Exhibit 10.1
SETTLEMENT AGREEMENT
     This Settlement Agreement (“Settlement Agreement”) is made and entered into
as of the last date of signature below (the “Effective Date”), by and between
IRIDEX Corporation, a Delaware corporation, having offices at 1212 Terra Bella
Avenue, Mountain View, California 94043 USA (“IRIDEX”), Synergetics, Inc., a
Missouri corporation, having offices at 3845 Corporate Centre Drive, O’Fallon,
Missouri 63368, and Synergetics USA, Inc. a Delaware corporation, having offices
at 3845 Corporate Centre Drive, O’Fallon, Missouri 63368 (collectively,
“Synergetics”) (IRIDEX and Synergetics are individually referred to herein as a
“Party,” and collectively as the “Parties”).
     WHEREAS, IRIDEX and Synergetics have asserted claims against each other in
the Actions;
     WHEREAS, IRIDEX and Synergetics desire to settle all claims that were ever
asserted in the Actions on the terms and conditions recited below;
     NOW, THEREFORE, in consideration of the above recitals and the terms and
conditions hereinafter contained, the Parties agree as follows:
ARTICLE 1 — DEFINITIONS
     As used in this Settlement Agreement, the following terms shall have the
following meanings:

1.1   “Actions” means the following legal proceedings:

  1.1.1   IRIDEX Corporation v. Synergetics USA, Inc. and Synergetics, Inc.,
United States District Court for the Eastern District of Missouri, Case
No. 4:05-cv-01916-CDP (“the First Missouri Case”);     1.1.2   Synergetics, Inc.
v. IRIDEX Corporation, United States District Court for the Eastern District of
Missouri, Case No. 4:07-cv-358-MLM (“the Second Missouri Case”); and     1.1.3  
Synergetics, Inc. v. Peregrine Surgical, Ltd., Innovatech Surgical, Inc., and
IRIDEX Corporation, United States District Court for the Eastern District of
Pennsylvania, Case No. 2:06-cv-00107-TMG (“the Pennsylvania Case”).

1.2   “Intuitive Patent Applications” means U.S. Patent Applications
60/444,060,10/765,350, and 11/035,694, any patent issuing therefrom and all
reissues, reexaminations and extensions of any of such patents, and any other
patents issuing from continuations, continuations-in-part and divisions of these
applications, and all patent applications and issued patents (both foreign and
domestic) that claim priority from them.

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1.3   “IRIDEX Patent” means U.S. Patent No. 5,085,492 (the ‘“492” Patent), all
reissues, reexaminations and extensions of any of such patent, and any other
patents issuing from continuations, continuations-in-part and divisions of the
application on which such patent is based, and all patent applications and
issued patents (both foreign and domestic) that claim priority from the 492
Patent.   1.4   “Person” shall mean an individual, trust, corporation,
partnership, joint venture, limited liability company, association,
unincorporated organization or other legal or governmental entity.   1.5  
“Synergetics Patent” means U.S. Patent No. 6,984,230 (the “230” Patent), all
reissues, reexaminations and extensions of any of such patents, and any other
patents issuing from continuations, continuations-in-part and divisions of the
application on which such patent is based, and all patent applications and
issued patents (both foreign and domestic) that claim priority from the’230
Patent. The definition of “Synergetics Patent” does not include U.S. Patent
No. 6,572,608.

ARTICLE 2 — DISMISSALS, RELEASES, LICENSES AND MANUFACTURING AGREEMENT

2.1   Dismissal. Within five (5) business days of the Effective Date of this
Settlement Agreement, the Parties shall jointly execute and file dismissals with
prejudice of the Actions, with each Party bearing its own attorney’s fees and
costs. With respect to the Pennsylvania Case, Synergetics will dismiss with
prejudice its claims against IRIDEX. Synergetics will dismiss without prejudice
as to Peregrine Surgical Ltd. but hereby waives and releases its claim for past
damages as alleged in the Pennsylvania Case against Peregrine Surgical Ltd.
through the Effective Date of this Settlement Agreement. Except as explicitly
waived or released herein, Synergetics specifically reserves all claims, causes
of action, demands, damages, losses or other right to sue Peregrine Surgical
Ltd., including but not limited to patent infringement for future damages and
injunctive relief if Peregrine continues to make, use, sell, offer to sell or
otherwise infringe Synergetics patents beyond the Effective Date of this
Settlement Agreement, provided, however, that Peregrine may continue to make
laser probes for IRIDEX pursuant to IRIDEX’s license under Section 2.5.1 until
one-hundred, twenty-five (125) days after the Effective Date or until
Synergetics provides IRIDEX a Notice of Ready pursuant to the “Supply Agreement”
attached hereto as Exhibit B, whichever is later. This Settlement Agreement
shall have no effect with regards to Innovatech Surgical, Inc. and does not
require Synergetics to dismiss its claim against Innovatech Surgical, Inc.   2.2
  Synergetics Release. Synergetics, and Synergetics’ successors, predecessors,
parents, subsidiaries, affiliates, officers, directors, shareholders, employees
and agents, hereby release, relinquish and discharge IRIDEX, and all of IRIDEX’s
successors, predecessors, parents, subsidiaries, affiliates, officers,
directors, shareholders, employees, customers,

