Filed by sedaredgar.com - Neovasc Inc. - Exhibit 4.2






ADDENDUM TO OCTOBER 24, 2005 DISTRIBUTION AGREEMENT

between ITOCHU International Inc. and PM Devices, Inc.

This Addendum is made effective this 17th day of July 2007, by
and between ITOCHU International Inc. of 335 Madison Ave, New York, New York,
USA (“Distributor”); and PM Devices Inc., Unit 2135 – 13700 Mayfield Place,
Richmond, British Columbia, Canada, ("Manufacturer") 

WITNESSETH

WHEREAS, the above-named parties have performed certain
activities pursuant to a Distribution Agreement dated October 24, 2005 (the
“Distribution Agreement”); and 

WHEREAS, the parties desire to revise said Agreement in
accordance with their mutual agreement as to activities and rights that are to
be applicable in the future; and

WHEREAS, said revisions are incorporated into this Addendum,
which shall govern the relationship of the parties until expiration of the
Distribution Agreement.

NOW, THEREFORE, in consideration of the premises and
performance of the covenants herein contained, it is agreed that:

	1. 	
      This instrument, together with the Distribution
      Agreement, contains the entire agreement of the parties relating to the
      subject matter hereof and may not be changed, modified or amended, except
      by writing signed by both parties.

	 	 
	2. 	
      The Parties hereby agree to change Exhibit A. DESCRIPTION
      OF PRODUCTS; Exhibit B. DESCRIPTION OF TERRITIORY and Exhibit C. PRICE
      LIST.

	 	 
	3. 	
      The Parties hereby agree to extend the duration of the
      agreement for an additional two (2) year period as per article 1. b.) (1)
      of the Distribution Agreement.

	 	 
	4. 	
      No terms of the Distribution Agreement, other than those
      specified herein, shall be affected by this
Addendum.



IN WITNESS WHEREOF, the parties have executed this Agreement on
the day and year first above written. 

	PM Devices, Inc. 	 
	 	  	 
	 	/s/ Kevin McKim 	 
	 By: 		 
	 	Kevin McKim, Vice President Sales &
      Marketing 	 
	 	  	 
	 	  	 
	ITOCHU International Inc. 	 
	 	  	 
	 	/s/ William Rutan 	 
	 By: 		 
	 	William Rutan, President ITOCHU Healthcare 	 


Page 1 of 3




EXHIBIT A

DESCRIPTION OF PRODUCTS

Products shall mean: 

PM Devices PeriPatch Sheets


	Product Code 	 
                         
                     
       Product 
	  	  
	0.8P8 	0.8 cm x 8 cm PeriPatch Sheet
    
	1P6 	1 cm x 6 cm PeriPatch Sheet 
	1.5P8 	1.5 cm x 8 cm PeriPatch Sheet
    
	2P9 	2 cm x 9 cm PeriPatch Sheet 
	4P4 	4 cm x 4 cm PeriPatch Sheet
  
	4P6 	4 cm x 6 cm PeriPatch Sheet 
	6P8 	6 cm x 8 cm PeriPatch Sheet
  
	8P14 	8 cm x 14 cm PeriPatch Sheet 
	10P16 	10 cm x 16 cm PeriPatch Sheet
    
	  	  
	AE45-1 	45 mm PeriPatch Aegis – 1
      firing 
	AE45-2 	45 mm PeriPatch Aegis – 2 firing 
	AE45-4 	45 mm PeriPatch Aegis – 4
      firing 
	AE60-1 	60 mm PeriPatch Aegis – 1 firing 
	AE60-2 	60 mm PeriPatch Aegis – 2
      firing 
	AE60-4 	60 mm PeriPatch Aegis – 4 firing 
	AG45-1 	45 mm PeriPatch Aegis – 1
      firing 
	AG45-2 	45 mm PeriPatch Aegis – 2 firing 
	AG45-4 	45 mm PeriPatch Aegis – 4
      firing 
	AG60-1 	60 mm PeriPatch Aegis – 1 firing 
	AG60-2 	60 mm PeriPatch Aegis – 2
      firing 
	AG60-4 	60 mm PeriPatch Aegis – 4 firing




And such additional products as the parties shall in writing
agree from time to time. 

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EXHIBIT B

DESCRIPTION OF TERRITORY

For purposes of this Agreement, the “Territory” shall include
the following country:

	United States of America 


Page 3 of 3




EXHIBIT C

PRICE LIST

PM Devices PeriPatch Sheet

	Model 	Description 	1-2491 	250-499 	500+ 
	0.8P8 	0.8 cm x 8 cm PeriPatch Sheet    	 	 	 
	1P6 	1 cm x 6 cm PeriPatch Sheet 	 	 	 
	1.5P8 	1.5 cm x 8 cm PeriPatch Sheet    	 	 	 
	2P9 	2 cm x 9 cm PeriPatch Sheet 	 	 	 
	4P4 	4 cm x 4 cm PeriPatch Sheet 	[ Redacted Information ]

	4P6 	4 cm x 6 cm PeriPatch Sheet 	 	 	 
	6P8 	6 cm x 8 cm PeriPatch Sheet 	 	 	 
	8P14 	8 cm x 14 cm PeriPatch Sheet 	 	 	 
	10P162 	10 cm x 16 cm PeriPatch Sheet    	 	 	 
	  	  	  	  	  
	AE45-1 	45 mm PeriPatch Aegis – 1
      firing 	 	 	 
	AE45-2 	45 mm PeriPatch Aegis – 2 firing 	 	 	 
	AE45-4 	45 mm PeriPatch Aegis – 4
      firing 	 	 	 
	AE60-1 	60 mm PeriPatch Aegis – 1 firing 	 	 	 
	AE60-2 	60 mm PeriPatch Aegis – 2
      firing 	 	 	 
	AE60-4 	60 mm PeriPatch Aegis – 4 firing 	 	 	 
	AG45-1 	45 mm PeriPatch Aegis – 1
      firing 	 	 	 
	AG45-2 	45 mm PeriPatch Aegis – 2 firing 	 	 	 
	AG45-4 	45 mm PeriPatch Aegis – 4
      firing 	 	 	 
	AG60-1 	60 mm PeriPatch Aegis – 1 firing 	 	 	 
	AG60-2 	60 mm PeriPatch Aegis – 2
      firing 	 	 	 
	AG60-4 	60 mm PeriPatch Aegis – 4 firing 	 	 	 


 




DISTRIBUTION AGREEMENT

THIS DISTRIBUTION AGREEMENT (this ”Agreement”) is made as
October 24, 2005. 

