to (i) give either party
the power to direct and control the day-to-day activities of the other or (ii)
allow either party to create or assume any obligation on behalf of the other
party for any purpose whatsoever. All financial obligations associated with each
party's business are the sole responsibility of such party. All sales and other
agreements between Fukuda and its customers are Fukuda's exclusive
responsibility and shall have no effect on EndoSonics' obligations under this
Agreement. EndoSonics shall be solely responsible for, and shall indemnify and
hold Fukuda free and harmless from, any and all claims, damages or lawsuits
(including attorneys' fees) arising out of the acts of EndoSonics, its employees
or its agents. Fukuda shall be solely responsible for, and shall indemnify and
hold EndoSonics free and harmless from, any and all claims, damages or lawsuits
(including attorneys' fees) arising out of the acts of Fukuda, its employees or
its agents.

3.          TERMS OF PURCHASE OF PRODUCTS BY FUKUDA



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            A. Terms and Conditions. All purchases of IVUS Products by Fukuda
from EndoSonics during the term of this Agreement shall be subject to the terms
and conditions of this Agreement.

            B. Prices. All prices are F.O.B. EndoSonics' plant. This purchase
price to Fukuda for each of the IVUS Products ("Purchase Price") are set forth
on Exhibit "A" hereto, as such Purchase Prices shall be amended from time to
time during the term of this Agreement by mutual agreement of the parties.

            The prices may be revised from time to time through consultation
between EndoSonics and Fukuda, taking into account the then prevailing market
prices of the similar products. Such revisions shall apply to all orders
received after the effective date of revision. Price increases shall not affect
unfulfilled purchase orders accepted by EndoSonics prior to the effective date
of the price increase.

            C. Taxes. The amounts payable by Fukuda under Section 3 are
exclusive of all taxes and government charges (including, without limitation,
interest and penalties) payable to Japanese government, if any. If Fukuda is
required to withhold any taxes on amounts payable to EndoSonics in accordance
with this Agreement, pursuant to the laws and regulations of Japan, Fukuda shall
compensate EndoSonics for any such withholding by paying EndoSonics an
additional amount equal to such amount withheld. Nothing in this Section 3.C.
shall be construed to mean that Fukuda is responsible for taxes and charges
(including, without limitation, interest and penalties) to the federal or state
government of the U.S.A. which are imposed on EndoSonics.

            D. Order and Acceptance. All orders for IVUS Products submitted by
Fukuda shall be initiated by written purchase orders sent to EndoSonics and
requesting a delivery date during the term of this Agreement; provided, however,
that an order may initially be placed orally or by facsimile if a confirmational
written purchase order is received by EndoSonics within ten (10) days after said
oral or facsimile order. To facilitate EndoSonics' production scheduling, Fukuda
shall use reasonable commercial efforts to submit purchase orders to EndoSonics
at least sixty (60) days prior to the first day of the requested month of
delivery. No order shall be binding upon EndoSonics until accepted by EndoSonics
in writing, and EndoSonics shall have no liability to Fukuda with respect to
purchase orders that are not accepted. EndoSonics shall notify Fukuda of the
acceptance or rejection of an order and of the assigned delivery date for
accepted orders within ten (10) days of receipt of the purchase order, if not
rejected within such period of ten (10) days, the order shall be deemed
accepted. EndoSonics will use its Best Efforts, consistent with its obligations
to other similarly-situated customers, to process and ship all orders in
accordance with requested delivery dates by Fukuda.

            E. Terms of Purchase Orders. Fukuda's purchase orders submitted to
EndoSonics from time to time with respect to IVUS Products to be purchased
hereunder shall be governed by the terms of this Agreement, and nothing
contained in any such purchase order shall in any way modify such terms of
purchase or add any additional terms or conditions.



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            F. Payment. EndoSonics shall submit an invoice to Fukuda upon each
shipment of IVUS Products ordered by Fukuda. The invoice shall cover Fukuda's
purchase price for the IVUS Products in a given shipment plus any freight, taxes
or other applicable costs initially paid by EndoSonics but to be borne by
Fukuda. Payment shall be made in U.S. dollars and payment shall be by wire
transfer, check or other instrument approved by EndoSonics. Payment terms shall
be the full invoiced amount due for payment received by EndoSonics within sixty
(60) days of the date of the invoice. Fukuda may take a two (2) percent discount
as a reduction of the invoice price if payment is received by EndoSonics within
fifteen (15) days of the date of invoice. Any invoiced amount not received
within sixty (60) days of the date of invoice shall be subject to a service
charge of one and a half percent (1.5%) per month or such lesser percentage
permitted by applicable law.

