INTERNATIONAL DISTRIBUTORSHIP AGREEMENT

                                     between

                       ARTERIAL VASCULAR ENGINEERING, INC.

                                       and

                            JAPAN LIFELINE CO., LTD.











                          Dated as of January 22, 1997







<PAGE>
<TABLE>



                                               TABLE OF CONTENTS
<S>                                                                                             <C>
Section 1.  Definitions..........................................................................1

Section 2.  Relationship of Parties..............................................................1
        2.1 Appointment..........................................................................1
        2.2 Exclusivity..........................................................................2
        2.3 Independent Contractor...............................................................2

Section 3.  Marketing of Products................................................................3
        3.1 Obligations of Distributor...........................................................3
        3.2 Obligations of AVE...................................................................5
        3.3 Forecasts............................................................................5
        3.4 Reports..............................................................................5

Section 4.  Purchase and Sale of Products .......................................................5
        4.1 Orders...............................................................................5
        4.2 Delivery.............................................................................6
        4.3 Price................................................................................6
        4.4 Payment..............................................................................6
        4.4 Payment..............................................................................6
        4.5 Taxes................................................................................6
        4.6 Interest.............................................................................6
        4.7 Returns..............................................................................7
        *

Section 5.  Confidentiality; Proprietary Rights .................................................7
        5.1 Confidentiality......................................................................7
        5.2 Insider Information - Securities Law Violations......................................8
        5.3 Ownership ...........................................................................8
        5.4 Enforcement..........................................................................8
        5.5 Trademarks and Trade Names...........................................................8
        5.6 Assignments..........................................................................9

Section 6.  Warranty, Remedies and Disclaimers...................................................9
        6.1 Warranty.............................................................................9
        6.2 Exclusive Remedies...................................................................9
        6.3 DISCLAIMER...........................................................................10

Section 7.  Product Liability....................................................................10
        7.1 Indemnity............................................................................10
        7.2 Insurance............................................................................10

Section 8.  Other Obligations of Distributor.....................................................11
        8.1 No Unauthorized Warranties...........................................................11
        8.2 Compliance Laws......................................................................11
        8.3 U.S. Export Controls.................................................................11
        8.4 Insurance ...........................................................................11
        8.5 Noncompete...........................................................................11
----------------------------------------------------
*  Certain  confidential  information  contained  in this  document,  marked  by
asterisks,  has been  omitted  and  filed  seperately  with the  Securities  and
Exchange  Commission  pursuant to Rule 24b-2 of the Securities  Exchange Act, as
amended.

                                           i
<PAGE>

        8.6 Indemnity............................................................................12

Section 9.  Term and Termination.................................................................13
        9.1 Commencement.........................................................................13
        9.2 Expiration...........................................................................13
        9.3 Termination by AVE...................................................................13
        9.4 Termination by Distributor...........................................................14
        9.5 Effect of Termination................................................................15
        9.6 Acknowledgment.......................................................................15

Section 10.  Resolution of Disputes..............................................................16
        10.1 Negotiation.........................................................................16
        10.2 Mediation...........................................................................16
        10.3 Arbitration.........................................................................16

Section 11.  Equitable and Payment Remedies......................................................17

Section 12.  Miscellaneous.......................................................................17
        12.1 Limitation of Liability.............................................................17
        12.2 Force Majeure.......................................................................17
        12.3 Distributor's Representation........................................................18
        12.4 Assignment..........................................................................18
        12.5 Successors and Assigns..............................................................18
        12.6 Notice..............................................................................18
        12.7 Entire Agreement....................................................................18
        12.8 Nonwaiver...........................................................................18
        12.9 Interpretation......................................................................19
        12.10 Governing Law; Venue ..............................................................19

                                          ii
</TABLE>
<PAGE>



        This  Agreement,  dated as of January 22, 1997, is made and entered into
between Arterial Vascular Engineering. Inc., a Delaware corporation ("AVE"), and
Japan  Lifeline  Co.,  Ltd.,  a  company  organized  under  the  laws  of  Japan
("Distributor").

        AVE and Distributor agree as follows:

Section 1.            Definitions

        1.1 "Confidential  Information" means any information  furnished or made
known  to  Distributor  or  its  officers,   directors,   employees,  agents  or
representatives  during the Term,  including,  but not limited  to,  information
relating to Product  specifications,  design data, finances,  know-how,  general
business   operations,   prices  and  pricing  policies,   marketing  practices,
litigation,  identity of customers or any other confidential  and/or proprietary
aspect of AVE's business; provided, however, that Confidential Information shall
not include (i) information  that at the time of disclosure to Distributor is in
the public domain,  (ii)  information  that,  after  disclosure to  Distributor,
becomes part of the public  domain,  by  publication  or  otherwise,  through an
authorized  source other than Distributor and without fault by Distributor,  and
(iii)   information  that  Distributor  can  show  by  written  records  was  in
Distributor's  possession  prior to its  disclosure to  Distributor  and was not
acquired, directly or indirectly, from the Company.

        1.2 "Extension  Period" means a mutually  agreed period of time, if any,
extending  the Term and which would  commence on the  expiration  of the Initial
Term.

        1.3 "Initial  Term" means the period of time  commencing  on the date of
this Agreement and ending on July 31,1999.

        1.4  "Minimum  Purchases"  for the Initial  Term are as set forth in the
attached Schedule B.

        1.5 "Products"  means only those  products of AVE that are  specifically
listed  in  the  attached  Schedule  A.  AVE  may  change  the   specifications,
components, design, performance and appearance of, or discontinue production of,
any Product at any time.  AVE will give  Distributor  written notice of any such
change, whereupon Schedule A will be deemed amended to reflect such change.

        1.6  "Term"  means the  period of time  determined  in  accordance  with
Section 9.

        1.7 "Territory"  means the  geographical  area described in the attached
Schedule C.

        1.8 "Trademarks"  means the trademarks and trade names of AVE identified
in the attached Schedule D as well as any other trademarks and trade names which
are obtained by either party with respect to the Products during the Term.

Section 2.            Relationship of Parties

        2.1 Appointment

                                       1
<PAGE>

        (a) Subject to Section  2.1(c),  AVE hereby  appoints  Distributor,  and
Distributor  hereby  accepts AVE's  appointment,  as AVE's  distributor  for the
promotion,  distribution  and sale of the Products in the  Territory  during the
Term, subject to and in accordance with the provisions of this Agreement.

        (b) Distributor shall be allowed to appoint  sub-distributors,  dealers,
retailers or other  non-employee  representatives to work in connection with the
promotion,  distribution  and sales of Products in the Territory;  provided that
Distributor  shall be responsible for the agreement of and the observance by any
such sub-distributor,  dealer, retailer or other non-employee  representative of
all  of the  covenants  and  agreements  of  Distributor  under  this  Agreement
(including,  without limitation,  the covenants and agreements in Sections 5, 6,
and 8), and shall  otherwise  be  responsible  for the  performance  of any such
sub-distributors,  dealers, retailers or other non-employee representatives; and
provided   further  that  Distributor  will  be  responsible  for  any  and  all
termination or other compensation claims that any such sub-distributor,  dealer,
retailer or other  non-employee  representative  may have  against AVE under any
sub-distributorship  or similar  agreement it may have with Distributor or under
any applicable law.

        (c) With respect to products  offered by AVE for sale or distribution as
of the  date  hereof  or at any time  hereafter  that  are not  included  in the
Products,  AVE expressly  reserves the right to promote,  sell,  distribute  and
deliver  any such  additional  products,  either  directly  or through any other
person or entity, to potential and actual  purchasers  thereof in the Territory,
and,  notwithstanding  any term in this  Agreement to the contrary,  (i) nothing
shall  obligate  AVE to impose  any  restriction  upon the use or resale of such
additional  products  by a  purchaser  thereof,  (ii) the use or  resale of such
additional  products  in any area by such a  purchaser  shall not  constitute  a
breach of any  provision of this  Agreement by AVE,  (iii) AVE shall be under no
obligation to procure the  termination  of such use or resale,  and (iv) neither
AVE nor any of its  distributors  shall be under any  obligation  to  forward to
Distributor  any  purchase  inquiries  or  purchase  orders  that  AVE  or  such
distributor receives from any potential purchaser of such additional products in
the Territory,  but rather AVE or such  distributor  shall be entitled to pursue
such sale on its own without any compensation being due to the Distributor.

