EXHIBIT 10.1

 
PATIENT SAFETY TECHNOLOGIES
& A PLUS INTERNATIONAL

SUPPLY AGREEMENT

THIS SUPPLY AGREEMENT (“Supply Agreement”) is made effective as of August 10th,
2005, by and between SURGICOUNT MEDICAL, INC., (“Buyer”), a California
corporation, located at 100 Wilshire Blvd., Suite 1500, Santa Monica, California
90401, and A PLUS INTERNATIONAL INC. (“Seller”), a California corporation
located at 5138 Eucalyptus Avenue, Chino, California 91710.

W I T N E S S E T H

WHEREAS, Seller and Buyer desire to enter into this Supply Agreement, which
shall set forth the parties’ mutual rights and obligations with respect to the
supply of Products (as hereinafter defined).

NOW THEREFORE, for good and valuable consideration, including the mutual
promises contained in this Supply Agreement, the adequacy and sufficiency of
which are hereby acknowledged, Seller and Buyer mutually agree as follows:

1.  Supply of Products. During the term of this Supply Agreement, Buyer agrees
to purchase from Seller, and Seller agrees to manufacture and sell to Buyer,
certain disposable bar coded medical products, more particularly listed on
Exhibit A, attached hereto and incorporated herein by this reference
(hereinafter the “Products”).

2.  Term. This term of this Supply Agreement shall commence on the date first
set forth above and be effective for a period of five (5) years (“Initial
Term”), unless terminated earlier as set forth below. Thereafter, this Supply
Agreement shall automatically be renewed for successive three (3) year periods.

3. Exclusive Provider. During the term of this Supply Agreement, Buyer agrees
that Seller shall be the exclusive provider to Buyer of all Products that are
manufactured for SurgiCount and the bar coded sponge counting systems. Should
Seller fail to meet the terms and conditions of this agreement or any other
mutually pre-determined criteria for pricing thresholds, quality standards or
service levels, Buyer will be able to remedy the problem with Seller in a
reasonable time period or seek additional providers of the dressing products.

4. Exclusive Supplier. During the term of this Supply Agreement, Seller shall
not manufacture, distribute or otherwise supply any bar coded Products
manufactured in China for any third party except for Buyer.

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5. Demand Projections / Price Projections. Upon the execution of this Supply
Agreement, and every twelve (12) months during the term, Buyer shall provide
Seller with projections of the maximum/minimum levels required by Buyer,
provided, however, Buyer shall not be bound to purchase the inventory projected
by Buyer but shall make a good faith effort to purchase in line with its
projections. Notwithstanding the foregoing, should Buyer terminate this
Agreement without cause pursuant to the first sentence of Paragraph 8 below,
Buyer agrees to purchase all products covered by this Agreement that are (a) in
Seller’s inventory or the inventory of a Seller supplier on the date of notice
of termination, (b) in transit to or from a Seller facility on the date of
notice of termination, (c) work in process at Seller or an Seller supplier on
the date of notice of termination, or (d) on order from a Seller supplier on the
date of notice of termination, provided, however, that Buyer’s obligation to
purchase products under this Paragraph shall not exceed an amount equal to the
greater of (1) Buyer’s actual purchases during the six-month period prior to the
date of notice of termination, or (2) one half of Buyer’s most recent 12-month
projection as provided to Seller under Paragraph 5 hereof. The pricing schedule
for Buyer will be based on the bulk / sterile price points for Traditional
Dressings. These “base” prices will be impacted by the equipment cost / labor
associated with the manufacturing protocol which will include heat presses and
“online” scanning. The data matrix tags will be supplied by Buyer.

6. Shipment of Goods. Seller shall ship the Products to Buyer on such schedules
and to such destinations as requested by Buyer, at Seller’s sole cost and
expense, FOB destination.

7. Invoice. Seller shall invoice Buyer for Products upon delivery of Products
according to the purchase orders of Buyer. Payment terms for Buyer are net 30
days from delivery of Products to Buyer or date of the invoice to Buyer,
whichever is later.

8. Termination. Either party may terminate this Supply Agreement without cause
at any time after eight (8) years (the Initial Term and automatic renewal
period) upon delivery of ninety (90) days prior written notice. If either party
shall, at any time during the term of this Supply Agreement, materially breach
any obligation hereunder and such breach shall not be cured within ten (10) days
after written notice from the non-breaching party specifying the nature of the
breach, the non-breaching party may terminate this Supply Agreement immediately
upon expiration of such cure period. Termination or expiration of this Supply
Agreement, however, shall not relieve either party of the obligations contained
in Paragraph 9. Upon termination or expiration, both parties shall promptly
return to the other all documents, plans, drawings and writings of any kind
delivered to or derived from the other's Confidential Information.

9.  
 Confidentiality.

(a)  
This Supply Agreement and any provisions hereto shall remain strictly
confidential between the parties.

(b)  
After the execution of this Supply Agreement by both parties, Seller and Buyer
may arrange to exchange certain confidential technology relating to the design
and development of bar coded products for the healthcare industries, as well as
certain other confidential information and know-how relating to immediate
manufacturing requirements of Buyer and relating to special long-range
objectives of the parties (hereinafter collectively called "Confidential
Information"). Confidential Information may include, without limitation, product
specifications, manufacturing processes and techniques, and other technical,
design, financial, business, marketing or customer information. Each party shall
have the absolute right to determine what Confidential Information it shall
disclose and each party shall be under no obligation to disclose any particular
area of activity or research.