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    and agents from any and all claims, causes of action, demands, damages,
liabilities and losses of any nature, as of the Effective Date of this
Settlement Agreement.   2.3   IRIDEX Release. IRIDEX, and IRIDEX’s successors,
predecessors, parents, subsidiaries, affiliates, officers, directors,
shareholders, employees and agents, hereby release, relinquish and discharge
Synergetics, and all of Synergetics’ successors, predecessors, parents,
subsidiaries, affiliates, officers, directors, shareholders, employees,
customers, and agents from any and all claims, causes of action, demands,
damages, liabilities and losses of any nature, as of the Effective Date of this
Settlement Agreement.   2.4   IRIDEX License.

  2.4.1   IRIDEX hereby grants to Synergetics a perpetual, fully paid-up,
royalty free, worldwide, non-exclusive, non-transferable, non-sublicensable
license under the IRIDEX Patent to make, have made, use, sell, offer to sell,
and import Synergetics Licensed Products. No license is granted to Synergetics
to practice any IRIDEX Patent except in the form of a Synergetics Licensed
Product.     2.4.2   “Synergetics Licensed Product(s)” means any existing
product, any product in development, or any product developed and released in
the future that is a disposable laser delivery device that uses a connector
comprising an RCA plug and SMA connector (what the Parties have referred to as
the “new connector” in the First Missouri Case), in substantially the form shown
in Exhibit A, to connect to an IRIDEX laser. The definition of “Synergetics
Licensed Product(s)” excludes products using the adapter-based Quick Disconnect
connector system that was also accused of infringement in the First Missouri
Case.     2.4.3   IRIDEX hereby grants to Synergetics a perpetual, fully
paid-up, royalty free, worldwide, non-exclusive, non-transferable,
non-sublicensable license under the Intuitive Patent Applications to make, have
made, use, sell, offer to sell, and import any product and use any method.    
2.4.4   Both parties agree to mark their products in compliance with the patent
laws with the licensed patent numbers of the other party. If a party identifies
that the other party is not properly marking its products, the party owning the
patent shall send notice and the non-marking party shall thereafter take
diligent steps to properly mark products sold under license of the patent and
provide written assurance to the other party that it has done so.

2.5   Synergetics License.

  2.5.1   Synergetics hereby grants to IRIDEX a perpetual, fully paid-up,
royalty free, worldwide, non-exclusive, non-transferable, non-sublicensable
license under the Synergetics Patent to make, have made, use, sell, offer to
sell, and import any product and use any method.

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  2.5.2   Section 2.4.4 is incorporated herein by reference with respect to
Index’s marking obligations for products that it sells under license of the
Synergetics Patent.

2.6   Representation and Warranty. Each Party represents and warrants that it
holds the full right, title, and interest necessary to grant the licenses herein
granted.   2.7   No Admission. The Parties agree that the settlement of the
Actions is intended solely as a compromise of disputed claims, counterclaims and
defenses, all as more particularly described in this Settlement Agreement.
Neither the fact of a Party’s entry into this Settlement Agreement nor the terms
hereof nor any acts undertaken, pursuant hereto shall constitute an admission or
concession by any Party relating to any Action regarding liability or the
validity of any claim, counterclaim, or defense in the Actions.   2.8   The
Parties each acknowledge that they are familiar with Section 1542 of the Civil
Code of the State of California, which provides as follows:       A GENERAL
RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW OR SUSPECT TO
EXIST IN HIS FAVOR AT THE TIME OF EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM
MUST HAVE MATERIALLY AFFECTED HIS SETTLEMENT WITH THE DEBTOR.

