Exhibit 10.1

 

SETTLEMENT AGREEMENT

 

THIS SETTLEMENT AGREEMENT (the “Settlement Agreement”) is made and entered into
as of February 12, 2008 by and between Vision-Sciences, Inc. (hereinafter “VSI”)
and PENTAX Corporation (hereinafter “Pentax”).

 

WHEREAS, VSI and Pentax (formerly known as Asahi Optical Co., Ltd.) are parties
to a Supply Agreement, dated as of March 16, 1992, (as amended by (i) the
Amendment to Supply Agreement made as of October 1, 2002 between VSI and Pentax,
(ii) the Memorandum made as of March 16, 2003 between VSI and Pentax, and
(iii) the Memorandum made as of May 23, 2006 between VSI and Pentax, the “Supply
Agreement”), the term of which will expire on March 15, 2009;

 

WHEREAS, pursuant to the Supply Agreement, Pentax agreed to supply certain
devices, subassemblies and components (collectively, “Products”) to VSI;

 

WHEREAS, in connection with the Supply Agreement, a dispute has arisen between
the parties;

 

WHEREAS, VSI commenced an arbitration against Pentax and PENTAX Medical Company,
a Division of PENTAX of America, Inc. (“PAMC”) with the American Arbitration
Association (“AAA”) in New York (the “Arbitration”) by filing a Demand for
Arbitration dated December 11, 2007, captioned Vision-Sciences, Inc. v. Pentax
Corporation and Pentax Medical Company, a Division of Pentax of America, Inc.,
with AAA’s International Centre for Dispute Resolution;

 

WHEREAS, Pentax filed a Petition to Stay Arbitration pending in the U.S.
District Court for the Southern District of New York, captioned Pentax
Corporation v. Vision-Sciences, Inc., Civil Action No. 08 Civ. 00018 (NRB) (the
“SDNY Action”); and

 

WHEREAS, VSI and Pentax have reached terms upon which to settle their dispute.

 

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NOW, THEREFORE, VSI and Pentax agree as follows:

 

1.                                                               The parties
agree that the chart in the Appendix A attached hereto and made a part hereof
(the “Chart”) contains the firm and final monthly delivery schedule for the
Products (including, without limitation, replacement Products or repaired
Products) to be supplied by Pentax to VSI (including its subsidiary, Machida
Incorporated (“Machida”)) up to and including February, 2009.  Pentax shall be
obligated to deliver the Products to VSI as indicated in the Chart and VSI shall
be obligated to purchase and receive delivery of the Products as indicated in
the Chart and to pay for delivered Products pursuant to Section 2.4 of the
Supply Agreement, as amended hereby.  The Chart supersedes any and all
outstanding purchase orders, written or oral, placed by VSI with Pentax or any
subsidiary of Pentax, whether confirmed by Pentax or any such subsidiary or not.

 

2.                                                               The prices for
the Products set forth in Section 1 above are the prices as of the date of this
Settlement Agreement and defined in the Chart, and shall be the prices through
the expiration or termination of the Supply Agreement, as amended by the
Settlement Agreement.

 

3.                                                               VSI hereby
irrevocably waives, and causes Machida to irrevocably waive, any and all right,
if any, to place additional purchase orders for Products under the Supply
Agreement, as amended hereby, or otherwise to place orders for other Pentax
products and acknowledge that Pentax or any subsidiary of Pentax shall have no
further obligation at any time to supply Products or other Pentax products in
excess of the quantities indicated in the Chart on the dates specified therein
or to accept further or additional purchase orders of whatsoever type or nature.

 

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4.                                                               Except as
otherwise provided in the section of the Chart captioned “Note,” VSI’s right or
obligation to receive delivery of Products from Pentax or any subsidiary of
Pentax shall terminate as of February 28, 2009, subject to Pentax fulfillment of
the delivery by February 28, 2009 of the total quantities of all Products as
specified in the Chart, and any replacements of Rejected Products which VSI
shall be entitled to receive pursuant to Section 8 of this Settlement Agreement.

 

5.                                                               The Supply
Agreement, as amended hereby, shall expire as of February 28, 2009.  Upon the
expiration or earlier termination of the Supply Agreement, as amended hereby,
for any reason whatsoever, neither party (including Machida) shall have any
further right or obligation thereunder; provided, however, that (i) accrued
and/or outstanding rights and obligations existing at the time of termination or
expiration and (ii) rights and obligations arising under Section 4, 5, 9 or 10
of the Supply Agreement, as amended hereby, shall survive in perpetuity.

 

6.                                                               In the event
that payment by VSI or Machida, as the case may be, shall not be made within two
(2) business days after Pentax provides written notice to VSI or Machida, as the
case may be, that payment is overdue pursuant to Section 2.4 of the Supply
Agreement, as amended hereby, Pentax shall have the right to terminate the
Supply Agreement, as amended hereby, by sending written notice of termination to
VSI, such termination to be effective on the date specified in such notice.  In
the event of any such termination, Pentax or any subsidiary of Pentax shall have
no further obligation whatsoever to make any further deliveries of Products as
contemplated by the Chart.

 

7.                                                               As a condition
precedent to Pentax’s obligation to make deliveries of Products in January,
February and March, 2009, VSI shall post an irrevocable letter of credit no
later than December 31, 2008 to guarantee payment in full by VSI for such
Products.