        2.2           Exclusivity

        (a)    Subject to Section 2.1(c), during the Term AVE will not:

               (i)  appoint  another  distributor  of Products  whose  territory
includes any portion of the Territory; or

               (ii) make  direct  sales of  Products  to  dealers  or  retailers
located in the Territory.

        (b) Distributor shall obtain all  authorizations,  consents,  orders and
approvals that may be required under Section 6 of the Japanese Anti-Monopoly Act
and any law of similar  effect within the  Territory,  and shall timely make any
necessary  filings with the Fair Trade Commission of Japan,  with respect to the
transactions contemplated by this Agreement. Distributor shall hold AVE harmless
from and indemnify it against any and all claims, losses,  liabilities,  damages
and costs and expenses (including,  without limitations, costs of investigation,
court costs,  arbitrator's  fees and attorneys' fees) that AVE may incur arising
out of or  relating  to any  failure to obtain  such  authorizations,  consents,
orders and  approvals or any failure to timely make any  necessary  filings with
the Fair Trade Commission of Japan with respect to the transactions contemplated
by this Agreement. Except to the extent that the ability to sell Products in the
Territory is materially  prejudiced by any failure of Distributor to fulfill its
obligations  described in the first sentence of this Section 2.2(b),  the remedy
described in the immediately  preceding sentence shall be AVE's sole remedy with
respect to any such failure.

                                       2

<PAGE>

        2.3  Independent Contractor

        Distributor,  and  each  sub-distributor,   dealer,  retailer  or  other
non-employee  representative appointed by Distributor in accordance with Section
2.1, is an  independent  contractor  and not an agent,  employee,  franchise  or
partner  of AVE,  and is acting in the  ordinary  course  of  business.  Neither
Distributor  nor any of  such  sub-distributors,  dealers,  retailers  or  other
non-employee  representatives  has any  authority  to,  and none of them  shall,
create  or  assume  any  obligation,  express  or  implied,  on  behalf  of AVE.
Distributor  shall  be  responsible  for  all  taxes  and  payments   concerning
Distributor,  its employees,  or its sales representatives.  This Agreement does
not create or evidence any joint venture or partnership of the parties.

Section 3.            Marketing of Products

        3.1 Obligations of Distributor

        Distributor  will use its best efforts to aggressively  develop sales of
the  Products  and  support  AVE's  marketing  program  in  the  Territory.   In
furtherance thereof, Distributor will use its best efforts to:

               (a) Keep on hand a reasonable inventory of Products sufficient to
allow for prompt  delivery of Products to purchasers,  which  inventory shall in
any event be not less than one month's  average  projected sales of the Products
in the Territory;

               (b)  participate  regularly  in local and  regional  trade shows,
medical  conventions  or similar events in the  Territory,  conduct  appropriate
local promotional, advertising and other marketing efforts for the Products, and
provide AVE with copies of all advertising and promotional  materials  furnished
to potential purchasers of the Products;

               (c) provide  appropriate and professional  application advice and
counseling for each Product sold by  Distributor,  and provide prompt  follow-up
service and advice to purchasers of Products when so requested by the purchaser;

               (d) respond promptly to sales leads or referrals furnished by AVE
or by other distributors or dealers of AVE;

               (e)  have an  appropriate  number  of sales  representatives  and
marketing  staff, as may be reasonably  determined by  Distributor,  attend such
technical,  product familiarization and marketing meetings as AVE may reasonably
require from time to time, for which AVE will pay reasonable and documented food
and lodging  expenses,  and for which Distributor will bear travel and all other
expenses;

               (f) maintain and furnish  quarterly,  as reasonably  requested by
AVE,  reasonably  detailed  records  of sale of each  Product  sold  under  this
Agreement, including individual account information;

               (g) manage all clinical  trials  required to obtain  governmental
approval  to  import,  handle,  market,  sell,  demonstrate,  use or  distribute
Products (or any addition,  improvement or  modification  to any Product) in the
Territory and any other clinical trials sponsored by AVE involving  hospitals in
the  Territory,  and to collect  and  transmit  to AVE,  on a regular and timely
basis, such information, documentation and data from said clinical trials as AVE
may reasonably request;

               (h)  during  the   testing  or  clinical   evaluation   phase  of
development of any Product (or any addition, improvement or modification, to any
Product),  use its best  efforts to collect and

                                       3

<PAGE>

transmit to AVE on a regular  and timely  basis such  information  and data from
hospitals  and others  involved in testing  and use of such  Products as AVE may
reasonably request;

               (i) deliver to  customers or potential  customers  designated  by
AVE, free of charge,  such promotional  demonstration  units as may be delivered
free of charge to Distributor by AVE;

               (j) distribute to all purchasers of the Product,  as requested by
AVE, Product  information  bulletins and all other Product related  documents or
information,  and assist in translating accurately such documents or information
into a language other than English as appropriate or necessary for  distribution
of the Products in the Territory;

               (k) assist in promptly  executing  Product recalls as directed by
AVE,  in  which  event  AVE  will  reimburse  Distributor  for  all  documented,
reasonable,  out-of-pocket expenses reasonably incurred by Distributor to comply
with AVE's  directives  in  connection  with  repurchasing  Products  subject to
recall;

               (l) promptly  advise AVE of each complaint that  Distributor  may
receive  or  become  aware  of  concerning  the  Products,   and  telephone  AVE
immediately to report any  information of which  Distributor  becomes aware that
suggests  that any of the Products may have been  associated  in any way with an
injury to a user or patient;

               (m) refer to AVE any  inquiry,  other  than a  purchase  order or
potential purchase order, from the public, any governmental authority, any trade
association or any news media,  publication or reporter  concerning the Products
or AVE;

               (n) not market Products outside the Territory,  and not knowingly
sell,  lease, give or otherwise provide Product for any use or application other
than one specifically authorized by AVE in writing or in literature accompanying
the Product;

               (o)  secure  any  and  all  registrations,   permits,   licenses,
approvals,  and other governmental actions required to import,  handle,  market,
sell,  demonstrate,  use and  distribute  Products in the  Territory  (in such a
manner that such  registrations,  permits,  licenses and approvals may be timely
transferred  to AVE at the end of the  Term),  provide  to AVE  timely  progress
reports  on  any  such  action,   and   promptly   provide  AVE  copies  of  all
registrations,  permits, licenses, approvals,  certificates,  correspondence and
other documentation related to any such action;

               (p)  provide  to  AVE  all   information,   documents  and  other
assistance required by AVE to obtain U.S. export approvals,  if any, required to
import,  handle,  market,  sell,  demonstrate,  use and  distribute  Product  in
Territory;

               (q)  conduct  its  business,  including,  but not  limited to the
obligations set forth herein,  in a professional and lawful manner and otherwise
in a manner not detrimental to the business reputation of AVE;

               (r)  if  Distributor  appoints  any  sub-distributors,   dealers,
retailers or other  non-employee  representatives  in accordance  with paragraph
2.1,   Distributor  hereby  acknowledges  that  AVE  shall  have  the  right  to
communicate  directly  with said  sub-distributor,  dealer,  retailer,  or other
non-employee representative on all issues related to distribution of the Product
in the  Territory  or  any  issues  arising  directly  or  indirectly  from  the
distribution of said products, provided that AVE will consult and agree with the
Distributor  in  advance  as to the  substance  of  such  communications,  which
agreement shall not be unreasonably withheld by the Distributor; and

               (s)  except as  otherwise  stated  herein,  Distributor  shall be
solely  responsible for all expenses  incurred in performance of the obligations
set forth herein.

                                       4

<PAGE>

        3.2           Obligations of AVE

        Subject to Section 2.1(c), AVE will use its best efforts to:

               (a) provide to Distributor free of charge  reasonable  amounts of
sales literature and training materials;

               (b) provide  Distributor  reasonable  advance notice in the event
that it discontinues production of any of the Products;

               (c) refer to  Distributor  all inquiries for purchase of Products
received from within the Territory;

               (d)  keep  Distributor  informed  of any  Product  complaints  or
adverse reactions that are, in AVE's reasonable  judgment,  significant,  and of
all matters that are, in AVE's  reasonable  judgment,  important  concerning the
quality and performance of Products;

               (e)  provide  technical   specifications  and  other  information
required to support Distributor's securing of registrations,  permits, licenses,
approvals and other  governmental  actions required to import,  handle,  market,
sell, demonstrate, use or distribute Products in the Territory;

               (f) provide technical support to Distributor as may be reasonably
necessary to sell and market Products in the Territory; and

               (g) periodically  send a representative to visit the Territory to
support Distributor's sales and training efforts.