The Parties hereby waive any right or benefit that each has or may have under
Section 1542 of the Civil Code of the State of California. In connection with
such waiver, the Parties acknowledge that they or their attorneys or other
agents, may hereafter discover claims or facts in addition to or different from
those which they now know or believe to exist with respect to the subject matter
of this Settlement Agreement. Nevertheless, it is their intention to fully,
finally and forever settle and release all of the released matters.

2.9   Iridex agrees to exclusively engage Synergetics to manufacture directional
laser probes pursuant to the license granted by Synergetics under Section 2.5
and pursuant to the “Supply Agreement” attached hereto as Exhibit B. Any
material breach or default under the Supply Agreement shall constitute a
material breach under this Settlement Agreement, provided that the obligation to
pay the amounts specified in Section 4.1 is absolute and unconditional, and
shall not be subject to any set-off, claim or defense for any reason, including
any breach of the Supply Agreement, except that if IRIDEX enters any proceeding
under Chapter 7 of the Bankruptcy Code, any then-executory payments will be
excused, and that Synergetics may set-off any uncontested amount due Synergetics
under the Supply Agreement that is past due by thirty days or more and is
confirmed to be uncontested in writing by IRIDEX, which confirmation shall not
unreasonably be withheld.

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      ARTICLE 3 — COOPERATION

3.1   The Parties agree to use commercially reasonable efforts to ensure the
present and continuing validity and enforceability of the Synergetics Patent and
the Intuitive Patent Applications and to cooperate in good faith to the extent
lawfully permissible with respect to the Synergetics Patent and the Intuitive
Patent Applications to promote their mutual interests, including their interests
in maintaining the Synergetics Patent and the Intuitive Patent Applications
valid and enforceable.   3.2   The Parties agree to jointly prepare a mutually
acceptable press release to announce the settlement of their litigation, such
press release to be issued after the Effective Date, and no further press
releases regarding this Settlement Agreement shall be made by any Party, its
employees, agents or representatives, except for purposes of reporting on this
Settlement Agreement to shareholders or otherwise complying with tax and
securities laws.

ARTICLE 4 — PAYMENT

4.1   In consideration of the licenses granted hereunder, Synergetics shall pay
to IRIDEX the following sums, due and payable according to the following
schedule:

      Amount   Due and payable
2.5 million dollars (US $2,500,000)
  April 16, 2007
 
   
Eight hundred thousand dollars (US $800,000)
  April 16, 2008
 
   
Eight hundred thousand dollars (US $800,000)
  April 16, 2009
 
   
Eight hundred thousand dollars (US $800,000)
  April 16, 2010
 
   
Eight hundred thousand dollars (US $800,000)
  April 16, 2011
 
   
Eight hundred thousand dollars (US $800,000)
  April 16, 2012

4.2   Payments by Synergetics to IRIDEX shall be made by wire transfer of funds
to the following account or such other account as Iridex may reasonably direct:

Mid Peninsula Bank
420 Cowper Street
Palo Alto, CA 94301
ABA# 121 141 534
Beneficiary: IRIDEX Corporation
Account Number: 10 79 95 601

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4.3   In the event that Synergetics fails to pay any amount due under
Section 4.1, each of the as-yet unpaid amounts listed in Section 4.1 shall
become immediately due and payable, subject to Section 6.1, which requires
written notice of a breach and the ability to cure.

ARTICLE 5 — DISCLAIMERS

5.1   Disclaimers. Nothing in this Settlement Agreement shall be construed as:

     (a) a warranty or representation by any Party as to the validity or scope
of any of its patents or patent applications;
     (b) a warranty or representation by any Party that any manufacture, sale,
use or other disposition of products by the other Party has been or will be free
from infringement of any third party patents;
     (c) an agreement by any Party to bring or prosecute actions or suits
against any third party for infringement, or conferring any right to any other
Party to bring or prosecute actions or suits against any third party for
infringement;
     (d) conferring upon any Party any right to include in advertising,
packaging or other commercial activities related to any product, any reference
to another Part, its trade names, trademarks or service marks in a manner which
would be likely to cause confusion or to indicate that such product is in any
way certified by any other Party;
     (e) conferring by implication, estoppel or otherwise, upon any Party, any
right or license not expressly set forth herein under any patent or other
intellectual property right; or
     (f) an obligation to furnish any technical information, copyrights, mask
works or know- how, or any tangible embodiments thereof.
ARTICLE 6 — MISCELLANEOUS PROVISIONS

6.1   Remedies for Breach. In the event of a breach of this Settlement
Agreement, the non-defaulting Party shall have all rights and remedies available
to it at law or equity, in addition to the rights and remedies provided for in
this Settlement Agreement. The non-defaulting Party shall provide written notice
describing the nature of the breach to the Party in breach of this Settlement
Agreement, and the non-defaulting Party shall provide the defaulting Party five
(5) business days from the date of the notice to cure its breach before taking
or instituting any legal action or otherwise withholding performance under this
Settlement Agreement, provided, however, that Synergetics shall have thirty
(30) days from notice of breach of a payment obligation under Section 4.1 to
cure that breach if IRIDEX did not give notice of the upcoming payment
obligation thirty days in advance of the due date specified in Section 4.1.  
6.2   Representation. Each Party hereby declares and represents that it is
executing this Settlement Agreement after consultation with its own independent
legal counsel.