            G. Shipping. All IVUS Products delivered pursuant to the terms of
this Agreement shall be suitably packed for air freight shipment in EndoSonics'
standard shipping cartons, marked for shipment at Fukuda's address set forth
above or any other address in the Territory as Fukuda indicates, and delivered
to Fukuda or its carrier agent F.O.B. EndoSonics' manufacturing plant, at which
time title to such IVUS Products and risk of loss shall pass to Fukuda. Unless
otherwise instructed in writing by Fukuda, EndoSonics shall select the carrier.
All freight, insurance, and other applicable expenses, as well as any special
packing expense, shall be paid by Fukuda.

            H. Rejection of Products. Fukuda shall inspect all IVUS Products,
except those IVUS Products which are sterilized and sealed by EndoSonics at its
plant, promptly upon receipt thereof and may reject any IVUS Product that fails
to meet the specifications set forth in EndoSonics' current product
specifications for that IVUS Product. Any IVUS Product not properly rejected
within sixty (60) days of receipt of that IVUS Product at Fukuda's facility
after customs clearance for import (the "Rejection Period") shall be deemed
accepted. To reject an IVUS Product, Fukuda shall, within the Rejection Period,
notify EndoSonics in writing by facsimile of its rejection and request a Return
Material Authorization ("RMA") number. EndoSonics shall provide the RMA number
in writing by facsimile to Fukuda within ten (10) days of receipt of the
request. Within ten (10) days of receipt of the RMA number, Fukuda shall return
to EndoSonics the rejected IVUS Product, freight collect, in its original
shipping carton with the number displayed on the outside of the carton. Provided
that EndoSonics has complied with its obligations in this Agreement, EndoSonics
reserves the right to refuse to accept any rejected IVUS Products that do not
bear an RMA number on the outside of the carton. As promptly as possible but no
later than fifteen (15) working days after receipt by EndoSonics of properly
rejected IVUS Products, EndoSonics shall, at its expense, replace the IVUS
Products and ship such replacement IVUS Products freight prepaid.

            I. Return of Products After Rejection Period. After the Rejection
Period, EndoSonics' Standard Limited Warranty shall be applied. For sterilized
and sealed IVUS Products such as catheters, however, EndoSonics shall replace
those IVUS Products found defective with new IVUS Products if such defects
should be found within fifteen (15) months of shipment of such IVUS Products to
Fukuda if a notice with the details of such defects is given by 



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Fukuda to EndoSonics within a reasonable period after Fukuda or the user has
discovered defects or ought to have discovered them. If EndoSonics tests and
inspects these returned IVUS Products and determines that such IVUS Products
perform according to EndoSonics written specifications, no credit will be given
to Fukuda. If upon such test and inspections, such returned IVUS Products do not
perform to EndoSonics' written specification, these IVUS Products will be
replaced at no cost to Fukuda except in the case that EndoSonics proves that
such defect was caused after the F.O.B. point of shipment by EndoSonics to
Fukuda.

            J. No Time Restriction. Notwithstanding any provision herein to the
contrary, Fukuda's rights and remedies under this Agreement or laws of the
Territory shall not be subject to any time restriction that may be imposed by
any provisions of the laws of non-mandatory nature so long as Fukuda gives
notice specifying the nature of the lack of conformity within a reasonable time
after Fukuda or the user has discovered it or ought to have discovered it.



4.          WARRANTY TO FUKUDA'S CUSTOMERS

            A. Standard Limited Warranty. Fukuda shall pass on to its customers
EndoSonics Standard Limited Warranty for the IVUS Products. This warranty shall
cover the IVUS Products for a period of fifteen (15) months from the date of
shipment to Fukuda. This warranty is contingent upon proper use of an IVUS
Product in the application for which it was intended and does not cover IVUS
Products that were modified without EndoSonics' approval or that were subjected
by the customer to unusual physical stress. If an IVUS Product fails to meet the
warranty provided herein, EndoSonics' sole liability and Fukuda and/or the
end-user's sole remedy shall be either the replacement by EndoSonics of the
defective unit with another unit of the same product (or a unit of a
substantially equivalent product thereto if the original model is no longer
manufactured) or the refund by EndoSonics of the purchase price paid for such
defective product.

            B. No Other Warranty. EXCEPT FOR THE EXPRESS WARRANTY SET FORTH
ABOVE, ENDOSONICS HEREBY DISCLAIMS ALL OTHER WARRANTIES, EXPRESS OR IMPLIED, BY
STATUTE OR OTHERWISE, REGARDING THE IVUS PRODUCTS, INCLUDING BUT NOT LIMITED TO
THEIR FITNESS FOR A PARTICULAR PURPOSE, OR THEIR MERCHANTABILITY. OTHER THAN FOR
PUNITIVE DAMAGES, NOTHING IN THIS SECTION 4. SHALL LIMIT THE INDEMNIFICATION
OBLIGATION UNDER SECTION 8.A. WITH RESPECT TO DAMAGE CLAIMS FOR PERSONAL INJURY
AND/OR DEATH CAUSED BY DEFECT OF THE IVUS PRODUCTS.