	BETWEEN: 	
      ITOCHU International Inc. of 335 Madison Ave. in the City
      of New York, in the State of New York, United States of America
      (”Distributor”) 

	  	
       

	AND: 	
      PM Devices Inc., a Company incorporated under the laws of
      British Columbia under Certificate No. 564428, of Unit 2135, 13700
      Mayfield Place, in the City of Richmond, in the Province of British
      Columbia, Canada ("Manufacturer" or “PM Devices”) 



BACKGROUND 

A. PM Devices manufactures (or causes to be manufactured) and
markets certain products and devices described in the attached Exhibit A (such
products and devices are referred to as the ”Products”); 

B. Distributor possesses the facilities, personnel, ability and
capacity to promote the sale and use of the Products in the geographic area
described in the attached Exhibit B (such area is referred to as the
”Territory”); and 

C. PM Devices wishes to sell the Products to Distributor, and
Distributor wishes to purchase the Products for resale in the Territory.

AGREEMENT 

In consideration of the foregoing and of the mutual covenants
contained herein, and intending to be legally bound, PM Devices and Distributor
agree as follows: 

1. Distribution.

a.) Appointment. Subject to the
terms of this Agreement, PM Devices hereby appoints Distributor, and Distributor
hereby accepts its appointment, as the exclusive distributor of the Products in
the Territory. 

b.) Duration and
Termination.

(1) This Agreement shall begin on the
date written above and shall continue in full force and effect for an initial
two-year term. At the end of this initial term or any extension term, this
Agreement shall automatically be renewed for a further successive period of two
years, unless either party gives the other party notice of its intention not to
renew this Agreement upon the expiration of the then-current term at least 90
days prior to the expiration of such term. In the event of non-renewal of this
Agreement, upon expiration of the current term, Distributor may continue to sell
and purchase Product for an additional 90 days following the effective date of
termination. During the additional 90 day period, Distributor will not have
exclusive distribution rights in the Territory and Manufacturer shall be free to
enter into distribution agreements with third parties for the Territory and any
Product purchased by Distributor during this 90 day period can not be returned
for refund as described in section 2. e.) (5). Any such notice of non-renewal
shall be provided as required by Section 14 of this Agreement.

(2) Each of the following circumstances
shall constitute an ”Event of Default” under this Agreement: 

	 	i) 	
      The material breach of any term or condition of this
      Agreement

	 	 	 
	 	ii) 	
      The repeated failure of a party to perform one or more of
      its obligations under this Agreement, whether or not this repeated failure
      constitutes a material breach;

	 	 	 
	 	iii) 	
      The filing by or against a party of any insolvency or
      bankruptcy proceeding, proceedings for reorganization, receivership,
      dissolution or any arrangement under bankruptcy
law,



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	 	iv) 	
      The existence of a condition of force majeure that
      continues for longer than six (6) months;

	 	 	 
	 	v) 	
      Any change in a party’s ownership which shall impair its
      ability to perform its obligations under this Agreement; and

	 	 	 
	 	vi) 	
      The failure or inability of Distributor to meet sales
      objectives outlined in Section 2(d)(2).



Upon the occurrence of an Event of
Default by a party, the other party may terminate this Agreement upon thirty
(30) days prior written notice to the defaulting party, specifying the default;
provided that the defaulting party shall not have cured the default within such
thirty (30) day period. Therefore, if an Event of Default is not cured within
that thirty (30) day period, this Agreement may be immediately terminated at the
discretion of the non-defaulting party by giving written notice, in accordance
with section 14, to the defaulting party.

(3) During the 30-day notice period
described in subsection (2) above, the party giving notice may withhold its own
performance (except with respect to payment of any amount due to the other
party), unless the other party cures or acts with due diligence to cure the
Event of Default within the notice period or otherwise gives the notifying party
sufficient security. Notwithstanding the foregoing, in the case of an Event of
Default arising under section 1.(b) (2) (iii) as a result of voluntary petition
in bankruptcy filed by Distributor, this Agreement will automatically terminate.


c.) Sub-Distributors.

Distributor shall have the right to
appoint sub-distributors for the Products in the Territory; provided, however,
that if Distributor appoints any sub-distributor (other than an ITOCHU Group
entity) for the Products during the term of this Agreement, Distributor shall:


	 	i) 	
      Cause such sub-distributor to comply fully with all
      obligations imposed hereunder upon Distributor applicable to resale of the
      Products within the Territory;

	 	 	 
	 	ii) 	
      Obtain a guarantee from such sub-distributor that it will
      not represent itself as an employee, agent or representative of PM
      Devices;

	 	 	 
	 	iii) 	
      Obtain such sub-distributor’s commitment to indemnify PM
      Devices and defend and to hold PM Devices harmless from all claims,
      damages and liabilities which it may incur in connection with the
      appointment or termination of such sub-distributor and the sale of the
      Products by such sub-distributor;

	 	 	 
	 	iv) 	
      Submit to PM Devices a list of the sub-distributors
      including addresses, fax and phone numbers.



d.) Conflicts of lnterest.

Distributor expressly agrees not to
engage in any activity relating to a product that competes directly with the
Products. These competing products are outlined in Exhibit E.

e.) Independent Contractor.

Distributor is an independent
contractor authorized only to purchase products from PM Devices for resale
within the Territory. Nothing in this Agreement creates a relationship of
employer-employee, principal-agent, franchiser-franchisee, joint venture or
partnership between Distributor and PM Devices. Distributor has no power or
authority to bind PM Devices in any way for any purpose, nor to give any
representation on PM Devices’ behalf, nor to create any liability against PM
Devices. Distributor agrees to indemnify and to hold harmless PM Devices from
and against any and all claims, damages or liabilities arising from any act of
Distributor outside of its scope of authority under this Agreement. 

