**Exhibit 10.1**

 

Termination andSettlement AgreementEntered into on this 2nd day of October 2005 (the “Effective Date”)(the “Agreement”)

 

Byand Between:

Vision-Sciences, Inc., a Delaware(U.S.A.) corporation, having its principal place of business at 9 StrathmoreRoad, Natick, Massachusetts 01760, U.S.A., Fax No. +1-508-650-9976 (the “Company”);

 

And

 

Three BY Ltd., a company duly organized underthe laws of Israel and having its principal place of business at Migdal Tefen,Israel, Fax No. + 972-4-987-2340 (the “Manufacturer”);

 

WHEREAS, the Parties have entered into aContract Manufacturing Agreement dated June 25th 2003, as ineffect on the date hereof, together with all related or ancillaryagreements  or instruments (the “Main Agreement”);

 

WHEREAS, the Parties have mutually agreed toterminate the Main Agreement and settle finally any issues or disputes betweenthem relating to the termination of the Main Agreement or the partiesrelationship prior to the date of this Agreement in accordance with the termsand conditions of this Agreement as hereinafter stipulated;

 

# **1.**               Capitalizedterms used herein and not otherwise defined herein shall have the meaningascribed thereto in the Main Agreement.

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# **2.**               Withoutderogating from the provisions of this Agreement, the parties agree that theMain Agreement shall be, and hereby is, mutually terminated (in accordance withthe provisions of Section 17.2 of the Main Agreement) effective on thedate that is six months from the date of this Agreement (the “Effective TerminationDate”). The termination of the Main Agreement shall be without derogation ofthe provisions of Section 18 of the Main Agreement. For the sake ofclarity, it is agreed and understood that except as expressly provided in thisAgreement, neither party will be entitled to any remuneration or compensationas a result of or by reason of the termination of the Main Agreement, except asdescribed in this Agreement, and that upon the Effective Termination Date, theparties shall, and hereby agree to, release and discharge the other from anyand all claims under the Main Agreement, except for or without limitation ofthe obligations of the parties under this Agreement, which shall survive theEffective Termination Date, together with any provisions of the Main Agreementthat by their terms are designed or intended to survive the termination of theMain Agreement.

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# **3.**               TheCompany hereby agrees to issue, within 3 business days following the EffectiveDate, its binding purchase order to the Manufacturer (the “Purchase Order”) for theManufacture of 180,000 ENT sheaths (the “Sheaths”) at aprice of US $1.204 per unit, Ex Works (Incoterms 2000) Manufacturer’s facility,totaling US $216,720. The Manufacturer shall provide the Company with thecomplete list of the raw materials and their costs purchased for themanufacture of the Sheaths, prior to the first monthly shipment. Based on anydocumented cost increase of raw materials purchased by the Manufacturer for themanufacture of the Sheaths, compared to the last purchase of such raw material,the unit price of the Sheaths will be adjusted in good faith by the Parties.

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## **Notwithstanding the aforesaid,the Company shall have the right to revise the quantity of each Sheath’scatalog number in a given monthly shipment, by giving a written notice to theManufacturer, as long as the followings are met: (i) the total monthlyquantity remains 30,000; and (ii) the notice of the revision is given atleast 60 days prior to the scheduled shipment date.**

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# **4.**               It isrecorded that the Company has shipped 675 pounds of polyurethane to theManufacturer for which the Manufacturer hereby confirms that it agrees to issueits binding purchase order at a price of US $5.58 per pound, plus freight coststo Manufacturer, payable within 30 days

 

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# **following the receipt by 3BY of the Purchase Order.The parties agree that this supply will allow the Manufacturer adequate timeusing the Manufacturer’s best efforts to procure additional polyurethane so asto manufacture the Sheaths without delays and comply with the terms of thisAgreement and related purchase orders for Sheaths.  It is understood that the Manufacturer willprocure all additional raw materials required for the Manufacture of theSheaths, except those mentioned in Section 5 below, on a best effortsbasis.**

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# **5.**               TheCompany will ship to the Manufacturer, no later than 5 business days followingthe Effective Date, the windows for the first monthly shipment of Sheaths.  The Company will supply windows forsubsequent shipments at least 30 days prior to the scheduled shipmentdate.  The Manufacturer will issue to theCompany a purchase order for said windows at a price of $0.005 per windowpayable within 30 days from shipment by the Company.