        3.3           Forecasts

        
At least  fifteen  (15)  days  before  the  beginning  of each  calendar
quarter,  Distributor  will furnish AVE with a rolling forecast of sales for the
following six (6) months of Product by units within each Product  group,  and an
estimate  of  Distributor's  forthcoming  orders  for  Products  during the next
calendar quarter. Forecasts are not binding on Distributor.

        3.4           Reports

        Distributor  will furnish AVE with an annual  marketing plan  (detailing
planned  sales  training,  staffing,   convention  and  trade  show  attendance,
advertising,  etc.) not less than  ninety (90) days before the start of each AVE
calendar year. Distributor will also give AVE a written summary of Distributor's
marketing  initiatives,  quarterly sales reports,  and such other information as
AVE may  reasonably  request  within  thirty  (30)  days  after  the end of each
calendar  quarter,  it being understood that immaterial delays by Distributor in
the delivery of such summary  information to AVE beyond such 30-day period shall
not constitute a breach of this Agreement.

                                       5

<PAGE>

Section 4.            Purchase and Sale of Products

        4.1           Orders

        Distributor's  orders for Products are subject to  acceptance by AVE and
to the provisions of this Agreement, but in no event shall Distributor order and
purchase less than the Minimum Purchases,  which Distributor hereby acknowledges
are reasonable and constitute a material  obligation of this Agreement,  and AVE
shall be  obligated  to supply  such  Minimum  Purchases  to  Distributor.  Once
accepted,  AVE will  fill and  ship  orders  in  accordance  with its  customary
procedures  subject  to  Product  availability,  and  may  allocate  its  output
according to its sole  judgment if demand  exceeds its  manufacturing  capacity;
provided,  however,  that AVE will pay  Distributor  the  amount,  and under the
circumstances, set forth in Schedule E in the event that certain of the Products
are not provided to Distributor.  AVE will use reasonable efforts to utilize the
mode of shipment and carrier requested by Distributor.

        4.2           Delivery

        AVE  will  deliver  all  Products  sold  to  Distributor  FOB  at  AVE's
warehouse.  Title  to and all  risk of loss of or  damage  or  casualty  to such
Products will pass to  Distributor  upon delivery to the carrier.  If Product is
not shipped freight  collect,  Distributor  will reimburse AVE on demand for all
shipping charges,  premiums for freight  insurance,  customs duties,  import and
export fees, and  transportation  costs incurred by AVE. AVE will use reasonable
efforts to utilize  the  freight  forwarder  and  customs  broker  requested  by
Distributor.

        4.3           Price

        AVE will sell Products to Distributor  under the Agreement at the prices
set forth in the  attached  Schedule E. All prices are payable in United  States
currency unless  provided  otherwise on the applicable  invoice.  Prices for the
Products shall not be changed  during the Initial Term.  Prices for the Products
during any Extension  Period shall be determined by mutual  agreement of AVE and
Distributor at the time of any agreement with respect to such Extension Period.

        4.4           Payment

        Except as set forth in  Schedule F,  Distributor  will pay each of AVE's
invoices  within sixty (60) days after the date of the  invoice.  AVE may at its
discretion refuse orders, require payment in full, ship C.O.D. or halt shipments
in transit if any prior  invoice is not paid in full  during the  aforementioned
60-day  period or such  other  period as may be set forth in  Schedule  F if AVE
reasonably deems such steps necessary to secure payment; provided that AVE shall
give notice to  Distributor  of the  existence  of any such unpaid  invoices and
allow  Distributor  a 10-day grace period in which to remit such payment  before
taking the aforementioned actions.

        4.5           Taxes

        The purchase prices and other amounts specified in this Agreement do not
include sales,  use or other  applicable  taxes,  unless expressly stated to the
contrary. Distributor will pay all such taxes.

        4.6           Interest

        Any amount  not paid when due will be subject to finance  charges at the
rate of one and one-half  percent (1.5%) per month or the maximum rate permitted
by applicable usury law, whichever is less, determined and compounded on a daily
basis from the date due until the date paid.  Payment  of such  finance  charges
will not excuse or cure Distributor's breach or default for late

                                       6

<PAGE>

payment. If AVE retains a collection agency,  attorney or other person or entity
to collect overdue payments,  all collection costs, including but not limited to
reasonable attorney's fees, will be payable by Distributor.

        4.7           Returns

        Authorization   is  required  for  all  returns  and  a  Returned  Goods
Authorization  (RGA) number must be obtained prior to returning  product to AVE.
An RGA number can be obtained by a fax  transmittal to  707-525-1990  requesting
and RGA number for specified product(s).  Please include quantity,  part numbers
and lot numbers.  All returns are to be sent to ARTERIAL  VASCULAR  ENGINEERING,
INC.,  5355 Skylane  Boulevard,  Santa Rosa, CA 95403 U.S.A.  An RGA number must
appear on the outside of the box. AVE will not accept or return any  merchandise
that:

1. is a special order.

2. has been held by the Distributor  for more than 90 days,  except with respect
to  (i)  merchandise  that  the  Distributor  has  reasonably  determined  to be
defective,  in which case such  merchandise  shall be returned within 30 days of
the  discovery  of such defect,  and (ii) the exchange of Products  described in
Section 4.8.

3. is in unsalable  condition,  used  merchandise,  or  merchandise  returned in
damaged packaging or shelf box.

4. has not been shipped freight prepaid, C.O.D. shipments will not be accepted.

AVE  reserves  the right to have  final  approval  on all  merchandise  returns.
Distributor  shall be  refunded  the  original  FOB price  plus  shipping  costs
actually  incurred by  Distributor  with respect to returns of Products that are
determined  by AVE to be defective  with respect to the design,  specifications,
quality or original  packaging  of such  Products.  Except  with  respect to the
exchange of Products  described in Section 4.8 and the return of Products  under
warranty claims in accordance with Section 6.2 hereof, all other returns will be
subject to a 20% reprocessing  and restocking  charge unless otherwise agreed in
writing by AVE.

*

Section 5.            Confidentiality; Proprietary Rights

        5.1           Confidentiality

        During the term of this Agreement or at anytime thereafter,  Distributor
will not,  and shall cause any  sub-distributors,  dealers,  retailers  or other
non-employee representatives appointed by Distributor in accordance with Section
2.1 not to,  from  the  date  hereof  until  the date  that is the  third  (3rd)
anniversary of the date of expiration or termination of this Agreement, disclose
or  allow  the  disclosure  to any  third  parties,  or use  other  than  in the
performance of Distributor's obligations under this Agreement, any confidential,
proprietary or trade secret  information of AVE (including,  but not limited to,
information relating to AVE's products, technology, know-how, research, customer
lists, supplier lists, marketing plans, financial information,  costs or pricing
information)  without  the  express  prior  written  consent  of AVE;  provided,
however,  that to the extent (but only to the extent) necessary and customary in
connection  with  the  sales  of the  Products,  the  Distributor  and any  such
sub-distributors, dealers, retailers or other non-employee representatives shall
not be precluded from disclosing or allowing access to Confidential  Information
to (i) those of its or

----------------------------------------------------
*  Certain  confidential  information  contained  in this  document,  marked  by
asterisks,  has been  omitted  and  filed  seperately  with the  Securities  and
Exchange  Commission  pursuant to Rule 24b-2 of the Securities  Exchange Act, as
amended.

                                       7

<PAGE>

their  employees for whom such  information is necessary for the  performance of
their duties to the Distributor or such sub-distributors,  dealers, retailers or
other non-employee  representatives and (ii) purchasers and potential purchasers
of the Products not owned or  controlled  by a  competitor  of AVE.  Distributor
hereby  agrees  that  damages  or any  other  remedy  available  at law would be
inadequate to redress or remedy  available at law would be inadequate to address
or remedy any loss or damage  suffered by AVE upon any breach of this section by
the Distributor.

        5.2           Insider Information - Securities Law Violations

        In the course of the performance of Distributor's duties, it is possible
that  Distributor  will receive  information  considered  to be material  inside
information within the meaning and intent of the federal securities laws, rules,
and  regulations  of the U.S.A.  Distributor  will not  directly  or  indirectly
disclose or otherwise use this information in deciding to or advising another to
buy, sell, or otherwise deal in AVE's securities.