5.          ADDITIONAL OBLIGATIONS OF ENDOSONICS AND FUKUDA

            A. Clinical Trials: Management, Product Supply and Regulatory
Approvals. Fukuda agrees that it will undertake to manage, at Fukuda's expense,
all animal trials and human clinical trials required to obtain approval from all
Japanese regulatory authorities to market in the Territory the IVUS Products and
all other products to which Fukuda acquires exclusive 



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distribution rights under this Agreement. Fukuda agrees to expeditiously submit
for Ministry of Health and Welfare ("MOHW") approval for the In-Vision(TM)
System and upon receipt of such approval, transfer the approval to the party
specified by EndoSonics. Fukuda will continue to process the existing submission
for the amended Oracle 96(TM) System and transfer such approval to JJMKK in
accordance with the Distribution Transition Agreement. EndoSonics will use Best
Efforts to cause JJMKK to transfer to Fukuda all MOHW approvals held by JJMKK on
products to which Fukuda acquires exclusive distribution rights hereunder upon
the termination of the JJMKK Agreement. Any costs and expenses which exceed the
amount paid by JJMKK to Fukuda in consideration of the transfer of the MOHW
approvals from Fukuda to JJMKK will not be the responsibility of Fukuda.

            EndoSonics agrees that it will sell products to Fukuda to conduct
the animal trials and human clinical trials for Japanese marketing approval at a
fifty percent (50%) discount to EndoSonics' regular prices to Fukuda. Payment
for these products will be sixty (60) days following shipment from EndoSonics.
Shipment costs will be added to invoice amounts.

            EndoSonics shall assist Fukuda in obtaining regulatory approvals and
registration of the products in the Territory by providing Fukuda with;

            (i) materials in EndoSonics possession necessary to obtain MOHW
approvals and marketing approvals, licenses, and permits;

            (ii) certificates of analysis, export and compliance;

            (iii) trademark authorizations; and

            (iv) such other information as Fukuda shall reasonably request from
time to time.

            EndoSonics agrees to train Fukuda in the proper clinical use of all
IVUS Products, and Fukuda shall be responsible in turn for training their
customers. Also at Fukuda's request, EndoSonics agrees to make arrangements to
send one of EndoSonics' major U.S. Clinical Investigator Physicians to Japan to
(i) give lectures on the use of these products and (ii) perform clinical
training of these products to Japanese physicians. Fukuda agrees to reimburse
EndoSonics for all out-of-pocket expenses for the travel of this physician to
Japan.

            B. Minimum Purchases. Commencing on January 1, 2000 until the
termination or expiration of this Agreement, Fukuda commits to purchase from
EndoSonics certain annual minimum quantities of IVUS Products ("Minimums"). The
Minimums for the calendar year 2000 shall [*]. Fukuda shall use reasonable
commercial efforts to ensure that the annual purchase commitment is reasonably
distributed over each calendar quarter. For each calendar year after 2000, the
parties shall discuss in good faith and agree upon Minimums in writing no later
than six (6) months prior to the commencement of such calendar year. If Fukuda
fails to purchase the required Minimums in any calendar year, EndoSonics may, 


* Confidential Treatment Requested. Confidential Portion Has Been Filed
  Separately with the Securities and Exchange Commission.

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as the sole remedy for Fukuda's failure to purchase the Minimums, upon thirty
(30) days written notice to Fukuda, either terminate this Agreement or render
non-exclusive the distribution rights granted to Fukuda in Section 2.A.

            C. Forecasts. Within the first ten (10) days of every quarter,
Fukuda shall provide EndoSonics with a four quarter rolling forecast
("Forecast") showing prospective orders by product model and intended purchase
order submittal date. The quantities forecasted for the first quarter of each
Forecast ("Binding Quarter") shall be binding on Fukuda and deemed supported by
a non-cancelable purchase order. In addition, the quantities corresponding to
the Binding Quarter of the next four quarter rolling forecast may not be less
than 50% of the quantities corresponding to the second quarter forecast of the
previous Forecast.

            D. Promotion of the Products. Fukuda shall, at its own expense, use
its best efforts to promote the sale of the IVUS Products within the Territory.
Such promotion shall include, but not be limited to, preparing promotional
materials in languages appropriate for the Territory, advertising the IVUS
Products in trade publications within the Territory, participating in
appropriate trade shows to the extent Fukuda thinks fit, and directly soliciting
orders from customers for the IVUS Products.