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6.3   Further Acts. Each Party agrees to perform any further acts, and to
execute and deliver any further documents that may be reasonably necessary to
carry out the provisions of this Settlement Agreement.   6.4   Notices. All
notices required or permitted to be given hereunder shall be in writing and
shall be made by depositing the writing with Federal Express or other similar
express letter carrier, expenses prepaid for overnight delivery with receipt
signature required. Notices shall be deemed effective upon execution of the
receipt signature. Notices shall be addressed as follows:

         
 
  If to Synergetics:   Synergetics USA, Inc.
 
      Attention: Chief Executive Officer
 
      3845 Corporate Centre Drive
 
      O’Fallon, MO 63368
 
       
 
  If to IRIDEX:   IRIDEX Corporation
 
      Attention: Chief Executive Officer
 
      1212 Terra Bella Avenue
 
      Mountain View, CA 94043

6.5   Severability. If any provision of this Settlement Agreement is held to be
illegal or unenforceable, such provision shall be limited or eliminated to the
minimum extent necessary so that the remainder of this Settlement Agreement will
continue in full force and effect and be enforceable. The Parties agree to
negotiate in good faith an enforceable substitute provision for any invalid or
unenforceable provision that most nearly achieves the intent and effect of such
provision.   6.6   Entire Agreement. This Settlement Agreement, with Exhibit A,
embodies the entire understanding of the Parties with respect to the subject
matter hereof, and merges all prior discussions and agreements (written or oral)
between them, and none of the Parties shall be bound by any conditions,
definitions, warranties, understandings, or representations with respect to the
subject matter hereof other than as expressly provided herein. No oral
explanation or oral information by any Party hereto shall alter the meaning or
interpretation of this Settlement Agreement.   6.7   Modification. No
modification or amendment to this Settlement Agreement will be effective unless
it is in writing and executed by authorized representatives of the Parties, nor
will any waiver of any rights be effective unless assented to in writing by the
Party to be charged. The waiver of any breach or default will not constitute a
waiver of any subsequent breach or default.   6.8   Construction. Any rule of
construction to the effect that ambiguities are to be resolved against the
drafting Party will not be applied in the construction or interpretation of this

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    Settlement Agreement. As used in this Settlement Agreement, the words
“include” and “including,” “for example”, “such as” and variations thereof, will
not be deemed to be terms of limitation, but rather will be deemed to be
followed by the words “without limitation.” The headings in this Settlement
Agreement will not be referred to in connection with the construction or
interpretation of this Settlement Agreement.   6.9   Counterparts. This
Settlement Agreement may be executed in identical counterparts or duplicate
originals, both of which shall be regarded as one and the same instrument, and
which shall be the official arid governing version in the interpretation of this
Settlement Agreement. This Settlement Agreement may be executed by facsimile
signatures and such signatures shall be deemed to bind each Party as if they
were original signatures.   6.10   Assignability. This Settlement Agreement
shall not be assignable by either Party to any Person without the prior written
consent of the other Party. Consent may be withheld for any reason.

          IN WITNESS WHEREOF, the Parties hereto have caused this Settlement
Agreement to be signed below by their respective duly authorized officers.

                      Synergetics, Inc.       IRIDEX Corporation    
 
                   
By: /s/ Gregg Scheller
 
      By:   /s/ Barry Caldwell
 
    Name: Gregg Scheller       Name: Barry Caldwell     Title: President & CEO  
    Title: President & CEO    
 
                    Date: 4/6/07       Date: 4/6/07    
 
                   
Synergetics USA, Inc.
         
 
                   
By: /s/ Gregg Scheller
 
                Name: Gregg Scheller                 Title: President & CEO    
           
 
                    Date: 4/6/07                

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Exhibit A
Synergetics’ New Connector
(GRAPHIC) [f32991f3299101.gif]

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Exhibit B
Supply Agreement

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