        5.3           Ownership

        The Products  involve valuable patent,  copyright,  trade secret,  trade
name, trademark and other proprietary rights of AVE. No title to or ownership of
any such proprietary right is transferred to Distributor under this Agreement or
by use of any trademark,  patent or other  proprietary  right.  AVE reserves all
such  proprietary  rights.  Distributor  will not  infringe,  misappropriate  or
violate any proprietary  rights of AVE.  Without  limiting the generality of the
foregoing,  Distributor  will not register or attempt to  register,  directly or
indirectly,  within the  Territory or elsewhere,  any such patents,  copyrights,
trade names,  trademarks or other  proprietary  rights other than in the name of
AVE.

        5.4           Enforcement

        Distributor   will   immediately   notify   AVE  of  any   infringement,
misappropriation  or violation of any of AVE's proprietary  rights. In the event
of  any  such  infringement,  misappropriation  or  violation  relating  to  the
activities of Distributor or any of its employees,  agents,  representatives  or
customers, Distributor will take all steps reasonably necessary to terminate the
same.  Distributor will immediately notify AVE of any legal proceeding initiated
by  Distributor  in  connection  with  such  infringement,  misappropriation  or
violation.  AVE may,  at its  option  and  expense,  assume  control of any such
proceeding.  If AVE assumes  control,  AVE will have exclusive  control over the
prosecution and settlement of the proceeding and  Distributor  will provide such
assistance  related to such proceeding as AVE may reasonably  request and assist
AVE  in  enforcing  any  settlement  or  order  made  in  connection  with  such
proceeding.

        5.5           Trademarks and Trade Names

        AVE hereby grants Distributor a royalty-free right to use the Trademarks
in the  Territory  during the Term  solely for the  purpose of  identifying  the
Products in conjunction  with  Distributor's  marketing and sale of the Products
under this  Agreement,  and solely in  accordance  with the Product  quality and
other standards  issued from time to time by AVE. Except as permitted under this
paragraph,  AVE reserves all rights in the Trademarks.  Distributor will not use
the Trademarks for any purpose other than as permitted under this paragraph 5.4.
Distributor will transact business in a manner which enhances the reputation and
good will attached to the  Trademarks.  Distributor  will properly  identify and
accurately  describe as a product of AVE all of the Products.  Distributor  will
not alter,  remove,  deface or  obscure  any notice of  trademark,  trade  name,
patent,  copyright,  proprietary right or trade secret on a Product and will not
add to a Product any other additional  trademark.  Distributor shall not use any
words,  phrase symbol,  trademark or trade name which is confusingly  similar to
the Trademarks or which constitute a colorable imitation of the Trademark.


                                       8

<PAGE>

        5.6           Assignments

        At the end of the Term,  Distributor  will  assign to AVE or such  other
person or entity as AVE may designate all rights,  registrations,  reservations,
licenses,  permits and similar items made or obtained by  Distributor  relating,
directly or indirectly,  to the Products,  the Trademarks,  or any other related
proprietary rights.  Notwithstanding the foregoing,  Distributor may retain such
rights,  licenses,  etc. as are necessary  for the  continued  operations of its
business  independent  of  the  Products,   the  Trademarks  and  other  related
proprietary rights of AVE.

Section 6.            Warranty, Remedies and Disclaimers

        6.1           Warranty

        AVE warrants that, upon delivery:

               (a) each  Product  will be free from  defects  in  materials  and
workmanship; and

               (b) each Product  will  conform in all  material  respects to its
specifications established by AVE.

        6.2           Exclusive Remedies

               6.2.1 AVE will repair,  replace or otherwise  correct any Product
that does not  conform to the  warranty  set forth in  paragraph  6.1(a) or (b),
provided that:

               (a)  Distributor,  at AVE's  request and  Distributor's  expense,
returns the nonconforming Product to AVE's plant within 30 days of Distributor's
discovery of such defect; and

               (b)  such  nonconformity  is not  the  result  of any  use of the
Products  other  than in strict  accordance  with  AVE's  instructions  and user
manual.

               6.2.2 AVE will  defend  Distributor  against  any claim  that the
Products infringe any patent arising under the law of any country (including the
United  States and Japan) in which AVE has been  granted a patent or has filed a
patent application; provided that Distributor:

               (a)  notifies  AVE of the  claim of  promptly  after  Distributor
learns of the same;

               (b) allows AVE to assume  exclusive  control of the  defense  and
settlement of the claim;

               (c) cooperates  with AVE and provides such  assistance as AVE may
reasonably request in connection with the defense or settlement of the claim;

               (d) does not  settle the claim  without  AVE's  written  consent,
which consent will not be unreasonably withheld; and

               (e)  complies  with  any   settlement  or  court  order  made  in
connection with the claim.

               AVE will have no Liability or obligation for any  infringement or
alleged  infringement that arises out of the use of Products with any equipment,
devices,  or other goods not made by or  furnished  by AVE or arising out of any
modification of Products not done by or at the direction of AVE.


                                       9

<PAGE>

        6.3           Disclaimer

        AVE MAKES NO  REPRESENTATION  OR WARRANTY  WITH REGARD TO ANY PRODUCT OR
OTHER ITEM FURNISHED UNDER THIS AGREEMENT  EXCEPT AS  SPECIFICALLY  SET FORTH IN
PARAGRAPH 6.1. EXCEPT AS PROVIDED IN PARAGRAPHS  6.2.1 AND 6.2.2,  AVE DISCLAIMS
AND DISTRIBUTOR WAIVES AND RELEASES ALL WARRANTY  OBLIGATIONS OF AVE, EXPRESS OR
IMPLIED,  ARISING BY LAW OR  OTHERWISE,  WITH  RESPECT TO ANY  PRODUCTS OR OTHER
ITEMS DELIVERED BY OR ON BEHALF OF AVE UNDER THIS AGREEMENT (INCLUDING,  BUT NOT
LIMITED TO, ANY IMPLIED WARRANTY OF  MERCHANTABILITY OR FITNESS FOR A PARTICULAR
PURPOSE, IMPLIED WARRANTY ARISING FROM COURSE OF PERFORMANCE, COURSE OF DEALING,
OR USAGE OF TRADE, AND ANY CLAIM OF INFRINGEMENT).

Section 7.             Product Liability

        7.1           Indemnity

        AVE  will  defend  Distributor   against  any  claim  of  bodily  injury
(including  death)  or damage  to  personal  property  to the  extent  caused by
negligence or any defect in the design or manufacture of the products,  provided
that Distributor:

               (a) notifies AVE of the claim promptly after  Distributor  learns
of the same;

               (b) allows AVE to assume control of the defense settlement of the
claim;

               (c) cooperates  with AVE and provides such  assistance as AVE may
reasonably  request in  connection  with the defense or settlement of the claim;
and

               (d) does not  settle the claim  without  AVE's  written  consent,
which consent will not be unreasonably withheld.

        Further,  in such  event,  AVE will:  pay any  damages  awarded  against
Distributor in any proceeding  resulting from the claim;  reimburse the expenses
reasonably incurred by Distributor to provide the assistance requested by AVE in
connection  with the  defense  settlement  of the  claim;  and,  if the claim is
settled,  pay any amounts  consented to by AVE. This paragraph will not apply to
the extent any claim arises out of any breach of or default under this Agreement
by Distributor or Distributor's negligence.

        7.2           Insurance

        During the Term, AVE will maintain product liability  insurance coverage
issued by a  responsible  insurer,  with  limits of  coverage  not less than one
million dollars  ($1,000,000)  per claim and $20,000,000 in the aggregate.  Upon
Distributor's request and subject to the consent of AVE's insurer, AVE will name
Distributor  as an  additional  insured  under such  coverage and will provide a
certificate  of insurance  from the insurer  certifying  that the coverage is in
place.

Section 8.            Other Obligations of Distributor

        8.1           No Unauthorized Warranties

        Distributor will not make or extend on behalf of AVE any written or oral
warranty in respect of any of the  Products  except as may be contained in sales
literature  or  brochures  that are  published  or  approved  in writing by AVE.
Distributor  will not advise,  perform or demonstrate  any use or

                                       10
<PAGE>

application of any Product that is not specifically  approved in writing by AVE.
Distributor  will not impair the  sterility or  integrity of the Products  while
they are in Distributor's custody.