 

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(c)  
For a period of two (2) years from the date of the termination or expiration of
this Supply Agreement, the recipient party shall maintain Confidential
Information in confidence and shall not itself use or disclose the same to
others without the written consent of the disclosing party except when and to
the extent such information either:

(i)  
was known to the recipient party prior to the disclosure thereof by the
disclosing party as evidenced by written records in the recipient party's
possession; or

(ii)  
is, or shall become, other than by act or omission on the recipient party's
part, generally available to the public; or

(iii)  
is lawfully made available to the recipient party by a third party with no
obligation of confidentiality to the disclosing party.

(d)  
Neither party shall disclose to any third party the fact that the other party is
working in this area, or the specifics of the other party's work, without the
prior written consent of the other party.

(e)  
Each party shall take normal and reasonable safeguards with respect to
Confidential Information, including limiting the employees who receive such
Confidential Information and providing them with only such information as they
need and providing adequate safeguard protection for all documents, plans,
drawings and writings. Both parties may disclose to their sub-contractors and/or
materials or component suppliers so much of the Confidential Information
received from each other as is necessary to enable them to accomplish the
purposes of this Supply Agreement; provided that such sub-contractors and/or
materials or component suppliers are obligated in writing to them to hold such
information in confidence and to not use such information, except as authorized.

(f)  
Seller and Buyer shall promptly disclose to one another any inventions or
improvements which are conceived or made by any employees during the life of
this Supply Agreement, which inventions or improvements incorporate or rely on
Confidential Information of the non-inventing party which, at the time said
inventions or improvements were conceived or made, the party conceiving such
invention was obligated to hold in confidence in accordance with Paragraph 8
hereof.

(g)  
No rights or licenses under any patent or under the Confidential Information are
granted hereunder by either party to the other party.

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10. Notices. Any notice required to be given hereunder shall be in writing
(unless specifically provided to the contrary in this Supply Agreement),
addressed to each party at the last known address of its principal place of
business, which at the time of execution of this Supply Agreement is as follows:

To Buyer:                              SurgiCount Medical, Inc.
c/o Patient Safety Technologies, Inc.
100 Wilshire Boulevard, Suite 1500
Santa Monica, CA 90401
Attn: Vice President - Supply Chain

To Seller:                               A Plus International Inc.
5138 Eucalyptus Avenue
Chino, California 91710
Attn: Bill Adams, Director of Marketing

Notices shall be deemed given when personally delivered, or mailed certified
mail, postage prepaid, return receipt requested, or consigned to a private
overnight delivery service. A party may change its address to which notices are
to be sent by written notice to the other party, and such changed address shall
be effective ten (10) days after the giving of notice thereof.

11. Time of the Essence. Time is of the essence for the performance of all the
obligations of the parties under this Supply Agreement, including without
limitation, the delivery of Products to Buyer according the delivery schedules
set forth in each purchase order.

12. Headings; Entire Agreement. The headings of this Supply Agreement are
provided for convenience of reference only, and are not an integral part of this
Supply Agreement and shall not affect its construction or interpretation. This
Supply Agreement embodies the entire agreement and understanding of the parties
hereto with respect to the subject matter hereof, and supersedes all previous
understandings, agreements, negotiations, commitments, or any other writings or
communications with respect to such matter. If any terms of any purchaser order
conflict with any term of this Supply Agreement, this Supply Agreement shall
control. This Supply Agreement may only be amended by written agreement of the
parties.

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13. Applicable Law and Jurisdiction. This Supply Agreement is made under,
governed by and shall be interpreted solely under the laws of the State of
California, without regard to any choice of law provisions of the State of
California. In addition to any other proper forum, suit to enforce this Supply
Agreement may be brought in Los Angeles County, California regardless of the
place of business of Seller and Seller hereby consents to personal jurisdiction
in Los Angeles County, California.

14. Assignment, Successors, and No Third-Party Rights. The rights and
obligations of the parties under this Supply Agreement shall benefit and be
binding upon the successors and assigns of each party, including any entity with
which said party may merge or consolidate or to which all or substantially all
of its assets may be transferred. Nothing expressed or referred to in this
Supply Agreement will be construed to give any person other than the parties to
this Supply Agreement any legal or equitable right, remedy, or claim under or
with respect to this Supply Agreement or any provision of this Supply Agreement.
This Supply Agreement and all of its provisions and conditions are for the sole
and exclusive benefit of the parties to this Supply Agreement and their
successors and permitted assigns.

15. Relationship of the Parties. Seller is only an independent contractor and
supplier to Buyer. This Supply Agreement does not in any manner or for any
purpose create a partnership, joint venture, or employment relationship.

IN WITNESS WHEREOF, the parties hereto have caused this Supply Agreement to be
executed by its duly authorized representative.

[Signatures on following page]

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SELLER:     BUYER:             A PLUS INTERNATIONAL INC.   SURGICOUNT MEDICAL,
INC. 8/17/05               By:  /s/ David Lee    By:  /s/ Milton Ault Printed
Name: David Lee    Printed Name:  Milton C. Ault, III Title: Vice President  
Title:   CEO  
 
   
 
                PATIENT SAFETY TECHNOLOGIES, INC.                           By:
/s/ Milton Ault       Printed Name:  Milton C. Ault, III       Title:  Chairman
& CEO        
 

      

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Exhibit A
(Products)

ITEM     
 
Bar Coded gauze sponges
 
Bar Coded laparotomy sponges

Bar Coded O.R. towels

Bar Coded specialty sponges

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