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.

    


    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    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. 

            


    

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    
      	(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.

            


    

    


    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    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.

    


    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    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]

    


    


    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    
       

    

    
      
        
          	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
	 	 	 	 	
                   

                


        

      

    

          


    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

       

      Exhibit
        A

    

    (Products)

    


    ITEM     

     

    Bar
      Coded
      gauze sponges

     

    Bar
      Coded
      laparotomy sponges

    


    Bar
      Coded
      O.R. towels

    


    Bar
      Coded
      specialty sponges