THIRD  AMENDMENT,  dated  as of  December  22,  1997,  to that  certain
International  Distributorship  Agreement,  dated as of  January  22,  1997,  as
amended  (as so  amended,  the  "Distributorship  Agreement")  between  Arterial
Vascular  Engineering,  Inc., a Delaware  corporation ("AVE") and Japan Lifeline
Co., Ltd., a company organized under the laws of Japan (the "Distributor").

         WHEREAS,  AVE and the Distributor desire to amend certain provisions of
the Distributorship Agreement;

         NOW, THEREFORE, in consideration of the premises and for other valuable
consideration,  receipt  of which is hereby  acknowledged,  the  parties  hereto
hereby agree as follows:

         1.       Section 3.6 is hereby amended by inserting the following after
the words "September 30, 1998" and before the words "in connection with":

                  "and  the  amount  of * on  January  1,  1998,  for use by the
                  Distributor  during  the  period  between  January 1, 1998 and
                  December 31, 1998,"

         2.        Schedule B is hereby  amended by  revising  the   proviso  to
the end of the  sentence  under the  heading  "Coronary  Stent  Systems,"  which
proviso shall be and read as follows:

                  "; provided,  however, that for the quarterly period beginning
                  October  1, 1997 and ending  December  31,  1997,  Distributor
                  shall purchase at least * coronary stent systems".

         3.        Schedule B is hereby further amended by adding an  additional
paragraph under the heading  "Coronary Stent Systems",  which paragraph shall be
and read as follows:

"Inaddition to the minimum  quarterly  purchases  specified  above,  Distributor
   shall also purchase an aggregate of * GFX(TM)  coronary stent  systems,  with
   purchases  of  portions of such  aggregate  amount to be at such times as AVE
   shall require;  provided,  however, that Distributor shall not be required to
   purchase more than * of such additional GFX(TM) coronary stent systems in any
   one quarterly  period;  and provided  further that  Distributor  shall not be
   required to purchase any such additional  GFX(TM)coronary stent systems prior
   to the date of grant of Japanese  insurance  reimbursement for such Products;
   and provided further that Distributor shall not be required to place an order
   for a portion of such  additional  GFX(TM)  coronary stent systems within the
   three-month  period  immediately  preceding the  introduction to the Japanese
   market of an improved  version of the GFX(TM)  coronary  stent;  and provided
   further  that  Distributor  shall not be  required  to  purchase  more than *
   GFX(TM)  coronary  stent  systems in the aggregate  (including  the otherwise
   required minimum quarterly purchases) in any single 12-month period following
   the date of grant of Japanese  insurance  reimbursement  for such  Products."

   -------------
*  Confidential  treatment has been requested for certain information  contained
   in this document.  Such  information  has  been omitted and filed  separately
   with  the  Securities  and  Exchange   Commission   pursuant  to  Rule  24b-2
   promulgated under the Securities Exchange Act of 1934, as amended.


<PAGE>

         4.       This   Amendment  is  limited  as  specified   and  shall  not
constitute a  modification,  acceptance or waiver of any other  provision of the
Distributorship Agreement.

         5.       From  and  after  the  date  hereof,  all  references  in  the
Distributorship   Agreement   shall  be   deemed   to  be   references   to  the
Distributorship Agreement as modified hereby.

         6.       This  Amendment   shall  be  governed  by,  and  construed  in
accordance  with,  the laws of the State of  California  applicable to contracts
executed in and to be performed in that State.


         IN WITNESS WHEREOF,  AVE and the Distributor have caused this Amendment
to be duly  executed  as of the date  first  written  above by their  respective
officers thereunto duly authorized.


ARTERIAL VASCULAR ENGINEERING, INC.                  JAPAN LIFELINE CO., LTD.  
                                                   
      /s/ Scott J. Solano                             /s/ Takeshi Masumoto
--------------------------------------               -------------------------
         Scott J. Solano                                Takeshi Masumoto
President and Chief Executive Officer                      President