2. Products.

a.) Price.

(1) PM Devices shall have the absolute
right to establish the prices of the Products purchased by Distributor under
this Agreement. The initial Price for each of the Products is set forth in the


Page 2 of 20




attached Exhibit C. Distributor shall
have the absolute right to establish the prices of the Products sold by
Distributor as contemplated by this Agreement.

(2) Prices may be modified by PM
Devices upon sixty (60) days written notice to Distributor. The prices in such
modified Price List shall be effective for all Products ordered by Distributor
after the effective date of such modification, which date shall be set forth in
the notice. No change in the Price List shall be effective before the first
anniversary of this Agreement. A maximum of two (2) price increases are
permitted in any one (1) calendar year period.

(3) The modified price will not apply
to orders received and accepted by PM Devices prior to the effective date of
such price change.

(4) All prices and shipments to
Distributor shall be F.O.B. PM Devices’ plant in Vancouver, Canada. To such
prices shall be added all shipment costs, transit insurance costs and applicable
duties or taxes and other related costs and expenses incurred by PM Devices and
relating to the sale and shipment of the Products to Distributor. 

b.) Purchase Orders.

(1) Distributor agrees to purchase the
Products from PM Devices, solely from PM Devices and not from any other source,
and Distributor agrees that purchase of the Products is for resale on
Distributor’s own account. 

(2) Distributor shall issue purchase
orders for the Products to PM Devices from time to time. All purchase orders
shall be in a writing (including an email or fax) and specify the Product type,
quantity, desired shipping date, unit price (from the Price List), unique
purchase order number, shipping destination and any special shipping
instructions. All purchase orders shall be subject to the terms and conditions
of this Agreement and in the event of a conflict or inconsistency between the
terms of this Agreement and the terms of any purchase order or other document
submitted by Distributor to PM Devices, this Agreement shall control unless the
parties specifically otherwise agree in writing.

(3) PM Devices may impose, as a
prerequisite to its acceptance of a purchase order, the payment of outstanding
delinquent invoices. 

(4) PM Devices will acknowledge the
acceptance of a purchase order by a written order confirmation. Distributor
acknowledges and understands that PM Devices’ obligation to sell any Products is
subject to availability of the Products. No purchase order shall be binding upon
PM Devices until the same is accepted in writing by PM Devices. 

(5) PM Devices shall make reasonable
efforts to fill each purchase order that is accepted, but PM Devices shall not
be liable for damages caused by failure to ship or delay in shipment resulting
from conditions beyond the control of PM Devices, including but not limited to
the inability of its suppliers to obtain material and supplies or to produce
sufficient components to meet Product sales demand. 

c.) Payment.

(1) All amounts due to PM Devices shall
be for the net invoice amount paid in U.S. Dollars without discount or rebate.
Payment terms are thirty (30) days, which shall be stated on each invoice. PM
Devices may at its sole discretion require wire transfer prior to shipment or
irrevocable standby letter of credit payable by sight draft from Distributor in
the event Distributor is in payment default under this Agreement. If Distributor
is prohibited from making payment in U.S. Dollars because of any applicable law
or regulation, PM Devices may elect to designate a non-prohibited currency or
mode of payment.

(2) If Distributor is delinquent in
remitting payments to PM Devices under the terms of any invoice in a timely
fashion, PM Devices may: i) decline to accept purchase orders or make shipments
against accepted purchase orders; ii) charge Distributor interest on past due
amounts at a rate of 1.5 percent per calendar month; and/or iii) require advance
payment, payment on delivery or bank-

Page 3 of 20




guaranteed method of payment for
further shipments. Distributor shall comply with the modified payment terms. The
foregoing remedies of PM Devices are not exclusive, but in addition to any and
all remedies available to PM Devices under this Agreement and applicable law.


d.) Sales.

(1) Distributor shall restrict to the
Territory its active promotion and marketing of the Products. Distributor shall
not actively pursue sales of the Products outside the Territory. 

(2) Minimum purchase requirements are
as set out in Exhibit D. There shall be no minimum purchase obligations for the
period from the effective date through December 31, 2005, and thereafter minimum
purchase obligations shall be established by mutual agreement of the parties. If
PM Devices and Distributor cannot mutually agree on sales minimums through
negotiation, then minimums will be set at the previous years sales minimum plus
20 percent. If minimum cannot be negotiated for 2006, then the minimum will be
set using the following formula: average 2005 monthly sales multiplied by 12
plus 20 percent. The Failure of Distributor in any one-year period to purchase
the annual commitment shall result in a ninety (90) day probationary period.
During this period, Distributor must increase purchases to reasonable levels
specified by PM Devices. If Distributor fails to meet the probationary purchase
requirements, PM Devices may terminate this Agreement immediately upon written
notice to Distributor. 

(3) Distributor shall submit detailed
sales and inventory reports to PM Devices on request. Annual sales forecasts for
the Territory shall be submitted no later than sixty (60) days prior to the
beginning of the calendar year. The annual forecast shall be updated not later
than one hundred twenty (120) days after the beginning of the year for the last
half of the forecast year. The reports shall be in a form and substance as
reasonably required by PM Devices. 

e.) Shipment, Delivery and
Inventory.

(1) All risk of loss or damage to the
Products shipped will pass from PM Devices to Distributor at the time the
shipment is delivered to the carrier. 

(2) Delivery schedules set forth in PM
Devices’ order confirmations reflect PM Devices’ reasonable estimate of actual
shipping dates. PM Devices will use its reasonable best efforts to meet such
dates. Partial shipments will constitute independent transactions for which
payment is due according to the terms of this Agreement. Distributor shall be
solely responsible for obtaining whatever licenses, permits or the like may be
required to allow it to receive the Product. 

(3) Distributor shall inspect the
Products promptly upon their arrival at their shipping destination. All defects
or other nonconformities of the Products to the terms of the purchase order
discoverable upon receiving inspection, must be reported in writing to PM
Devices within thirty (30) days after the date of receipt of the Products, or
Distributor’s rights for redress for any defect or nonconformity in said
shipment that are visually observable shall be forever waived. All other defects
or nonconformities must be reported in writing within thirty (30) days after
their discovery or Distributor’s rights for redress shall be forever waived.