 

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8.                                                               Anything
contained in the Supply Agreement, as amended hereby, to the contrary
notwithstanding, VSI may reject Products received from Pentax only for the
reasons of either being defective/damaged, or in the case of fiber bundles, for
non-compliance with the applicable specifications (the “Specifications”) as
indicated in Appendix B attached hereto and made a part hereof (the “Rejected
Products”).  VSI shall notify Pentax in writing of the Rejected Products within
five (5) business days of receipt thereof by VSI, and Pentax shall issue to VSI
in writing a return goods authorization (“RGA”) with reference to the specific
delivery of such Rejected Products within two (2) business days of Pentax
receipt of VSI’s written notification.  VSI shall then return the Rejected
Products to Pentax within two (2) business days of VSI’s receipt of the relevant
RGA and Pentax shall inspect such returned Rejected Products to verify
defects/damage, (or, in the case of fiber bundles, non-compliance with the
Specifications) within three (3) business days of Pentax’s receipt of the
Rejected Products.  If the alleged defects/damage (or, in the case of fiber
bundles, non-compliance with the Specifications) of the Rejected Products is
verified by Pentax, then VSI may, in its discretion, require Pentax to either
issue a credit to VSI for such Rejected Products, or replace them as soon as
practically possible but no later than sixty (60) days from the date of receipt
by Pentax of such returned Rejected Products.  If defects/ damage (or, in the
case of fiber bundles, non-compliance with the Specifications of the Rejected
Products) is not verified by Pentax, Pentax shall inform VSI in writing of such
result and VSI shall, in its discretion and in writing, either request Pentax to
redeliver to VSI, or to dispose of, such Rejected Products at the expense of
VSI.

 

9.                                                               VSI
acknowledges that all of VSI’s claims and Machida’s claims with respect to the
failure of any previously delivered Products to conform

 

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to the Specifications applicable to such Products have been resolved to its
satisfaction.

 

10.                                                         Article 10.3 of the
Supply Agreement shall be amended to revise the notice addresses of the parties
as follows:

 

“To VSI:

 

Vision-Sciences, Inc.

 

 

40 Ramland Road South

 

 

Orangeburg, New York 10962

 

 

 

 

 

Attn: Mr. Ron Hadani, President & CEO

 

 

 

To Pentax:

 

PENTAX Corporation

 

 

c/o PENTAX Medical Company

 

 

102 Chestnut Ridge Road

 

 

Montvale, New Jersey 07645

 

 

 

 

 

Attn: Mr. David Woods, President

 

11.                                                         Promptly after
execution and delivery of this Settlement Agreement by both parties, counsel for
VSI and Pentax shall jointly cause the Arbitration and the SDNY Action to be
withdrawn and terminated in their entirety.

 

12.                                                      This Settlement
Agreement shall be binding upon and inure to the benefit of the parties hereto
and their respective officers, directors, shareholders, employees, agents,
attorneys, predecessors, successors, parents, affiliates, subsidiaries
(including, without limitation, in the case of VSI, Machida, and in the case of
Pentax, PENTAX of America, Inc.), related companies, licensees, transferees,
assigns, administrators, heirs, servants, and representatives, each of whom
shall be entitled to enforce said provisions.

 

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13.                                                         This Settlement
Agreement shall be construed in accordance with and governed by the laws of
Japan.

 

14.                                                         This Settlement
Agreement together with the Supply Agreement, as amended hereby, constitutes the
entire agreement between the parties hereto with respect to the subject matter
hereof and thereof and cancels, terminates, and supersedes any prior agreement,
written or oral, entered into by Pentax or any subsidiary of Pentax (including,
without limitation, all outstanding purchase orders placed by VSI or Machida
with Pentax or any subsidiary of Pentax, whether confirmed by Pentax or any such
subsidiary or not) relating to the subject matter hereof or to the dispute which
this Settlement Agreement is intended to settle.  Each of the parties hereto
further acknowledges and agrees that it has been represented and advised
throughout all of the negotiations that preceded the execution of this
Settlement Agreement by counsel of such party’s own choice, and that in entering
into this Settlement Agreement, it is not relying on any representations or
warranties except those expressly stated in this Settlement Agreement. Except as
specifically amended hereby, the Supply Agreement remains in full force and
effect.

 

15.                                                         None of the
provisions of this Settlement Agreement may be waived or modified except by a
writing signed by all parties hereto.

 

16.                                                         Failure of any party
to require the performance of any term in this Settlement Agreement, or the
waiver by any party of any breach thereof shall not prevent subsequent
enforcement of such term nor be deemed a waiver of any subsequent breach.

 

17.                                                         VSI shall cause
Machida, and Pentax shall cause PAMC, to comply with this Settlement Agreement.

 

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18.                                                         Each individual
executing this Settlement Agreement on behalf of any party hereto, whether
corporate or otherwise, covenants and warrants that he or she has the right,
power, and authority to execute this Settlement Agreement on behalf of, and to
bind, such party.

 

 

 

 

 

 

 

 

VISION-SCIENCES, INC.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

By:

 /s/ Ron Hadani

 

 

 

 

 

Name:

Ron Hadani

 

 

 

 

 

Title:

President & Chief Executive Officer

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

PENTAX CORPORATION

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

By:

 /s/ Nobuaki Tauishima

 

 

 

 

 

Name:

Nobuaki Tanishima

 

 

 

 

 

Title:

President

 

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