            E. Finances and Personnel. Fukuda shall devote sufficient financial
resources, technically qualified sales personnel, and service personnel to the
IVUS Products to fulfill its responsibilities under this Agreement.

            F. Customer and Sales Reporting. Fukuda shall, at its own expense:

                        (i) place the IVUS Products in Fukuda's  catalogues as
soon as possible and feature IVUS Products in any applicable trade show that it
attends to the extent Fukuda thinks fit;

                        (ii) provide adequate contact with existing and
potential customers within the Territory on a regular basis, consistent with
good business practice;

                        (iii) assist EndoSonics in assessing customer
requirements for the IVUS Products, including modifications and improvements
thereto, in terms of quality design, functional capability, and other features;

                        (iv) submit market research information, as reasonably
requested by EndoSonics, regarding competition and changes in the
market within the Territory; and

                        (v) provide EndoSonics with a report, by product type,
of all sales of IVUS Products for each quarter no later than thirty
(30) days following the end of such quarter.

            G. Import Requirements. Fukuda shall, at its own expense, pay all
import licenses and permits, pay customs charges and duty fees, imposed by any
Japanese governmental authority upon or applicable to any import by Fukuda under
this Agreement, and take all other actions required to accomplish the import of
the IVUS Products purchased by Fukuda.

            H. Export Law Compliance. Fukuda understands and recognizes that the
Product and other materials made available to it hereunder may be subject to the
export administration regulations of the United States Department of Commerce
and other United States government 



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regulations, as amended from time to time, related to the export of technical
data and equipment and products produced therefrom. Fukuda agrees to comply with
all such regulations in connection with the distribution of the IVUS Product.
Fukuda agrees to cooperate with EndoSonics and to provide EndoSonics with such
reasonable assistance as is required in order to comply with the export
administration regulations of the United States. Nothing in this Section 5. H.
shall be construed to require that Fukuda shall bear any cost or expense
required to comply with such U.S. export regulations.

            I. Upgrade of IVUS Products. No later than June 30, 1999, Fukuda
hereby agrees to upgrade the Oracle 96(TM) Systems installed as of the Effective
Date to: (i) conform to the specification for the In-Vision(TM) Systems, and
(ii) include both the ChromaFlo(TM) and In-Line Digital(TM) features. EndoSonics
shall supply to Fukuda kits required for such upgrade at the following prices:


<TABLE>
<CAPTION>
                  Feature                                Price per Unit (U.S. $)
                  -------                                -----------------------
<S>                                                      <C>    
        Upgrade to In-Vision(TM) System                           [*]

        Addition of ChromaFlo(TM) and In-Line 
        Digital(TM) to the In-Vision(TM)
        System                                                    [*]
</TABLE>


            J. In-Vision(TM) System Promotional Allowances. During 1999, up to
10 In-Vision(TM) Systems may be purchased by Fukuda from JJMKK for which
EndoSonics will provide promotional allowances to Fukuda. [*]. The promotional
allowances will be paid within thirty (30) days after the end of the 1999
calendar quarter in which Fukuda purchases the In-Vision(TM) Systems.

6.          ADDITIONAL OBLIGATIONS OF ENDOSONICS

            A. Supply of Sample Products and Materials. EndoSonics shall supply
Fukuda's requirements for the IVUS Products in the Territory consistent with the
delivery schedules and the Minimums. EndoSonics shall promptly provide Fukuda
without any charges with marketing and technical information concerning the IVUS
Products as well as reasonable quantities of brochures, instructional material,
advertising literature, and other IVUS Product data, with all such material
printed in the English language. EndoSonics agrees to discuss with Fukuda for


* Confidential Treatment Requested. Confidential Portion Has Been Filed
  Separately with the Securities and Exchange Commission.


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supplying appropriate number of sample IVUS Products or granting a fifty percent
(50%) discount for appropriate number of IVUS Products for assistance of
Fukuda's sales.

            B. Response to Inquiries. EndoSonics shall promptly respond to all
inquiries from Fukuda concerning matters pertaining to this Agreement.

            C. Testing. EndoSonics shall test all IVUS Products before shipment
to Fukuda under U.S. FDA GMP or QSR requirements.

            D. Delivery Time. EndoSonics shall minimize delivery time as much as
possible and to fulfill delivery obligations as committed in any acceptance.

            E. Territorial Inquiries. EndoSonics shall submit to Fukuda any
inquiry originating from the Territory rather than answering the inquiry
directly.

            F. Quotations to exporters. EndoSonics shall refrain from giving
quotations to exporters whom EndoSonics knows or has reason to suspect will ship
IVUS Products to the Territory.