(4) Subject to PM Devices ability to
supply, Distributor shall at all times maintain sufficient inventory of Products
to meet customer demand and established sales objectives for the Territory.
Products consigned to Distributor’s customers are part of Distributor’s
inventory until purchased by the customer. Distributor shall maintain the right
to withdraw consigned inventory at any time prior to purchase by the customer.


(5) Distributor may not return
inventory to PM Devices or transfer inventory to any other distributor without
PM Devices’ express written consent. Product can be returned to PM Devices only
in the event of termination of this Agreement. Product with a minimum of six (6)
months shelf life remaining can be returned for a refund of the purchase price.
Product with less than six (6) months remaining shelf life cannot be returned.
Distributor will bear all risks of loss or damage to returned Products occurring
before receipt of the Products by PM Devices. Distributor shall have the right,
one time per calendar year, to return Products to PM Devices with a total value
of up to five percent 

Page 4 of 20




(5%) of annual purchases. The
restocking fee for returned products will be 25%. All returned product must have
a remaining shelf-life of 12 months. 

(6) PM Devices’ Products will have a
minimum one-year shelf life upon leaving plant. 

(7) The Products will be shipped via
the carrier or freight forwarder designated by Distributor.

f.) Product Modifications.

(1) PM Devices reserves the right to
modify the design, specifications and/or method of manufacture of the Products
at any time without notice, and to substitute the modified Products for those
originally ordered by Distributor, provided there is no material alteration of
the Products’ form, fit, function or quality. PM Devices may also discontinue
manufacture of any of the Products without notice. PM Devices will not
compensate Distributor for any change or discontinuation of Products. 

3. Distributor’s Obligations.

In addition to Distributor’s other
agreements herein, Distributor further agrees to: 

a.) Exercise its reasonable best
efforts to (1) promote the sale of the Products at its own expense throughout
the Territory using such means as advertising, customer contact, distribution of
printed materials, attendance at trade shows and conventions, support of local
surgeons at trade shows and conventions and the like; (2) promote the good will
of PM Devices; and (3) meet or exceed the sales objectives established in
Section 2; 

b.) Provide and maintain at its own
expense, one or more suitable places of business in the Territory staffed with
an adequate force of competent sales personnel who are thoroughly familiar with
the Products and shall contact customers throughout the Territory; pay all
expenses incurred by its personnel relating to attendance at PM Devices’
training or other presentations regarding the Products; 

c.) Cooperate with PM Devices in the
sponsorship and planning of technical seminars on the Products, without charge
to PM Devices; 

d.) Provide PM Devices with prompt
written notice of all changes in management or sales personnel responsible for
the promotion and sale of the Products in the Territory; 

e.) When appropriate, assist PM Devices
in collecting clinical data from designated clinical centers within the
Territory; 

f.) Maintain, in accordance with PM
Devices’ requirements as provided to Distributor, complete, accurate and current
records on Product shipments so that quarterly reports may be sent to PM Devices
indicating location, by serial number or lot number, of all Products sold to
Distributor by PM Devices; and 

g.) Assist PM Devices in any recall of
Products sold in the Territory.

4. Surviving Obligations.

     Upon the expiration or
termination of this Agreement, all rights of Distributor under this Agreement
shall immediately cease, and PM Devices may appoint a new distributor(s) of the
Products in the Territory. The following obligations of Distributor shall
survive and continue after expiration or termination: 

a.) To sell its inventory of the
Products back to PM Devices at the purchase price originally paid by
Distributor, less any credits and allowances applied to Distributor’s account
for the Products. PM Devices shall be obliged to repurchase such Products,
provided they are in their original packaging, form and condition, with a least
six-months shelf life remaining, in accordance with section 2. e) (5).

Page 5 of 20




b.) To immediately return to PM Devices
all Product samples, information, literature and other documents supplied to
Distributor by PM Devices; 

c.) To continue to make payments owed
to PM Devices promptly when due; 

d.) To provide a final, current and
accurate record of the location of all Products not returned to PM Devices under
section (a) above; 

e.) To cease trading in the Products
and give prompt notice to all sub-distributors, agents and employees in the
Territory of the cessation of Distributor’s rights to distribute the Products in
the Territory; 

f.) To continue to indemnify PM Devices
with respect to all matters to which indemnification by Distributor is
covenanted herein for a period of five-years from the effective date of
termination;

g.) To continue to keep information
confidential and protect PM Devices’ Intellectual Property as provided under
Section 8; and 

h.) To continue to observe any and all
obligations of Distributor herein which are to survive expiration of this
Agreement according to express terms of this Agreement. 

5. PM Devices’ Obligations.

In addition to PM Devices’ other
agreements herein, PM Devices further agrees to: 

a.) Furnish to Distributor reasonable
quantities of promotional materials and marketing literature as sales aids for
the Products. All such promotional materials shall be and remain the exclusive
property of PM Devices;

b.) Provide to Distributor in writing,
or by oral or other presentation, information and training concerning the
technical specifications of the Products; 

c.) Cooperate with Distributor in the
planning of technical and educational seminars on the Products

d.) Respond to inquiries from
Distributor regarding the Products, their use and application, the status of
shipments on accepted purchase orders, new or improved versions of the Products
and the like; 

e.) Assist Distributor in responding to
any questions, concerns, complaints or the like raised by any customer of
Distributor, any governmental agency or other authority or any other third
party, and bear the costs and responsibility therefore; and 

f.) Refrain from soliciting employees,
subsidiaries or third party sub-distributors (excluding third-party
sub-distributors that developed through PM Devices contacts) of Distributor for
employment by PM Devices during the term of this Agreement, as extended, and for
one (1) year following the termination or expiration of this Agreement. This
obligation shall survive the termination or expiration of this Agreement unless
such termination results from an Event of Default by Distributor under this
Agreement. 

