PATIENT SAFETY TECHNOLOGIES & A PLUS INTERNATIONAL SUPPLY AGREEMENT

EXHIBIT 10.1

PATIENT SAFETY TECHNOLOGIES

& A PLUS INTERNATIONAL

SUPPLY AGREEMENT

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.