        8.2           Compliance With Laws

        Distributor  represents and warrants that it is thoroughly familiar with
applicable  laws,  ordinances,  regulations  another  governmental  requirements
concerning the importation,  handling,  marketing, sale, demonstration,  use and
distribution  of Products  in the  Territory.  Distributor  will comply with all
laws, ordinances,  regulations and other governmental requirements applicable to
its business and to the importation,  handling,  marketing, sale, demonstration,
use and distribution of Products pursuant to this Agreement.

        8.3 U.S.  Export Controls  Without  limiting the generality of paragraph
8.2,  Distributor  will not,  directly or  indirectly,  export or re-export  any
Products, technical data associated with the Products, or the immediate Products
(including,  but not limited to, processes,  services, data and reports) derived
from use of the  Products  from  the  Territory,  without  first  obtaining  the
appropriate  license from the United States Bureau of Export  Administration  or
its successor.

        8.4           Insurance

        During the Term,  Distributor will maintain adequate liability insurance
coverage  issued by a responsible  insurer  satisfactory to AVE as an additional
insured  and  afford  AVE not less  than  twenty  (20)  days  advance  notice of
cancellation or material change in the policy.  Upon AVE's request,  Distributor
will  provide a  certificate  of  insurance  from the  insurer  certifying  that
coverage is in place.

        8.5           Noncompete

        (a)  Except as set forth in Section  8.5(b),  Distributor  warrants  and
agrees that it does not now and will not during the Term, and that it will cause
any  sub-distributor,  dealer,  retailer  or other  non-employee  representative
appointed by Distributor in accordance  with Section 2.1 not to during the Term,
without  the prior  written  consent  of AVE,  directly  or  indirectly  design,
develop, manufacture, license, register, market, sell, distribute or promote any
product in the Territory that competes  directly with any of the Products or any
other of AVE's balloon angioplasty  catheters or stent systems (whether coronary
or  noncoronary)  that  it may  offer  from  time  to  time  Product  or  have a
significant financial interest in any person or entity that does so. Distributor
represents and warrants that such  restriction will not cause it to be prevented
from  handling  products  with  respect  to which it has  previously  acted as a
distributor, agent or other representative for a person or entity.

        (b)  AVE  agrees  to  allow  Distributor  to  pursue  the  registration,
licensing  and  preparation  for  sale of  products  that may  compete  with the
Products,  and to sell competing balloon angioplasty catheters at any time after
January  1,  1999;  provided  that prior to  commencing  any such  registration,
licensing or sales  Distributor will first complete the transfer to AVE or AVE's
designee  of  any  and  all   registrations,   licenses  or  other  governmental
authorizations  with respect to the Products or any other products of AVE, at no
charge  to AVE;  and  provided  further  that  Distributor  shall in no event be
released from its obligation not to  manufacture,  market,  sell,  distribute or
promote competing coronary stents during the Term.

        8.6           Indemnity

        (a) Each of Distributor, on the one hand, and AVE, on the other hand (as
the case may be, the "Indemnifying Party"), will indemnify and hold harmless the
other  (as the case  may be,  the  "Indemnified  Party")  from any  liabilities,
losses, claims, damages, penalties,  judgments, suits, costs 

                                       11

<PAGE>

and  expenses  (costs  and  expenses  incurred  in  connection  with  performing
obligations  and,  interest  and  applicable  costs and  reasonable  attorneys',
engineers' and  investigators'  fees and  disbursements) or disbursements of any
kind  ("Losses")  arising  out of or  resulting  from (i) a breach of or default
under this  Agreement by the  Indemnifying  Party or (ii) any  personal  injury,
death or property  damage,  sustained by any person  arising out of or resulting
from the activities contemplated by this Agreement,  where such injury, death or
damage is caused by the  negligence or misconduct  of the  Indemnifying  Party's
officers,  directors,  employees,  affiliates, agents or representatives (or, in
the case of Distributor,  of the sub-distributors,  dealers,  retailers or other
non-employee representatives appointed by Distributor in accordance with Section
2.1).

        (b) Distributor shall indemnify AVE and hold it harmless from any Losses
arising out of or resulting from the  Distributor's  business or the sale or use
of  the  Products  by it or  any  sub-distributor,  dealer,  retailer  or  other
non-employee  representative appointed by Distributor in accordance with Section
2.1

        (c) An  Indemnified  Party shall give prompt notice to the  Indemnifying
Party of any Losses  for which such  Indemnified  Party  seeks  indemnification,
stating the amount of the Loss, if known, and method of computation thereof, and
containing a reference to the  provisions of this  Agreement in respect of which
such  right of  indemnification  is  claimed  or  arises.  The  obligations  and
liabilities  of the  Indemnifying  Party under this  Section 8.5 with respect to
Losses  arising  from  claims  of any  third  party  which  are  subject  to the
indemnification provided for in this Section 8.5 ("Third Party Claims") shall be
governed by and contingent upon the following additional terms and conditions:

                (i)  If the  Indemnifying  Party  acknowledges  in  writing  its
        obligation  to indemnify the  Indemnified  Party  hereunder  against any
        Losses  that  may  result  from  such  Third  Party   Claim,   then  the
        Indemnifying  Party  shall be entitled to assume and control the defense
        of such Third Party  Claim at its  expense  and  through  counsel of its
        choice  if it  gives  prompt  notice  of its  intention  to do so to the
        Indemnified  Party;  provided,  however,  that  if  there  exists  or is
        reasonably  likely to exist a conflict  of  interest  that would make it
        inappropriate  in the reasonable  judgment of the Indemnified  Party for
        the same  counsel  to  represent  both  the  Indemnified  Party  and the
        Indemnifying  Party,  then the  Indemnifying  Party shall be entitled to
        retain its own counsel at the expense of the Indemnifying Party.

                (ii) The Indemnified Party shall cooperate with the Indemnifying
        Party in such defense and make available to the  Indemnifying  Party, at
        the Indemnifying  Party's  expense,  all witnesses,  pertinent  records,
        materials and information in the Indemnified Party's possession or under
        the  Indemnified  Party's  control  relating  thereto  as is  reasonably
        required by the Indemnifying  Party. In the event the Indemnified  Party
        is,  directly or  indirectly,  conducting  the defense  against any such
        Third Party Claim,  the  Indemnifying  Party shall  coooperate  with the
        Indemnified  Party in such defense and make available to the Indemnified
        Party, at the  Indemnifying  Party's expense,  all witnesses,  pertinent
        records,   materials  and  information  in  the   Indemnifying   Party's
        possession or under the Indemnifying Party's control relating thereto as
        is reasonably required by the Indemnified Party.

        
                (iii)  No  such  Third   Party  Claim  may  be  settled  by  the
        Indemnifying Party without the written consent of the Indemnified Party,
        which consent shall not be unreasonably withheld.

        (d) To the extent that the  undertakings of AVE or Distributor set forth
in this Section 8.5 may be  unenforceable,  AVE or Distributor,  as the case may
be, shall contribute the maximum amount that it is permitted to contribute under
applicable law to the payment and  satisfaction of all Losses incurred by AVE or
Distributor, as the case may be.


                                       12

<PAGE>

        (e) The  provisions  of this Section 8.5 shall  survive the  expiration,
termination or suspension of this Agreement.

Section 9.            Term and Termination

        9.1           Commencement

        The Term will commence as of the date of this Agreement.

        9.2           Expiration

        (a) Unless  sooner  terminated  pursuant to paragraph 9.3 or 9.4 for the
material  breach of any  provisions of this Agreement or the parties have agreed
to an Extension  Period as set forth in the following  sentence,  this Agreement
shall automatically expire without notice or any other action by either party at
the end of the Initial Term. The Term may be extended for an Extension Period as
may be  negotiated  by the  parties if the  parties  agree in writing to Minimum
Purchases and other terms for the Extension  Period no later than six (6) months
prior to the expiration of the Initial Term. AVE shall not be obligated to offer
this Extension Period and either party may decline to extend this Agreement with
or without cause.

        (b)  Distributor  shall  transfer to AVE or AVE's designee at the end of
the Term all applicable,  registrations,  permits, licenses and other applicable
governmental  approvals in the Territory for the Products and any other coronary
stent  products  not  covered  in this  Agreement.  Distributor  shall  take all
reasonable actions to assure that such transfer is successfully completed at the
end of the Initial Term.

