SUPPLY AGREEMENT

A.

HYTEK manufactures and/or supplies products for use in medical devices, and

B.

Medtronic is a manufacturer of medical devices and wishes to purchase certain products for use in its devices.

1.

DEFINITIONS

A.

“Affiliate” of a specified person (natural or juridical) means a person that directly, or indirectly through one or more intermediaries, controls, or is controlled by, or is under common control with, the person specified. “Control” shall mean ownership of more than 50% of the shares of stock entitled to vote for the election of directors in the case of a corporation, and more than 50% of the voting power in the case of a business entity other than a corporation.

B.

“Agreement” means this Agreement and all its attachments and amendments.

C.

“Confidential Information” is defined in Section 4, below.

D.

“Effective Date” is as specified at the beginning of this Agreement.

E.

“Product” means the Medtronic Bravo ^™ hybrid that is manufactured by HYTEK for Medtronic specifically for Medtronic’s use in accordance with the Specifications as defined below.

F.

“Specifications” means all applicable specifications, including those attached as Exhibit A, and protocols relative to the design, physical characteristics, function, performance, manufacture, packaging and quality of the Products. Specifications will include those, which have been specifically agreed by the parties, and all applicable published specifications and protocols.

2.

SALE AND PURCHASE OF PRODUCT

A.

Sale of Products . During the term of this Agreement, HYTEK will sell and supply the Products listed in Exhibit A to Medtronic at the prices listed in Exhibit A. Additional Products may be added to Exhibit A by mutual agreement of the parties in writing. To the extent a Product includes embedded software, the term “sell” will be understood to refer to a non-exclusive license to use (and to allow customers and end-users to use) such software in connection with the Product.

B.

Forecasting .

(1)

Medtronic will submit to HYTEK monthly rolling forecasts covering its anticipated purchases of Products for a period of 12 months. The first three months will be binding, the following three months are firm for material purchases, and the remaining six months of the forecast is non-binding. Medtronic may reschedule forecasts for the first three months of Product or following three months of material purchases by ± 10% without penalty.

(2)

HYTEK will use all reasonable efforts to satisfy all orders submitted by Medtronic, and will use its best efforts to provide Medtronic one hundred percent (100%) of the quantities of Products ordered.

C.

Orders .

(1)

Products will be ordered via standard Medtronic purchase orders, which may be submitted via mail, fax or, if mutually agreed by the parties, electronic data interchange (EDI). HYTEK will promptly acknowledge receipt of orders. Orders will be deemed accepted upon Medtronic’s receipt of HYTEK’s acknowledgement.

(2)

In order of priority, the terms of any order will be defined by the terms of (a) this Agreement and (b) the typed portions of Medtronic’s purchase order, (c) the typed portions of HYTEK’s acceptance, (d) the printed terms of Medtronic’s order, and (e) the printed terms of HYTEK’s acknowledgement. The current form of Medtronic’s purchase order is attached as Exhibit C. Except as otherwise agreed in writing by the parties, the resulting agreement will supersede and control any conflicting representation, agreements, or documentation.

D.

Prices .

(1)

The price stated in Exhibit B will be the maximum price for an initial period from August 1, 2003, through July 31, 2004 subject to HYTEK’s obligations set forth in Section D (2) below. After the initial period, the price is subject to review and good faith negotiation at the request of either party, but not more than once a

year. The right to revise the prices will be based on (a) material variations in manufacturing cost, burden rates, including any such variations resulting from shortages; (b) significant change in forecasted volumes; or (c) Specifications.

(2)

Cost reductions . HYTEK’s understands that price is a material term of this Agreement and therefore it commits on an ongoing basis, that it will use its best efforts to reduce the cost of Products and will in good faith negotiate price reductions to equitably share the resulting cost savings with Medtronic. HYTEK’s obligation includes, but is not limited to, the plans for price reduction set forth on Exhibit D including the reduced prices if the redesign work and efficiencies are successful as anticipated between the parties. HYTEK’s failure to reduce prices will be considered a breach of a material term of this Agreement and Medtronic may terminate in accordance with Section 8 B (1).

E.

Payment Terms . Except as otherwise specified in a purchase order, payment terms will be net thirty (30) after the date of invoice. Invoicing requirements, if any, will be as specified in the applicable purchase order.

F.

Delivery . Products must be delivered to Medtronic in accordance with the mutually agreed upon delivery requirements which shall be stated on Medtronic’s individual purchase orders. Unless otherwise specified in an applicable purchase order, delivery of Products will be f.o.b. HYTEK’s facility, and title and risk of loss will pass at that point.

G.

Allocation . Should HYTEK, despite such best efforts, be unable to supply the specified quantities or to meet the specified delivery date, Medtronic will be a preferred customer for delivery of what Product is available and in no case will receive less than a pro rata share based on volume purchased over the past year.

H.

Alternative Supply . It is understood that nothing in this Agreement (other than the confidentiality obligations specified in Section 4, below) will prevent Medtronic from developing products similar to the Products covered by this Agreement or from sourcing such products from another vendor.