            G. Market Information. Upon reasonable request of Fukuda, EndoSonics
shall provide Fukuda with information as to general market movement,
competitors' prices and strategies, names of EndoSonics' major customers (users)
and other information that may help Fukuda promote and sell the IVUS Products in
the Territory.

            H. Customer's Special Requirements. In case Fukuda encounters
requests from customers for special changes or modifications on IVUS Products so
that the IVUS Products meet their particular usage. In such cases, if Fukuda
deems it necessary to comply with such requirements for its market strategy,
Fukuda shall request EndoSonics to make such changes or modifications on the
IVUS Products and EndoSonics shall use its reasonable commercial efforts to meet
such requirements.

            I. New Developments. EndoSonics shall inform Fukuda of new IVUS
Product developments during regularly scheduled quarterly reviews.

            J. Regulatory Reporting and Analysis of Returned Products.
EndoSonics shall file, or cause to be filed, all reports required of a
manufacturer pursuant to the applicable U.S. medical device reporting
regulations. EndoSonics, as the manufacturer of the products, shall perform all
failure analysis on the products within thirty (30) days of receipt of each
failed product and shall file all reports required with the applicable U.S.
regulatory agency. EndoSonics shall further cooperate with and assist Fukuda in
submitting all reports that Fukuda, as distributor of the products, may be
required to file. Fukuda shall promptly provide EndoSonics with copies of all
such reports.



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7.          TERM AND TERMINATION

            A. Term. This Agreement shall be effective on the Effective Date and
shall continue in force through June 30, 2007, unless terminated earlier under
the provisions of this Section 7. Six (6) months prior to expiration, the
parties will meet to discuss in good faith an extension to this Distribution
Agreement. Thereafter the term of the Distribution Agreement may be renewed by
mutual agreement of the parties for successive periods of two (2) years each,
provided that (i) Fukuda has fulfilled its minimum purchase obligation agreed
upon with EndoSonics on or before September 30 of each year and (ii) the parties
mutually agree to minimums for each extension year.

            B. Termination for Cause. If either party materially defaults in the
performance any obligation in this Agreement, then the non-defaulting party may
give written notice to the defaulting party that if the default is not cured
within ninety (90) days after receipt of such notice, the Agreement will be
terminated. If the non-defaulting party gives such notice and the default is not
cured during the ninety-day period, then the Agreement shall automatically
terminate at the end of that period.

            C. Termination for Insolvency. This Agreement shall terminate,
without notice, (i) upon the institution by or against Fukuda or EndoSonics of
insolvency, receivership or bankruptcy proceedings or any other proceedings for
the settlement of debts; (ii) upon Fukuda's or EndoSonics' making an assignment
for the benefit of creditors; or (iii) upon Fukuda's or EndoSonics' dissolution.

            D. Fulfillment of Orders upon Termination. Upon termination of this
Agreement, EndoSonics shall continue to fulfill, subject to the terms of Section
3 above and if so requested by Fukuda, all orders accepted by EndoSonics prior
to the date of termination.

            E. Return of Materials. All trademarks, trade names, patents,
copyrights, designs, drawings, formulas or other data, photographs, samples,
literature and sales aids of every kind with respect to the IVUS Products shall
remain the property of EndoSonics as long as the objects sill remain in Fukuda's
possession. Within thirty (30) days after the termination of this Agreement,
Fukuda shall prepare all such items in its possession for shipment as EndoSonics
may direct, at EndoSonics' expense. Fukuda shall not make or retain any copies
of any confidential items or information or any product literature which may
have been entrusted to it. Effective upon the termination of this Agreement,
Fukuda shall cease to use all trademarks, marks and trade names of EndoSonics;
provided, however, that Fukuda may continue to use such trademarks to market,
distribute or sell any inventory of the products in Fukuda's possession at the
time of such termination as permitted pursuant to Section 7.F.



                                      -11-
<PAGE>   12

            F. Inventory on Termination. Upon termination of this Agreement due
to expiration (7.A.) Fukuda may return to EndoSonics, or its nominee, its
remaining inventory which is new and unused for credit or refund at then current
selling prices or, upon mutual agreement, for a period not to exceed one hundred
eighty (180) days, sell any remaining inventory. Upon termination due to
Fukuda's default or insolvency (7.B., 7.C.), Fukuda at EndoSonics' option will
return its remaining inventory which is new and unused for credit or refund at
then current selling prices or for a period not to exceed one hundred eighty
(180) days, sell any remaining inventory. Upon termination due to EndoSonics'
default or insolvency (7.B., 7.C.), Fukuda at its option will return its
remaining inventory which is new and unused for credit or refund at then current
selling prices, or for a period not to exceed one hundred eighty (180) days,
sell any remaining inventory.