        9.3           Termination by AVE

        Upon the  occurrence of any of the  following,  AVE may  terminate  this
Agreement,  and the Term shall be deemed to have  ended,  by giving  Distributor
written notice of such termination:

               (a) any  failure  of the  Distributor  to meet or exceed the most
recently  applicable  Minimum  Purchases  by  failure  to  timely  send  payment
therefore;

               (b)  any  material   change  in  the   ownership  or  control  of
Distributor  or  any  sale,  transfer  or  relinquishment  by  Distributor  of a
substantial  interest  in the  ownership  of the  business  to be  carried on by
Distributor under this Agreement,  notice of which shall immediately be given by
Distributor to AVE, and the failure by  Distributor to remedy such  circumstance
within 30 days of its occurrence,  without the prior written consent of AVE, but
in each case only to the extent that the resulting ownership,  control or holder
of a substantial business interest is a competitor of AVE;

               (c) the  insolvency of  Distributor,  the filing of a petition in
bankruptcy  by  or  against  Distributor,  the  appointment  of a  receiver  for
Distributor  or  Distributor's  property,  the  execution  of an  assignment  by
Distributor  of all or  substantially  all of its assets for the  benefit of its
creditors,  or the  conviction of Distributor or any principal or manager of the
Distributor for any crime tending to adversely affect the ownership or operation
of business,  notice of which shall  immediately be given by Distributor to AVE,
and the failure by Distributor to remedy such circumstance within 30 days of its
occurrence; or

               (d) the  material  breach by  Distributor  of any of its material
obligations   under  this  Agreement  (it  being  understood  that  individually
immaterial  obligations may in the aggregate  constitute a material  obligation)
and the failure by  Distributor  to remedy  such breach  within 30 days of being
notified of its existence by AVE;*.

----------------------------------------------------
*  Certain  confidential  information  contained  in this  document,  marked  by
asterisks,  has been  omitted  and  filed  seperately  with the  Securities  and
Exchange  Commission  pursuant to Rule 24b-2 of the Securities  Exchange Act, as
amended.

                                       13

<PAGE>

        9.4           Termination by Distributor

        Upon the occurrence of any of the following,  Distributor  may terminate
this  Agreement,  and the Term  shall be deemed  to have  ended,  by giving  AVE
written notice of such termination:

               (a) the insolvency of AVE, the filing of a petition in bankruptcy
by or against AVE, the appointment of a receiver for AVE or AVE's  property,  or
the execution of an assignment by AVE of all or substantially  all of its assets
for the benefit of its creditors,  notice of which shall immediately be given by
AVE to Distributor, and the failure by AVE to remedy such circumstance within 30
days of its occurrence; or

               (b) the material breach by AVE of any of its material obligations
under  this  Agreement  (it  being  understood  that   individually   immaterial
obligations  may in the  aggregate  constitute  a material  obligation)  and the
failure by AVE to remedy  such  breach  within 30 days of being  notified of its
existence  by  Distributor;*.

        9.5           Effect of Termination

        Any  expiration or  termination  pursuant to paragraphs  9.2, 9.3 or 9.4
will be without  prejudice to any other right or remedy afforded to either party
under this Agreement or any  applicable law (e.g.,  in the case of any breach or
default by the other party), and will not affect any rights or obligations which
have arisen prior to the date of such termination.  Termination of the Agreement
shall not relieve the parties of any  obligation  or liability  arising prior to
such termination,  including the obligation to maintain the  confidentiality  of
certain  information  as  referenced  in  Section  5.1  above.  In the  event of
expiration or termination, Distributor will:

               (a) not have any  further  right to  market,  sell or  distribute
Products in the Territory  other than as may be necessary to sell  Distributor's
inventory  of  Products,  if any,  remaining  after the  repurchase  of Products
described in Section 9.5(c),  provided that the amount of remaining inventory is
reasonable in view of Distributor's  normal inventory control practices over the
term of this Agreement;

               (b) return to AVE any Products,  sales materials,  manuals, price
lists,  and mailing  lists  provided by AVE to  Distributor  for  demonstration,
promotional, or marketing purposes;

               (c) in the event of a termination of this  Agreement  pursuant to
Sections  9.3 or 9.4,  make  available  for  repurchase  by AVE,  and AVE  shall
repurchase,  any coronary stent Products held by Distributor  that have not been
committed  for  sale to a  customer  within  the  90-day  period 

----------  
* Certain  confidential  information  contained  in  this  document,  marked  by
asterisks,  has been  omitted  and  filed  separately  with the  Securities  and
Exchange  Commission  pursuant to Rule 24b-2 of the  Securities  Exchange Act of
1934, as amended.

                                  14
<PAGE>

following  the  termination,  with any  such  repurchase  to be at the  original
transfer price between AVE and Distributor;  provided that AVE shall be under no
obligation  to repurchase a quantity of coronary  stent  Products in excess of *
for the Products in the Territory,  as measured by *, and in any event shall not
be obligated to repurchase  more than *; and provided  further that AVE shall be
under no  obligation  to  repurchase  any  coronary  stent  Products  which were
supplied  to  Distributor  more than  twelve  (12)  months  prior to the date of
termination.

               (d) in the event that the transfer by Distributor to AVE or AVE's
designee of any and all registrations,  permits, licenses and other governmental
approvals for the Products and any other  coronary stent products not covered in
this  Agreement  does  not  occur  by the end of the  Term,  continue  to act as
importer of the Products and continue to meet the applicable  Minimum  Purchases
following  such date  until  such time as such  transfer  has been  successfully
completed.

The provisions of this Section 9.5 shall survive the expiration,  termination or
suspension of this Agreement.

        9.6           Acknowledgment

Any expiration or termination of the Term will be final and absolute. Each party
waives any right,  either express or implied by applicable law or otherwise,  to
renewal of this Agreement or to any damages or  compensation  arising solely out
of the due expiration or  termination of this Agreement in accordance  with this
Section  9.  Each  of the  parties  have  considered  the  possibility  of  such
expiration  or  termination  and the  possibility  of loss and damage  resulting
therefrom  in  making  expenditures  in the  course of the  performance  of this
Agreement.  It is the express  intent and  agreement of the parties that neither
will be liable to the other for damages or otherwise by reason of the expiration
or termination  of the Term as provided for herein.  Nothing herein will prevent
the party terminating this Agreement for material breach by the other party from
pursuing its legal and equitable remedies as otherwise permitted  hereunder.  In
addition,  either party may  challenge  (as  permitted  hereunder) a termination
based on its alleged  material  breach if it  determines  in good faith that the
breach has not  occurred,  has been cured  within the  permitted  period,  or is
otherwise  excused,  and provides written notice of such  determination not more
than thirty days after its receipt of notice of termination.

Section 10.           Resolution of Disputes

        10.1          Negotiation

        Each party agrees that any dispute between the parties  relating to this
Agreement  will first be  submitted  in writing to the  President of each party.
Such officers,  or other executive  officers  designated by them, will then meet
and confer with each other in a good faith effort to resolve such  dispute.  Any
decision of such officers that is documented in a writing signed by both of them
will be final and binding on the  parties.  In the event that the  officers  are
unable to resolve any dispute  within 30 days after  submission of the matter to
them, either party may refer the dispute to mediation as described below.

        10.2          Mediation

        The parties  agree that any and all  disputes,  claims or  controversies
arising  out  of  or  relating  to  this   Agreement   shall  be   submitted  to
J.A.M.S./ENDISPUTE,  or its successor,  for mediation,  and if the matter is not
resolved through mediation, then it shall be submitted to J.A.M.S./ENDISPUTE, or
its  successor,  for final and binding  arbitration.  Either  party may commence
mediation  by  providing  to  J.A.M.S./ENDISPUTE  and the other  party a written
request for  mediation,  setting forth

----------  
* Certain  confidential  information  contained  in  this  document,  marked  by
asterisks,  has been  omitted  and  filed  separately  with the  Securities  and
Exchange  Commission  pursuant to Rule 24b-2 of the  Securities  Exchange Act of
1934, as amended.