I.

Third Party Fabricators . If requested by Medtronic, HYTEK will drop ship Product to third party fabricators identified by Medtronic. HYTEK will invoice the cost of Product (at the prices specified herein) to Medtronic. Medtronic will be responsible for payment for any orders of Product that Medtronic has requested be drop shipped to such fabricator.

J.

Exclusivity . HYTEK will not, during the term of this Agreement and for one year thereafter, provide any Product (or any product substantially similar in form, fit and function to a Product) to any third party without the prior written approval of Medtronic. If a Product is produced using or embodies any Medtronic intellectual property, this obligation will survive termination of this Agreement indefinitely.

K.

Quarterly Review . Quarterly management reviews will be held via telephone conference by Medtronic and HYTEK to provide regular performance feedback. Upon such review, Medtronic and the HYTEK shall review quality, delivery, lead-time, incremental sales opportunities, an action plan for cost improvements, and the performance of both parties to the conditions of this Agreement. The parties anticipate that the review will be used jointly to address any problems, to discuss cost improvement opportunities, to initiate

corrective actions plans (where necessary) and to agree upon any necessary adjustments for the following quarter. Failure to hold a quarterly review will not relieve HYTEK from its obligations under this Agreement.

3.

PRODUCTION

A.

Compliance with Specifications . HYTEK will cause the Product to be manufactured in strict accordance with the applicable Specifications .

B.

Change s.

(1)

If HYTEK finds it necessary or desirable to change the Specifications for any Product, or to change the design or production processes affecting the form, fit, function, performance or chemical composition of any Product, HYTEK will give Medtronic notice and not implement any such change without Medtronic’s prior written consent.

(2)

If Medtronic similarly finds it necessary or desirable to change the applicable Specifications for any Product, then it will so notify HYTEK. HYTEK will make any such changes at such an adjusted purchase price as Medtronic and HYTEK may agree to in writing pursuant to good faith negotiations.

(3)

Any agreed changes to the Specifications will be reduced to writing and become effective when signed by both parties.

C.

Packaging and Labeling . All Products will be packaged and labeled in accordance with any applicable Specifications.

D.

Quality . Unless otherwise specifically agreed in writing by Medtronic, all Products supplied under this Agreement will be manufactured in accordance with: (1) all applicable standards of the International Standards Organization (ISO) and applicable ISO-certified processes and (2) all other quality standards and quality assurance plans referenced in the Specifications.

E.

Compliance . HYTEK represents and warrants that the Product delivered to Medtronic will not: (1) be adulterated or misbranded within the meaning of the United States Food, Drug, and Cosmetic Act, (2) be in violation of any governmental statutes, orders, ordinances or regulations referenced in the Specifications, or (3) knowingly be in violation of any other governmental statutes, orders, ordinances or regulations.

F.

Non-conforming Product .

(1)

Medtronic will have the right to reject any Product, which does not meet the applicable Specifications, within 90 days after actual delivery for all parameters that can be tested at the time of receipt. For parameters that cannot be tested at that time, such as shelf life, HYTEK’s warranty will extend for the stated shelf life of 180 days.

(2)

In the event that any Product does not meet applicable Specifications and Medtronic has notified HYTEK, HYTEK will repair or replace such Product free of

charge and HYTEK shall cover expenses (including freight and customs clearance, if any) incurred by Medtronic in connection with (a) shipment of repaired or replacement Product to the same location and (b) shipment of the nonconforming Product back to HYTEK (if so requested by HYTEK). In the event of a rejection of defective Product, HYTEK will ship repaired or replacement Product within thirty (30) days of its receipt of a proper rejection notice from Medtronic.

G.

Approvals . Medtronic will be responsible for obtaining any regulatory and agency approvals. HYTEK will provide reasonably necessary assistance to Medtronic in obtaining those approvals.

H.

Excused Performance . A party’s obligations hereunder, including any delays in deliveries hereunder, will be excused by strikes, riots, war, invasion, acts of God, fire explosion, floods, delay of common carrier, acts of government agencies or instrumentalities, judicial action, and other contingencies beyond the reasonable control of the party. Medtronic may terminate a purchase order for any affected Product if HYTEK remains unable to provide such Product more than sixty (60) days.

I.

Subcontracting . HYTEK may not subcontract the manufacture of the end product under this Agreement without the prior written consent of Medtronic, and any subcontracting will be subject to the following terms:

(1)

The subcontracting must be under a written agreement which (a) obligates the subcontractor to comply with all relevant terms and condition of this Agreement as though it were HYTEK, and (b) names Medtronic as a third party beneficiary, and

(2)

HYTEK will remain primarily responsible for all acts and omissions of the subcontractor and will guarantee the performance of the subcontractor.

4.

CONFIDENTIALITY AND PUBLICITY

A.

Confidential Information . “Confidential Information” will mean all data, information and know-how disclosed by one party (“Discloser”) to the other party (“Recipient”) during the term of this Agreement (or in contemplation of it) regarding technology, designs, know-how, computer programs, products, markets and business plans relating to the subject