6. Compliance with Law.

a.) PM Devices will comply with all
pertinent provisions of the United States Food and Drug Administration laws
applicable to the manufacturing and marketing of the Products. 

b.) Distributor shall be responsible
for compliance in the Territory with all applicable United States or local laws
and regulations relating to the Products and the marketing and sale thereof by
Distributor. PM Devices and Distributor will cooperate where appropriate in
order to assure compliance of both parties with such laws and regulations. 

Page 6 of 20




c.) Annually on the anniversary of the
Agreement, an officer of Distributor shall certify to PM Devices in writing by
providing a certificate in the form attached hereto as Exhibit F, Distributor’s
compliance with the requirements of this Section 6.

7. Limited Warranty and Limitation of Remedies.

	 	a) 	
      PM Devices warrants to Distributor only that the
      Products, at the time of shipment to Distributor under this Agreement,
      shall be:



(1) Free from material defects in
design, materials and workmanship; and

(2) In compliance with all United
States laws and regulations pertaining to the design, materials and workmanship
of such products.

In order to receive the exclusive
remedies specified in this Section 7(a) below, claims by Distributor concerning
any non-compliance with the above express warranties shall be made in writing
and shall be received by PM Devices within the stated Shelf-Life of the Products
by PM Devices to Distributor. THE EXPRESS WARRANTIES ABOVE ARE EXCLUSIVE AND ARE
GIVEN IN LIEU OF ALL OTHER WARRANTIES, REPRESENTATIONS, GUARANTEES AND
CONDITIONS, EXPRESS OR IMPLIED, STATUTORY OR OTHERWISE, INCLUDING, WITHOUT
LIMITATION, WARRANTIES AND CONDITIONS OF MERCHANTABILITY, DURABILITY AND FITNESS
FOR PURPOSE (INCLUDING FITNESS FOR A PARTICULAR PURPOSE) AND WARRANTIES ARISING
FROM USAGE OF TRADE OR COURSE OF DEALING. Other than the express warranties
specified above and any express written warranties provided directly to end
users by PM Devices, any description of the Products, whether in writing or made
orally by PM Devices, and any specifications, samples, models, bulletins,
drawing, diagrams, or similar material provided by PM Devices and used in
connection with the Products are for the sole purpose of identifying the
Products and shall not be construed as a warranty or representation in favour of
Distributor. PM DEVICES AND DISTRIBUTOR SPECIFICALLY EXCLUDE THE APPLICATION OF
THE UNITED NATIONS CONVENTION ON CONTRACTS FOR THE INTERNATIONAL SALE OF GOODS
TO THIS AGREEMENT AND TO THE PURCHASE AND SALE OF THE PRODUCTS
HEREUNDER.DISTRIBUTOR’S EXCLUSIVE REMEDY AND PM DEVICES’ SOLE LIABILITY
FOR ANY BREACH OF THE EXPRESS WARRANTIES DESCRIBED IN THIS SECTION 7.(a) SHALL
BE, AT PM DEVICES’ ELECTION, REPLACEMENT OF SUCH PRODUCTS BY PM DEVICES OR A
REFUND OF THE INITIAL PURCHASE PRICE RECEIVED BY PM DEVICES FOR SUCH PRODUCTS.
PM DEVICES SHALL NOT BE SUBJECT TO AND EXPRESSLY DISCLAIMS ANY OTHER OBLIGATIONS
OR LIABILITIES ARISING OUT OF BREACH OF WARRANTY.

	 	(b) 	
      NEITHER PARTY SHALL BE LIABLE TO THE OTHER FOR ANY
      CONSEQUENTIAL, INCIDENTAL, INDIRECT, SPECIAL, AGGRAVATED, PUNITIVE OR
      CONTINGENT DAMAGES; AND WITHOUT LIMITING THE GENERALITY OF THE FOREGOING,
      EACH PARTY SPECIFICALLY DISCLAIMS ANY LIABILITY FOR DAMAGES FOR LOST
      PROFITS OR REVENUES, LOSS OF REPUTATION OR GOODWILL OR ANY OTHER ECONOMIC
      LOSS.



Page 7 of 20




The cumulative aggregate liability of
PM Devices to Distributor for all claims relating to the Products or otherwise
in respect of this Agreement or any transactions contemplated by this Agreement,
shall in no event exceed the lesser of:

(1) the total proven direct damages
actually suffered by Distributor which PM Devices is liable for hereunder; or


(2) the sum of $2,000,000 (Cdn.
Funds).

The above limitation on liability
applies regardless of the cause of action, including contract (including
fundamental breach), tort (including negligence), product liability, strict
liability, infringement of third party intellectual property rights or other
third party claims against Distributor.

PM Devices shall not be liable to
Distributor for any Products damaged, mishandled or improperly shipped or stored
by Distributor or any person acting under direction or authorization of
Distributor, or for any Products tampered with or to which Distributor or any
person acting under direction or authorization of Distributor made changes in
fabrication, assembly or otherwise.

	 	(c) 	
      Subject as set out in Section 7(b), PM Devices shall
      defend and hold Distributor and its affiliates harmless from any and all
      claims, demands, actions, liabilities, damages, judgments, liens, costs,
      losses and expenses (including reasonable legal expenses) (collectively
      “Claims”) which may be suffered or incurred by Distributor or its
      affiliates arising from or related to any non-frivolous investigation or
      proceeding made by a third party (including any governmental authority)
      alleging any defect in the Products, including its design, materials or
      workmanship, any breach of warranty made by PM Devices
      to Distributor or to a third party or any material failure of PM
      Devices to perform and observe its obligations under this Agreement,
      provided that Distributor gives PM Devices written notice of the Claim
      with sufficient promptness to avoid any adverse effect on PM Devices’
      ability to defend the Claim; allows PM Devices to assume control of the
      defence and settlement of the Claim; reasonably assists and cooperates
      with PM Devices in connection with the defence and settlement of the Claim
      at PM Devices’ expense; and does not settle the Claim without PM Devices’
      prior written consent. This paragraph shall not apply to any Claims
      arising out of:



(1) any intentional wrongful act or
omission or gross negligence of Distributor or any third party;

(2) any failure to transport, store,
install, use, operate or maintain the Products in accordance with the reasonable
applicable specifications, instructions, manuals and other documentation
provided by PM Devices or any Products damaged, tampered with or changed in
fabrication or assembly or otherwise by any person other than PM Devices or any
person doing so with the express authorization of PM Devices ; or

(3) any representation or warranty
made by Distributor or any employee, agent or other representative (e.g., any
sales representative, service representative, dealer or distributor) of
Distributor with respect to any Products, which 

Page 8 of 20




representation or warranty is not
within the scope of PM Devices’ warranties set forth in any applicable
documentation, promotional literature and other materials published by PM
Devices or incorporated from such materials.