                                       15
<PAGE>

the subject of the dispute and the relief requested.  The parties will cooperate
with  J.A.M.S./ENDISPUTE  and with one  another in  selecting  a  mediator  from
J.A.M.S./ENDISPUTE's   panel  of  neutrals,  and  in  scheduling  the  mediation
proceedings. The parties covenant that they will participate in the mediation in
good faith, and that they will share equally in its costs. All offers, promises,
conduct  and  statements,  whether  oral or  written,  made in the course of the
mediation by any of the parties, their agents, employees, experts and attorneys,
and by the  mediator  or any  J.A.M.S./ENDISPUTE  employees,  are  confidential,
privileged  and  inadmissable  for any purpose,  including  impeachment,  in any
arbitration or other  proceeding  involving the parties,  provided that evidence
that is otherwise admissable or discoverable shall not be rendered  inadmissible
or  non-discoverable  as a result of its use in the mediation.  Either party may
initiate  arbitration  with  respect to the matters  submitted  to  mediation by
filing a written  demand  for  arbitration  at any time  following  the  initial
mediation  session or 45 days after the date of filing the  written  request for
mediation,  whichever  occurs  first.  The  mediation  may  continue  after  the
commencement of arbitration if the parties so desire. Unless otherwise agreed by
the parties,  the mediator shall be  disqualified  from serving as arbitrator in
the case.  The  provisions  of this Section 10.2 may be enforced by any court of
competent  jurisdiction,  and the party seeking enforcement shall be entitled to
an award of all costs, fees and expenses,  including attorneys' fees, to be paid
by the party against whom enforcement is ordered.

        10.3          Arbitration

        Any controversies or claims among the parties arising out of or relating
to this  Agreement  or any breach  thereof that are not resolved by their mutual
agreement, shall, upon demand of either party, be submitted to final and binding
arbitration before J.A.M.S./ENDISPUTE,  or its successor, pursuant to the United
States  Arbitration  Act, 9 U.S.C.  Sec. 1 et seq. Either party may commence the
arbitration  process called for in this agreement by filing a written demand for
arbitration  with  J.A.M.S./ENDISPUTE,  with a  copy  to the  other  party.  The
arbitration  will be  conducted  in  accordance  with the  provisions  of either
J.A.M.S./ENDISPUTE's Streamlined Arbitration Rules and Procedures (if the amount
in  dispute  does not exceed  $250,000)  or  J.A.M.S./ENDISPUTE's  Comprehensive
Arbitration  Rules and Procedures (if the amount in dispute exceeds $250,000) in
effect at the time of filing of the demand for  arbitration.  The  parties  will
cooperate  with   J.A.M.S./ENDISPUTE  and  with  one  another  in  selecting  an
arbitrator from  J.A.M.S./ENDISPUTE's  panel of neutrals,  and in scheduling the
arbitration proceedings.  The parties covenant that they will participate in the
arbitration in good faith.  The arbitrator,  in his or her discretion,  shall be
authorized to award the prevailing party  reimbursement of the costs and fees of
J.A.M.S./ENDISPUTE  and the  arbitrator,  and  reimbursement  for its reasonable
attorneys' fees, disbursements (inlcuding,  for example, expert witness fees and
expenses,  photocopy charges, travel expenses,  etc.) and costs arising from the
arbitration; provided, however, that until any such order is issued, the parties
shall bear equally the costs and fees of J.A.M.S./ENDISPUTE  and the arbitrator.
The arbitration will be conducted in San Francisco, California. The arbitrator's
decision may be enforced by any court of competent  jurisdiction,  and the party
seeking  enforcement  shall  be  entitled  to an award  of all  costs,  fees and
expenses,  including reasonable attorneys' fees, to be paid by the party against
whom enforcement is ordered. The arbitrator is specifically  authorized to grant
injunctive  relief,  either as part of the final  decision or prior to the final
decision.  The parties  desire that the courts  promptly  enforce all injunctive
relief  granted  prior to final  decision  as  though  it were part of the final
decision, even though such enforcement may be requested prior to final decision.

                                       16

<PAGE>

 Section 11.          Equitable and Payment Remedies

        Notwithstanding  the  provisions of section 10, either party may seek an
injunction  or other  equitable  relief,  and  judgment  for  failure to pay for
Products  purchased,  before the United States  District  Court for the Northern
District of the State of  California or the Tokyo  District  Court to compel the
performance of any obligation owed to it by the other party.

Section 12.           Miscellaneous

        12.1          Limitation of Liability

        EXCEPT  FOR  CLAIMS  ARISING  UNDER  PARAGRAPH  6.2.2,  AVE'S  LIABILITY
(WHETHER  IN  TORT,   CONTRACT  OR  OTHERWISE  AND  NOTWITHSTANDING  ANY  FAULT,
NEGLIGENCE (WHETHER ACTIVE,  PASSIVE OR IMPUTED),  PRODUCT LIABILITY,  OR STRICT
LIABILITY  OF AVE) UNDER THIS  AGREEMENT OR WITH REGARD TO ANY PRODUCTS OR OTHER
ITEMS  FURNISHED UNDER THIS AGREEMENT WILL IN NO EVENT EXCEED THE GREATER OF (A)
THE  COMPENSATION  PAID TO AVE  UNDER  SECTION  4 OR (B)  THE  LOST  PROFITS  OF
DISTRIBUTOR  BASED ON THE MINIMUM  PURCHASES (AS DEFINED HEREIN) THAT WOULD HAVE
BEEN MADE BY IT PRIOR TO THE FIRST  ANNIVERSARY OF THIS  AGREEMENT.  IN NO EVENT
WILL AVE OR  DISTRIBUTOR  BE LIABLE  FOR ANY  INDIRECT,  INCIDENTAL,  SPECIAL OR
CONSEQUENTIAL  DAMAGES ARISING OUT OF ITS PERFORMANCE OR  NONPERFORMANCE OF THIS
AGREEMENT OR THE USE OF, INABILITY TO USE, OR RESULTS OF USE OF ANY PRODUCTS.

        12.2          Force Majeure

        Neither party will be liable for, or be considered to be in breach of or
default  under this  Agreement on account of, any delay or failure to perform as
required by this Agreement  (other than for payment under Section 4) as a result
of any cause or condition beyond such party's reasonable control.

        12.3          Distributor's Representation

        Distributor  represents and warrants to AVE that  Distributor is free to
enter into and perform  this  Agreement  without  thereby  being in breach of or
default under the terms of any other contract, commitment or understanding.

        12.4          Assignment

        Distributor  will  not  assign  this  Agreement,  in  whole  or in part,
directly,  by  operation  of law, or  otherwise,  except with the prior  written
consent of AVE. No assignment  by  Distributor,  with or without AVE's  consent,
will relieve Distributor of Distributor's responsibilities under this Agreement.


        12.5          Successors and Assigns; No Third-Party Beneficiaries

        This Agreement  shall be binding upon and inure solely to the benefit of
the parties hereto and their  respective  successors  and permitted  assigns (if
any). Nothing herein,  express or implied,  is intended or shall confer upon any
other  person or entity any legal or equitable  right,  benefit or remedy of any
nature whatsoever under or by reason of this Agreement.

        12.6          Notice

        Notices  or  consents  under  this  Agreement  will  be in  writing  and
delivered  personally or, if mailed, will be sent certified mail, return receipt
requested,  or by telex or facsimile or overnight

                                       17
<PAGE>

express  service,  if  addressed  to the  recipient's  address  set forth on the
signature page of this Agreement, or in either case to such other address as may
be established by notice to the other party.  Notice will be effective only upon
actual receipt.

        12.7          Entire Agreement

        This Agreement contains the entire agreement, and supersedes any and all
prior  agreements,  between  the  parties  with  regard  to the  appointment  of
Distributor as a distributor of Products and Distributor's  purchase and sale of
Products.  AVE will not be bound by,  and  specifically  objects  to, any terms,
conditions,  or other  provisions  that are different from or in addition to the
provisions of the Agreement.  Without  limiting the generality of the foregoing,
any  printed  terms,  conditions  or other  provisions  that are  included in or
accompany any of the Distributor's orders for Products under this Agreement will
not apply to or be binding on AVE. This Agreement may not be waived,  amended or
rescinded except by a writing signed by the party to be charged thereby.

        12.8          Nonwaiver

        The failure of either party to insist upon or enforce strict performance
of any of the provisions of this Agreement or to exercise any rights or remedies
under this Agreement will not be construed as a waiver or  relinquishment to any
extent of such party' right to assert or rely upon any such  provisions,  rights
or remedies in that or any other instance;  rather,  the same will be and remain
in full force and effect.

        12.9          Interpretation

        The English Language of the Agreement will govern any  interpretation of
or dispute  regarding the terms of this  Agreement.  Paragraph  captions are for
convenience of reference and do not alter or limit the terms of this Agreement.