            G. Limitation on Liability. In the event of termination by either
party in accordance with any of the provisions of this Agreement, neither party
shall be liable to the other, because of such termination, for compensation,
reimbursement or damages on account of the loss of prospective profits or
anticipated sales or on account of expenditures, inventory, investments, leases
or commitments in connection with the business or goodwill of EndoSonics or
Fukuda. Termination shall not, however, relieve either party of obligations
incurred prior to the termination.

            H. Survival of Certain Terms. The provisions of Sections 2.F, 3.F,
4, 7, 8, 9, 10, 11 and 12 shall survive the termination of this Agreement for
any reason. All other rights and obligations of the parties shall cease upon
termination of this Agreement

8.          LIABILITY COVERAGE AND LIMITATIONS

            A. Products Liability. EndoSonics agrees to carry products liability
insurance for all of its IVUS Products. This liability insurance will cover the
design, manufacture and performance of IVUS Products when these products are
promoted, sold and used by customers for uses specified in EndoSonics labeling,
promotional materials and instructions for use. Fukuda will be responsible for
any liability arising out of (1) Fukuda's sales of IVUS Products for
applications not included in EndoSonics' labeling, promotional material and
instructions for use, (2) for liability claims arising from Fukuda's wrongful
training of customer users, and (3) liability claims arising from wrongful use
of IVUS Products by Fukuda's customers. EndoSonics shall indemnify and hold
Fukuda free and harmless from all costs, expenses and damages incurred by Fukuda
in connection with third party claims concerning personal injury or death caused
by a defect in the design or manufacture of an IVUS Product or a non-conformance
with EndoSonics' then current specifications for IVUS Products existing at the
time of delivery of such IVUS Product by EndoSonics under Section 3.G.

            B. Limitation on Liability. ENDOSONICS' LIABILITY ARISING OUT OF
THIS AGREEMENT AND/OR SALE OF THE IVUS PRODUCT SHALL BE LIMITED TO THE AMOUNT
PAID BY THE CUSTOMER FOR THE IVUS PRODUCTS. IN NO EVENT 



                                      -12-
<PAGE>   13

SHALL ENDOSONICS BE LIABLE FOR COSTS OF PROCUREMENT OF SUBSTITUTE GOODS. IN NO
EVENT SHALL ENDOSONICS BE LIABLE TO FUKUDA OR ANY OTHER ENTITY FOR ANY SPECIAL,
CONSEQUENTIAL, INCIDENTAL, OR INDIRECT DAMAGES, HOWEVER CAUSED, ON ANY THEORY OF
LIABILITY, AND NOTWITHSTANDING ANY FAILURE OF ESSENTIAL PURPOSE OR ANY LIMITED
PURPOSE OR ANY LIMITED REMEDY. OTHER THAN FOR PUNITIVE DAMAGES, NOTHING IN THIS
SECTION 8.B. SHALL LIMIT THE INDEMNIFICATION OBLIGATION UNDER SECTION 8.A. WITH
RESPECT TO DAMAGE CLAIMS FOR PERSONAL INJURY AND/OR DEATH CAUSED BY DEFECT OF
THE IVUS PRODUCTS.

9.          PROPERTY RIGHTS AND CONFIDENTIALITY

            A. Property Rights. Fukuda agrees that EndoSonics owns all right,
title and interest in the IVUS Product lines that include the IVUS Products now
or hereafter subject to this Agreement and in all of EndoSonics' patents,
trademarks, trade names, inventions, copyrights, know-how, and trade secrets
relating to the design, manufacture, operation or service of the IVUS Products.
The use by Fukuda of any of these property rights is authorized only for the
purposes herein set forth, and upon termination of this Agreement for any
reason, such authorization shall cease.

            B. Sale Conveys No Right to Manufacture or Copy. The IVUS Products
are offered for sale and are sold by EndoSonics subject in every case to the
condition that such sale does not convey any license, expressly or by
implication, to manufacture, duplicate or otherwise copy or reproduce any of the
IVUS Products. Fukuda shall take appropriate steps with its customers, as
EndoSonics may request, to inform them of and assure compliance with the
restrictions contained in this Subsection 9.B.