PM Devices shall, during the term of
this Agreement, maintain at its own expense a reasonably sufficient amount of
general commercial and product liability insurance, and PM Devices shall request
that its insurer add Distributor as an “additional insured” to its policies as
its interest may appear.

	 	(d) 	
      Distributor shall not make any oral or written
      representations, warranties, conditions or guarantees which vary from the
      written representations, warranties, conditions or guarantees given or
      made by PM Devices to Distributor or Distributor’s employees with respect
      to the Products.

	 	 	 
	 	(e) 	
      Subject as set out in Section 7(f), Distributor shall
      defend and hold harmless PM Devices and its affiliates from and against
      any and all Claims which may be suffered or incurred by PM Devices or its
      affiliates arising from or related to any non-frivolous investigation or
      proceeding made by a third party (including any governmental authority)
      based upon any allegation of wrongdoing by Distributor in the importation,
      storage, transport, handling, use, marketing, advertising, sale and
      distribution of the Products by Distributor, any unauthorised warranty
      made by Distributor to a third party or any material failure of
      Distributor to perform and observe its obligations under this Agreement;
      provided that PM Devices gives Distributor written notice of the Claim
      with sufficient promptness to avoid any adverse effect on Distributor’s
      ability to defend the Claim; allows Distributor to assume control of the
      defence and settlement of the Claim; reasonably assists and cooperates
      with Distributor in connection with the defence and settlement of the
      Claim at Distributor’s expense; and does not settle the Claim without
      Distributor’s prior written consent. This paragraph shall not apply to any
      Claim arising out of the intentional wrongful act or omission or gross
      negligence of PM Devices or any third party.

	 	 	 
	 		
      Distributor shall, during the term of this Agreement,
      maintain at its own expense a reasonably sufficient amount of general
      commercial and product liability insurance and shall request that its
      insurer add PM Devices as an “additional insured” to its policies as its
      interest may appear.

	 	 	 
	 	(f) 	
      The cumulative aggregate liability of Distributor to PM
      Devices for all claims in respect of this Agreement or any transactions
      contemplated by this Agreement shall in no event exceed the lesser
    of:



(1) the total proven direct damages
actually suffered by PM Devices which Distributor is liable for hereunder; or


(2) the sum of $2,000,000 (Cdn.
Funds).

The above limitation on liability
applies regardless of the cause of action, including contract (including
fundamental breach), tort (including negligence), product liability, strict
liability, infringement of third party intellectual property rights or other
third party claims against PM Devices.

Page 9 of 20




Distributor shall not be liable to PM Devices for any Products
not in compliance with the express warranties in paragraph 7(a) above.

8. Confidentiality, Intellectual Property and
Non-Solicitation.

a.) PM Devices represents to
Distributor that PM Devices has the exclusive right, title and interest in the
Territory to PM Devices’ patents, trademarks, trade names, emblems, designs,
models and methods of presentation relating to the Products (referred to in the
aggregate as ”Intellectual Property”). Distributor shall not do or cause to be
done anything that directly or indirectly challenges or intentionally impairs PM
Devices’ rights to the Intellectual Property. 

b.) Except as expressly provided
herein, this Agreement does not give Distributor any right, title, license or
interest to the Intellectual Property and Distributor will not describe or
represent itself as having any such rights, except the right to distribute
Manufacturer’s Products hereunder. 

c.) Distributor may use PM Devices’
Intellectual Property only in connection with the promotion, marketing and sale
of the Products. During the term of this Agreement, Distributor may refer to
itself on its letterhead and in advertisements as the exclusive authorized
distributor of the Products in the Territory and put PM Devices’ company logo in
promotional materials relating to the Products. In no event is Distributor
granted the right to use PM Devices’ Intellectual Property in connection with
other goods distributed by Distributor, or to use or adapt such Intellectual
Property or any confusingly similar words or symbols as part of its commercial
name. 

d) Each party acknowledges that it will
obtain confidential information from the other party and that the public
disclosure of this information by the receiving would inflict irreparable harm
upon the disclosing party. Each party agrees to maintain in confidence aII
confidential information it may receive under this Agreement concerning the
Products or the business of PM Devices or Distributor, and neither party will
disclose or disseminate such information to others without the prior written
consent of the disclosing party. Each party specifically agrees: (1) not to
disclose to any unauthorized person any information concerning the negotiations,
terms and conditions of this Agreement; (2) to take all reasonable steps to
prevent unauthorized disclosure of confidential information by its agents,
representatives and employees; and (3) to safeguard and protect all confidential
documents from theft, loss or perusal by unauthorized persons. 

e) If this Agreement expires without
renewal or is otherwise terminated, Manufacturer agrees that it will not,
without the consent of Distributor, contact or solicit any of the parties listed
on Exhibit G which Distributor represents form a part of Distributor's
network.

9. Force Majeure and Other Contingencies.

Neither PM Devices nor Distributor
shall have any liability to the other for any failure or delay in the
performance of any obligation under this Agreement (except the obligation to
make payments as and when due) if directly or indirectly caused by or resulting
from force majeure beyond the reasonable control and without fault or negligence
of the party claiming force majeure. The party claiming force majeure will give
the other party written notice of the cause within fifteen (15) days after the
occurrence, and will exercise reasonable diligence to remove the cause and
resume performance. If PM Devices is the affected party, it may equitably
allocate production and delivery of affected Products among its customers and
its distributors. If any performance is suspended or delayed because of force
majeure, the period for performance will be correspondingly extended; provided
however, if the performance is suspended or delayed for more than six (6) months
the party not claiming force majeure may at any time after such six (6) month
period, and while the performance remains suspended or delayed, terminate this
Agreement by written notice to the other party, as provided in Section 14 below.