        12.10         Governing Law;  Venue

This Agreement will be governed by and  interpreted in accordance with the local
laws of the State of  California,  without regard to conflicts of law provisions
and not  including the  provisions  of the U.N.  Convention on Contracts for the
International  Sale  of  Goods.  Subject  to  Articles  10 and  11,  Distributor
irrevocably  consents and submits to the  jurisdiction  of the Federal and State
courts of and located in San Francisco, California, and AVE irrevocably consents
to the  jurisdiction  of the Tokyo District  Court.  Neither AVE nor Distributor
will commence or prosecute  any suit,  claim,  or proceeding  arising under this
Agreement  other than in the courts  identified in the preceding  sentence,  and
each  irrevocably  consents to the service of any and all process by the mailing
of  copies of such  process  to AVE or  Distributor,  as the case may be, at its
address set forth below. A copy of any service made on Distributor  will also be
delivered to Greg Beattie, Mendelson & Brown, 1040 Marina Village Parkway, Suite
B,  Alameda,  CA 95403.  Any  remedy of AVE set  forth in this  Agreement  is in
addition to any other  remedy  afforded to AVE under this  Agreement,  any other
contract, by law or otherwise.


                                       18

<PAGE>

        IN WITNESS  THEREOF,  the parties have executed this Agreement as of the
date first above written.



AVE:                                      DISTRIBUTOR:

Arterial Vascular Engineering, Inc.       Japan Lifeline Co., Ltd.,


By:      /s/ Brad Jendersee                By:      /s/ Takeshi Masumoto
         ---------------------                      -----------------------
         Brad Jendersee                             Takeshi Masumoto
                                       
Title:   President                         Title:   President
                                       
                                       
Address: 3576 Unocal Place                 Address: 2-38-1 Ikebukuro, Toshima ku
         Santa Rosa, CA  95403                      Tokyo 171
         U.S.A.                        
                                       
FAX:     707-525-0114                      FAX:     81-3-3590-1772
                                 

                                       19
<PAGE>



                              SCHEDULE A - PRODUCTS



1.   All existing,  improved and future  versions of AVE's  balloon  angioplasty
     catheters,  including,  without limitation,  AVE's Peak(TM),  Elite(TM) and
     Nike(TM) products.
2.   All existing, improved and future versions of AVE's coronary stent systems,
     but to the extent (and only to the extent) that such  products are included
     in, and  ultimately  approved  as part of, the first  Shonin  registration,
     permit  and  license  application  submitted  prior to the date  hereof  by
     Distributor to the Japanese governmental authorities in connection with the
     completed clinical trial of the Micro Stent(TM) Product.

<PAGE>


                         SCHEDULE B - MINIMUM PURCHASES


Balloon Angioplasty Catheters

Distributor  shall  purchase at least * balloon  angioplasty  catheters  in each
three-month  period  commencing with the period  beginning * and ending with the
three-month  period ending *.  Distributor may purchase any combination of AVE's
offered  balloon  angioplasty  catheters  with respect to such minimum  purchase
requirements.  After *,  Distributor  will cease to be  subject  to any  minimum
purchase requirements with respect to balloon angioplasty catheters.

Coronary Stent Systems

Beginning  with the AVE  fiscal  quarter  immediately  following  the AVE fiscal
quarter in which Distributor obtains the necessary  governmental  registrations,
licenses  and  permits to market  and sell such  coronary  stent  systems in the
Territory,  Distributor  shall purchase in each AVE fiscal  quarterly  period at
least* coronary stent systems.



--------
*  Certain  confidential  information  contained  in this  document,  marked  by
asterisks,  has been  omitted  and  filed  separately  with the  Securities  and
Exchange  Commission  pursuant to Rule 24b-2 of the  Securities  Exchange Act of
1934, as amended.


<PAGE>


                             SCHEDULE C - TERRITORY



Entire country of Japan.





<PAGE>


                             SCHEDULE D - TRADEMARKS


Trademarks and trade names of AVE either pending or issued:

     1.   AVE
     2.   Arterial Vascular Engineering, Inc.
     3.   Arterial Vascular Engineering Canada, Inc.
     4.   The AVE Logo
     5.   Micro Stent
     6.   Micro Stent II*
     7.   Micro Stent II XL*
     8.   Micro Stent 2.5*
     9.   Micro Stent II LP*
     10.  Micro Stent II HP*
     11.  AVE gfx Stent*
     12.  Nike
     13.  Elite
     14.  Peak
----------------
* For purposes of this  Agreement,  such trademark may be used by Distributor in
the Territory in accordance with Section 5.5 only to the extent that the product
relating to such trademark is a Product pursuant to Schedule A.





<PAGE>


                             SCHEDULE E - PRICE LIST



The following list confirms the prices as mutually agreed by AVE and Distributor
for the Initial Term:

$ *  per balloon angioplasty  catheter (regardless of whether such catheter is a
Peak(TM), Elite(TM), Nike(TM) or improved or future version thereof).

$* per  coronary  stent  system *;  provided,  however,  that  during the period
commencing  with the date that  Distributor  obtains the necessary  governmental
registrations,  licenses  and  permits  to market and sell such  coronary  stent
Products  in the  Territory  and  ending  on the  earlier  of (i) the  six-month
anniversary of such date and (ii) the date that Japanese insurance reimbursement
is granted for such  Products,  the  purchase  price for up to * coronary  stent
systems per month shall be $* per coronary stent system (it being understood and
agreed  that  Distributor  shall use its best  efforts  to market  and sell such
coronary stent systems during the pre-reimbursement period and not to accumulate
them in its inventory);  provided further,  however,  that during the AVE fiscal
quarter   during   which   Distributor   obtains  the   necessary   governmental
registrations,  licenses  permits and approvals to market and sell such coronary
stent  Products in the  Territory  (and only in the event and to the extent that
such registrations,  licenses, permits and approvals are actually received), the
purchase  price of up to * coronary stent systems shall be $* per coronary stent
system;  and provided further,  however,  that if AVE fails to make available to
Distributor the number of coronary stent systems at the * price set forth in the
immediately preceding proviso within two months after their order by Distributor
(which  order  may  be in  reasonable  anticipation  of  gaining  the  necessary
governmental  approvals),  then (i) if such failure is for any reason other than
the  termination of this Agreement  pursuant to Section 9.3, AVE shall* and (ii)
if such  failure is because of the  termination  of this  Agreement  pursuant to
Section 9.3(d) prior to Distributor's  having gained the necessary  governmental
approvals to market and sell coronary stent  Products in the Territory  (whether
or not an order  had  been  placed  by  Distributor),  AVE  shall * (A) * if the
termination  occurs in the quarterly  period ending March 31, 1997, (B) * if the
termination  occurs in the quarterly  period ending June 30, 1997,  (C) * if the
termination  occurs in the quarterly period ending September 30, 1997, and (D) *
if the termination occurs in (or after) the quarterly period ending December 31,
1997.

All prices are in U.S.  dollars and are F.O.B.  shipping  point,  Richmond,  BC,
Canada

--------
*  Certain  confidential  information  contained  in this  document,  marked  by
asterisks,  has been  omitted  and  filed  separately  with the  Securities  and
Exchange  Commission  pursuant to Rule 24b-2 of the  Securities  Exchange Act of
1934, as amended.

<PAGE>


                       SCHEDULE F -- SPECIAL PAYMENT TERMS

With  respect to  Distributor's  orders and  purchases of AVE's  coronary  stent
products,  Distributor  will pay each of AVE's  invoices  as  follows:  (i) with
respect to invoices  dated in the  three-month  period  beginning with the first
such order,  within * days after the date of the  invoice;  (ii) with respect to
the three-month  period  immediately  following the three-month period in clause
(i),  within * days after the date of the invoice;  and (iii) for all subsequent
orders, within sixty (60) days after the date of the invoice.


--------
*  Certain  confidential  information  contained  in this  document,  marked  by
asterisks,  has been  omitted  and  filed  separately  with the  Securities  and
Exchange  Commission  pursuant to Rule 24b-2 of the  Securities  Exchange Act of
1934, as amended.
<PAGE>


*

Certain  confidential  information  contained  in this  document,  marked  by
asterisks,  has been  omitted  and  filed  separately  with the  Securities  and
Exchange  Commission  pursuant to Rule 24b-2 of the  Securities  Exchange Act of
1934, as amended.