            C. Confidentiality. Each party shall maintain in confidence all
Confidential Information, as defined below, of the other party and shall not
use, disclose or grant use of such Confidential Information except as expressly
authorized by this Agreement. A party may disclose Confidential Information, as
authorized hereunder, only to those of its employees or agents who agree to be
bound by the terms of this Section 9. Fukuda may disclose the Confidential
Information to MOHW, if and when it is so required, during the MOHW approval
proceedings, provided that Fukuda shall make its Best Efforts to avoid or limit
such disclosure. As used in this Agreement, the term "Confidential Information"
shall mean information deemed by a party to be its confidential or proprietary
information and disclosed to the other party in writing and marked
"Confidential", or disclosed orally under confidence, including without
limitation, any confidential engineering designs and drawings, know-how, trade
secret, research, data, process, technique, research project, work in process,
future development, scientific, manufacturing, marketing, business plan,
financial or personnel matter relating to the party, its present or future
products, sales suppliers, customers, employees, investors or business. Upon
request of either of the parties hereto, the other party shall advise whether or
not it considers any particular information or materials to be confidential.
Fukuda shall not publish any technical description of the IVUS Products beyond
the description published by EndoSonics (except to 



                                      -13-
<PAGE>   14

translate that description into appropriate languages for the Territory). In the
event of termination of this Agreement, there shall be no use or disclosure by
either of the parties hereto of any Confidential Information of the other party,
provided that the restrictions under Section 9 hereof does not in any manner
affect Fukuda's rights and/or licenses granted under any other agreements
entered into between EndoSonics and Fukuda.

            D. Exclusions. The term "Confidential Information" shall not be
deemed to include information which: (i) is now, or hereafter becomes, through
no act or failure to act on the part of a party receiving such information,
generally known or available; (ii) is known by the party receiving such
information at the time of receiving such information, as evidenced by its
records; (iii) is hereafter furnished to the party receiving such information by
a third party, as a matter of right and without restriction on disclosure; (iv)
is the subject of a written consent to disclose provided by the disclosing
party, which consent may be withheld in the sole discretion of such party; or
(v) is discovered or developed by a party independent of and without any
reference to Confidential Information of the disclosing party, as evidenced by
the written records of the receiving party.

10.         TRADEMARKS AND TRADE NAMES

            A. Use. During the term of this Agreement, Fukuda shall have the
right to indicate to the public that it is an authorized distributor of IVUS
Products and to advertise (within the Territory) such IVUS Products under the
trademarks, marks and trade names that EndoSonics may adopt from time to time
("EndoSonics' Trademarks"). Fukuda shall not alter or remove any EndoSonics'
Trademark applied to the IVUS Products at the factory. Nothing herein shall
grant to Fukuda any right, title or interest in EndoSonics' Trademarks. At no
time during or after the term of this Agreement shall Fukuda challenge or assist
others to challenge EndoSonics' Trademarks or the registration thereof or
attempt to register any trademarks, marks or trade name confusing similar to
those of EndoSonics.

            B. Approval of Representations. Fukuda shall respect EndoSonics'
Trademarks and follow the instructions of EndoSonics as to the usage of
EndoSonics' Trademarks. If any of EndoSonics' Trademarks are to be used in
conjunction with another trademark on or in relation to the IVUS Products, then
EndoSonics' mark shall be presented equally legibly, equally prominently, and of
the same or greater size than the other but nevertheless separated from the
other so that each appears to be a mark in its own right, distinct from the
other mark.

11.         PATENT, COPYRIGHT AND TRADEMARK INDEMNITY

            A. Indemnification. Fukuda agrees that EndoSonics has the right to
defend, or at its option to settle, and EndoSonics agrees, at its own expense,
to defend or at its option to settle, any claim, suit or proceeding brought
against Fukuda or its customer on the issue of infringement of any Japanese
patent, or trademark by the IVUS Products sold hereunder, or the use thereof,
subject to the limitations hereinafter set forth. EndoSonics shall have sole
control of any such action or settlement negotiations, and EndoSonics agrees to
pay, subject to the limitations hereafter set forth, any final judgment entered
against Fukuda or its customer on such issue in 



                                      -14-
<PAGE>   15

any such suit or proceeding defended by EndoSonics. Fukuda agrees to notify
EndoSonics promptly in writing of such claim, suit or proceeding and gives
EndoSonics authority to proceed as contemplated herein, and, at EndoSonics'
expense, gives EndoSonics proper and full information and assistance to settle
and/or defend any such claim, suit or proceeding. If the IVUS Products, or any
part thereof, are the subject of any claim, suit or proceeding for infringement
of any Japanese patent, or trademark, or if the sale or use of the IVUS
Products, or any part thereof, is, as a result, enjoined, then EndoSonics shall,
at its expense (i) procure for Fukuda and its customers the right under such
patent, or trademark to sell or use, as appropriate, the IVUS Products or such
part thereof; or (ii) replace the IVUS Products, or part thereof, with other
suitable IVUS Products or parts; or (iii) suitably modify the IVUS Products, or
part thereof; or (iv) if the use of the IVUS Products, or part thereof is
prevented by injunction, remove the IVUS Products, or part thereof, and refund
the aggregate payments paid therefor by Fukuda, less a reasonable sum for use
and damage.