10. Equitable Relief.

Distributor acknowledges and agrees
that, in the event of a breach by Distributor of any of the provisions of
Sections 1(d) (Conflicts of Interest) or 8(d) (Confidentiality) of this
Agreement, PM Devices’ remedies at law may be inadequate and such breach may
cause PM Devices substantial 

Page 10 of 20




and irreparable injury and damages.
Distributor agrees that PM Devices will be entitled to the remedies of
injunction, specific performance and other equitable relief to prevent a breach
of such provisions of this Agreement. The exercise by PM Devices of its rights
under this Section 10 shall not be construed as a waiver of any rights which PM
Devices may have for damages or otherwise in the event of a breach of the
provisions of Sections 1(d) and 8(d), or any other provision of this Agreement.


11. No Liability for Termination.

No party terminating this Agreement in
accordance with its terms shall, because of such termination, be liable to the
other for compensation, reimbursement or damages on account of loss of profits
on sales or estimated profits on anticipated sales or on account of
expenditures, investments or commitments made in connection with the business or
goodwill of the other party and neither party shall have such claim upon the
expiration of this Agreement. Termination of this Agreement will not release
either party from any debt owed to the other party prior to termination.

12. Setoff.

PM Devices reserves the right to set
off any amounts Distributor owes to PM Devices against any amount PM Devices
owes to Distributor 

13. Severability.

If any one or more of the provisions
contained in this Agreement shall for any reason be held invalid, illegal or
unenforceable in any respect, such invalidity, illegality or unenforceability
shall not affect any other provision of this Agreement. 

14. Notices.

All notices or consents required by
this Agreement shall be in writing in English. Notices shall be deemed delivered
if: a) delivered in person, b) sent by certified mail, return receipt requested,
correct postage prepaid, c) by telecopy, or d) by recognized international,
commercial, overnight courier, to the address and/or telecopier number listed
below, unless such address or telecopier number is changed by written notice
hereunder: 

If to PM Devices: 

	 	PM Devices 	  
	 	Unit 2135, 13700 Mayfield Place 
	 	Richmond, BC Canada 
	 	V6V 2E4 	  
	 	  	  
	 	Telecopy: 	(604) 270-4384 
	 	  	  
	 	Attention: 	Mr. Carlos Vonderwalde 
	 	  	President, PM Devices Inc. 
	 	  	  
	 	If to Distributor: 
	 	  	  
	 	ITOCHU International Inc. 
	 	335 Madison Ave. 
	 	New York, New York 10017 
	 	United States of America 
	 	  	  
	 	Telecopy: 	(212) 818-8597 
	 	  	  
	 	Attention: 	Mr. William Rutan 
	 	  	President, ITOCHU Healthcare



Page 11 of 20




Any notice or consent delivered (a) in
person shall be deemed delivered when delivered and signed for by any person at
the address above; (b) by certified mail, postage prepaid, return receipt
requested, shall be deemed delivered on the seventh business day after the date
deposited in the mail; (c) by telecopier transmission shall be deemed delivered
on the date sent, if sent before 5:00 p.m. on a business day in the recipient’s
location, and in any event only when a transmission report is retained by the
sender which indicates the telecopy has been duly received; and (d) by courier
service shall be deemed delivered on the next business day after the date sent.


15. Applicable Law.

a.) This Agreement shall be governed by
the law of the Province of British Columbia, without regard to its principles of
choice of laws.

b.) Any and all disputes, controversies
or differences in connection with or arising out of this Agreement or any
alleged breach hereof, which cannot be amicably settled, shall be submitted to
and settled by arbitration. Arbitration shall be held in Vancouver, British
Columbia, Canada in accordance with the rules of the British Columbia
Arbitration Centre. The award resulting therefrom shall be final and binding
upon the parties hereto.

16. Entire Agreement.

This Agreement constitutes the entire
understanding between the parties with respect to the subject matter hereof; no
other representations or covenants have induced either party to enter into this
Agreement. 

17. Construction.

The paragraph headings of this
Agreement are for convenience of reference only and do not form a part of the
terms of this Agreement. As used in this Agreement, the masculine, feminine or
neuter pronoun shall include each the masculine, feminine and neuter genders. A
reference to a person or entity shall mean a natural person, a trustee, a
corporation, a partnership or any other form of legal entity. All references
(including pronouns) in the singular or plural number shall be deemed to have
been made, respectively, in the plural or singular number as well, as the
context may require. 

18. Benefit.

This Agreement shall be binding on, and
inure to the benefit of, the parties hereto and their respective heirs,
executors, administrators, successors and assigns. 

19. Counterparts.

This Agreement may be executed in
counterparts which when taken together shall constitute one agreement which is
binding on all the parties, even though all the parties are not signatories to
the same counterpart. 

20. Amendment and Modification.

This Agreement may be amended or
modified, or any provision hereof may be waived, only by a written amendment or
waiver executed by PM Devices and Distributor. 

21. No Waiver.

Waiver of any default shall not be
considered a waiver of any other default or of the same default occurring
subsequently. No delay or failure by any party to exercise any right or remedy
shall be a waiver of such right or remedy, and no single or partial exercise of
any right or remedy shall preclude the further exercise thereof, or the exercise
at any time of any other right or remedy. 

Page 12 of 20




22. Exhibits.

The Exhibits, which are attached and
made a part hereof, are a part of this Agreement as if fully set forth herein.
All references herein to sections, subsections, clauses and exhibits shall be
deemed references to such parts of this Agreement, unless the context shall
otherwise require. 

24. Third Party Beneficiary.

This Agreement is not intended as and
shall not be construed to make any third party a beneficiary hereof, except that
PM Devices’ warranty may be passed along by Distributor. No creditor of
Distributor shall have or receive any direct or indirect benefits hereunder and
this Agreement may be enforced only by the parties hereto. 

IN WITNESS WHEREOF, the parties have
executed this Agreement on the date first above written. 