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# **6.**               TheManufacturer agrees that the Sheaths will be delivered to the Company in six (6) consecutivemonthly shipments of 30,000 Sheaths each, the first of which will be made nolater than 30 days following the receipt by the Manufacturer of all rawmaterials required for the manufacture of this first shipment.  Subsequent shipments will be made atthirty-day intervals from the first shipment with the sixth and last shipmentbeing made no later than one hundred fifty (150) days following the date of thefirst shipment.  If the Manufacturer willnot be able to commence shipments by the later of: (i) 90 days from theEffective Date; or (ii) within 45 days from the receipt of first shipmentof windows from the Company, or if the Manufacturer otherwise does not comply withthis Agreement and the applicable terms of the Main Agreement, then the Companyshall be entitled to cancel the order for the Sheaths, and the EffectiveTermination Date will be accelerated to such date.

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# **7.**               For thesake of clarity, the provisions of the Main Agreement relating to the Products(including those contained in Sections 1, 2, 3.2, 3.3, 6, 7, 8, 11, 12, 13, 14,15 and 16) shall apply, mutatis mutandis, with respect to the Sheaths to bemanufactured by the Manufacturer in accordance with the terms of thisAgreement. Without derogating from the generality of the aforesaid, theManufacturer undertakes to manufacture the Sheaths in accordance with theapplicable standards and other terms of the Main Agreement pertaining to theManufacture of the Products.

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# **8.**               TheManufacturer hereby undertakes to return and make all the Equipment (as definedin the Agreement between the Parties dated December 28, 2004 and listed inAppendix “A” hereto) available to the Company, or its designee, at the premises of theManufacturer in Migdal Tefen. The Company shall arrange for shipment of theEquipment from said premises at the Company’s risk and expense.  The Equipment shall be returned and madeavailable to the Company, as aforesaid, in the same condition as it wasoriginally received by the Manufacturer, normal wear and tear accepted, asfollows:

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## **1.1**         All theEquipment that is not required for the Manufacture of the Sheaths - within 14days of the date of this Agreement; and

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## **2.2**         Theremaining part of the Equipment, upon the earlier to occur of: (i) within14 days of completion of the Manufacture of the last shipment of the Sheaths; (ii) June 1,2006; or (iii) upon termination of this Agreement by the Company under anyof the circumstances set forth in Sections 17.3 or 17.4 of the Main Agreement(which provisions are incorporated by reference to this Agreement) or inaccordance with the provisions of Section 6 above.

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# **9.**               Uponcompletion of the manufacture and shipment of the Sheaths, the Manufacturershall supply the Company with a list of the Sheath’s raw materials remaining inthe Manufacturer’s possession. The Company shall purchase from theManufacturer, at the Manufacturer’s purchase price, said remaining rawmaterials that are in a useable state within 10 business days after receipt bythe Company of said list.

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# **10.**         TheCompany shall reimburse the Manufacturer the total sum of US $16,700, asfollows:

 

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## **10.1**                 US $7,200 – for the SIGsealing machine – within 15 days of delivery of the machine to the Company;

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## **10.2**                 US $600 – for the labelprinter – within 15 days of delivery of the printer to the Company;

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## **10.1**                 US $900 – for the Gasketmold – within 15 days of delivery of the mold to the Company;

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## **10.3**                 US $6,000 – for theCompany’s share for the extra payment paid by the Manufacturer to Sheffiengineering – within 15 days of the date of signature of this Agreement;

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## **10.4**                 US $2,000 – for Zvi Haim’sexpenses during his last visit to the Company – within 15 days of the date ofsignature of this Agreement.

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# **11**            Section 21of the Main Agreement (Miscellaneous) is incorporated by reference to thisAgreement and forms an integral part hereof.

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# **12**            For thesake of clarity, Appendix“B” shows the status of the open purchase orders forProducts, components, and services that the Company has with the Manufactureras of August 31, 2005.  The purchaseorders for Products are to be completed and processed as provided in the MainAgreement.  The purchase orders forcomponents and services are to be completed and processed as defined on eachpurchase order, or as otherwise mutually agreed to by the Parties.

 

INWITNESS WHEREOF, the Parties have signed this Agreement on the date firsthereinabove written.

 
| Vision-Sciences, Inc. | Three BY Ltd.           |
|----------------------------|-------------------------|
| By:                        | Ron Hadani              |   | By: | Zvi Haim |   |
| Title: President and CEO   | Titles: General Manager |
|                            |                         |  |  |  |  |

 

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