            B. Limitation. Notwithstanding the provisions of Subsection 11.A.
above, EndoSonics assumes no liability for (i) infringements covering completed
equipment or any assembly, circuit, combination method or process in which any
of the IVUS Products may be used but not covering the IVUS Products standing
alone; (ii) any trademark infringement involving any marking or branding not
applied by EndoSonics or involving any marking or branding applied at the
request of Fukuda; or (iii) the modification of the IVUS Products, or any part
thereof, unless such modification or servicing was done by EndoSonics.

            C. Entire Liability. The foregoing provision of this Section 11
states the entire liability and obligations of EndoSonics and the exclusive
remedy of Fukuda and its customers, with respect to any alleged patent or
trademark infringement by the IVUS Products or any part thereof.





12.         GENERAL PROVISIONS

            A. Arbitration. All disputes, controversies, or differences which
may arise between the parties hereto, out of, in relation to, or in connection
with this Agreement or the breach thereof, shall be finally settled by
arbitration in accordance with the Japan-American Trade Arbitration Agreement of
September 16, 1952 (as amended), by which each party hereto agrees to be bound.
If arbitration is requested by Fukuda, arbitration shall be conducted in Palo
Alto, California, U.S.A.; if arbitration is requested by EndoSonics, arbitration
shall be conducted in Tokyo, Japan. Judgment upon an award rendered may be
entered in any court having jurisdiction, or application may be made to such
court for judicial acceptance of the award and an order of endorsement, as the
case may be.

            B. Entire Agreement. This Agreement sets forth the entire agreement
and understanding of the parties relating to the subject matter herein and
merges all prior discussions 



                                      -15-
<PAGE>   16

between them. No modification of or amendment to this Agreement, nor any waiver
of any rights under this Agreement, shall be effective unless in writing signed
by the party to be charged.

            C. Notices. Any notice required or permitted by this Agreement shall
be in writing and; (i) upon personal delivery to the party be notified; (ii)
when sent by confirmed facsimile if sent during normal business hours of the
recipient (if not, then on the next business day); (iii) ten (10) days after
having been sent by registered or certified airmail, return receipt requested,
postage prepaid; or (iv) four (4) business days, after being properly deposited
with an internationally recognized overnight courier, specifying express
delivery, with written verification of receipt addressed to the other party at
the address shown at the beginning of this Agreement or at such other address
for which such party gives notice hereunder.

            D. Force Majeure. Nonperformance of either party shall be excused to
the extent that performance is rendered impossible by strike, fire, flood,
governmental acts or orders or restrictions, failure of suppliers, or any other
reason where failure to perform is beyond the control of and not caused by the
negligence of the non-performing party.

            E. Change of Control; Assignment. This Agreement, including all
terms and conditions hereof which survive any termination or expiration of this
Agreement, shall be binding upon and inure to the benefit of the parties hereto
and their permitted successors and assigns. Neither party may assign any of its
rights and obligations hereunder without prior written consent of the other
party, and any such assignment or purported assignment shall be void, except
that an assignment pursuant to merger, acquisition or sale of all or
substantially all of the assets of a party shall not require such consent.

            F. Partial Invalidity. If any provision of this Agreement is held to
be invalid by a court of competent jurisdiction, then the remaining provisions
shall nevertheless remain in full force and effect. The parties agree to
renegotiate in good faith any term held invalid and to be bound by the mutually
agreed substitute provision.



            G. Legal Expenses. The prevailing party in any legal action brought
by one party against the other and arising out of this Agreement shall be
entitled, in addition to any other rights an remedies it may have, to
reimbursement for its expense, including arbitration costs and reasonable
attorneys' fees.

            H. Counterparts. This Agreement shall be executed in two
counterparts, each of which shall be deemed an original, each party retaining
one copy thereof.



                             ENDOSONICS CORPORATION



                                      -16-
<PAGE>   17

                                        By: /s/ Reinhard J. Warnking
                                            --------------------------------

                                        PRINTED NAME:  Reinhard J. Warnking

                                        TITLE: President, CEO



                                        FUKUDA DENSHI CO., LTD.

                                        By: /s/ Kotaro Fukuda
                                            --------------------------------

                                        PRINTED NAME:  Kotaro Fukuda

                                        TITLE:  President and Board Member



                                      -17-
<PAGE>   18


                                    EXHIBIT A

[*]




* Confidential Treatment Requested. Confidential Portion Has Been Filed
  Separately with the Securities and Exchange Commission.


                                      -18-
<PAGE>   19


                               EXHIBIT A (CONT'D)





[*]






* Confidential Treatment Requested. Confidential Portion Has Been Filed
  Separately with the Securities and Exchange Commission.