	PM Devices
      Incorporated, 	 	ITOCHU International
      Inc. 
	a division of Medical
      Ventures 	 	 	  
	 	  	 	 	  
	 	  	 	 	  
	 	  	 	 	  
	 	/s/ Carlos Vonderwalde 	 	 	/s/ Akira Hoshino 
	By: 		 	By:	 
	 	Carlos Vonderwalde, President 	 	 	Akira Hoshino, Senior Vice 
	 	  	 	 	President and General Manager, 
	 	  	 	 	Machinery Division 


Page 13 of 20




EXHIBIT A

DESCRIPTION OF PRODUCTS

Products shall mean: 

PM Devices PeriPatch Sheets


	Product Code 	Product 
	  	 
	1P6 	1 cm x 6 cm PeriPatch Sheet
  
	1.5P8 	1.5 cm x 8 cm PeriPatch Sheet 
	1.5P10 	1.5 cm x 10 cm PeriPatch Sheet
    
	4P4 	4 cm x 4 cm PeriPatch Sheet 
	4P6 	4 cm x 6 cm PeriPatch Sheet
  
	6P8 	6 cm x 8 cm PeriPatch Sheet 
	8P14 	8 cm x 14 cm PeriPatch Sheet
  
	10P162 	10 cm x 16 cm PeriPatch Sheet 
	  	 
	G45-23 	45 mm Endoscopic Sleeve – Two 
	G45-5 	45 mm Endoscopic Sleeve – Five
    
	G60-2 	60 mm Endoscopic Sleeve – Two 
	G60-5 	60 mm Endoscopic Sleeve – Five
    
	G60T-2 	60 mm Endoscopic Sleeve – Two 
	G60T-5 	60 mm Endoscopic Sleeve – Five
    
	E45T-2 	45 mm Endoscopic Sleeve – Two 
	E45T-5 	45 mm Endoscopic Sleeve – Five
    



And such additional products as the parties shall in writing
agree from time to time. 

Page 14 of 20




EXHIBIT B

DESCRIPTION OF TERRITORY

For purposes of this Agreement, the “Territory” shall include
the following state(s):

 

[Redacted Information]

 

 

 

Additional states shall be added at the discretion of Itochu  Healthcare.. 

The Distributor  guarantees that it currently has adequate sales representation in the  territories listed in Exhibit B in order to properly represent the Products in  those Territories

 

Page 15 of 20




EXHIBIT C

PRICE LIST

PM Devices PeriPatch Sheet

	Model 	Description 	1-2491 	250-499 	500+ 
	1P6 	1 cm x 6 cm PeriPatch Sheet 	 	 	 
	1.5P8 	1.5 cm x 8 cm PeriPatch Sheet 	 	 	 
	1.5P10 	1.5 cm x 10 cm PeriPatch Sheet    	 	 	 
	4P4 	4 cm x 4 cm PeriPatch Sheet 	[Redacted Information]

	4P6 	4 cm x 6 cm PeriPatch Sheet 	 	 	 
	6P8 	6 cm x 8 cm PeriPatch Sheet 	 	 	 
	8P14 	8 cm x 14 cm PeriPatch Sheet	 	 	 
	10P162 	10 cm x 16 cm PeriPatch Sheet 	 	 	 
	  	 	  	  	  
	G45-23 	45 mm Endoscopic Sleeve – Two 	 	 	 
	G45-5 	45 mm Endoscopic Sleeve – Five    	 	 	 
	G60-2 	60 mm Endoscopic Sleeve – Two 	 	 	 
	G60-5 	60 mm Endoscopic Sleeve – Five    	 	 	 
	G60T-2 	60 mm Endoscopic Sleeve – Two 	 	 	 
	G60T-5 	60 mm Endoscopic Sleeve – Five    	 	 	 
	E45T-2 	45 mm Endoscopic Sleeve – Two 	 	 	 
	E45T-5 	45 mm Endoscopic Sleeve – Five    	 	 	 


The Handling  Fee will be $15 per 12 units or multiples thereof, up to a maximum of $100. 

  Prices adjusted at PM Devices’ discretion in accordance with the  Agreement’s provisions. 

  When ordering, please use the Model number shown above.

  * Price  discounts are based on units purchased during the contract-year. Aggregate  totals of all products purchased from PMD regardless of type or description entitle  distributor to additional discounts, i.e. 1-249 is at column 1 prices, 250-499  are at column 2 prices, 500 and above at column 3 prices.  

  1 - All prices in U.S. dollars. Prices may vary  depending on economic and product market factors.

  2 – 10P16 PeriPatchÔ sheets  are special order only. Please allow up to 12 weeks for delivery. 

  3 - G model  numbers are compatible with U.S.  Surgical Endoscopic staplers

  4 – E model  numbers are compatible with J&J Ethicon Staplers

 

Page 16 of 20




EXHIBIT D

SALES OBJECTIVES

To be established as per section 2. b) (2) of this
agreement

Page 17 of 20




EXHIBIT E

COMPETING PRODUCTS

1. Bovine Pericardial or synthetic surgical patches or staple
line buttresses

Page 18 of 20




EXHIBIT F

CERTIFICATE OF OFFICER OF DISTRIBUTOR

[Letterhead of Distributor]

CERTIFICATE

[Date]

PM Devices Inc.
Unit 2135, 13700 Mayfield Place

Richmond, British Columbia, Canada 
V6V 2E4

Attn: President

Re: Distribution Agreement made as of June 1, 2005 (the
"Agreement") between ITOCHU International Inc. (the "Distributor") and PM
Devices Inc.(the "Manufacturer")

Pursuant to section 6 of the Agreement, the undersigned, in his
capacity as an officer of ITOCHU and not in his personal capacity, hereby
certifies to the Manufacturer to the best of his information and belief that
ITOCHU has complied with all applicable United States and local laws and
regulations in the Territory (as defined in the Agreement) relating to the
Products (as defined in the Agreement) and the marketing and sale thereof by the
Distributor.

ITOCHU International Inc.

	Per: 	 
	 	 
	Authorized Signatory 	 


Page 19 of 20




EXHIBIT G

DISTRIBUTOR’S NETWORK

	Product for Surgery Inc.
  
	Flanagan Instruments
  
	Additional Sub-Distributors 


Page 20 of 20