A dispute between the Penobscot Indian Nation and Shape Inc. over the tribe’s right to manufacture a patented cassette tape has been settled, according to William A. Brandt Jr.

Brandt is the court-appointed trustee of Shape, a Biddeford company that is operating under the protection of the bankruptcy court. The company had granted a license to produce its Mark 10 cassette to Olamon Industries, a manufacturing company owned by the Penobscots.

But Brandt sought to withdraw the license after expressing concern about political instability on Indian Island. The Penobscots filed suit against the bankruptcy trustee and won a temporary injunction against the license withdrawal in mid-December.

Brandt said Wednesday that a document detailing the settlement soon will be filed with the U.S. Bankruptcy Court in Portland. According to the trustee, the lengthy and complex document stipulates the future relationship between Shape and Olamon.

Employment at Olamon Industries has fallen from a peak of more than 175 production workers last year to fewer than 35 currently. The agreement specifies a transition period during which Shape would help Olamon retool its manufacturing facility to produce a new product that Brandt said would be more appropriate to current market conditions.

Brandt declined to discuss other terms of the agreement, saying that not all of the parties to the settlement had signed it.

Neither the tribal government nor its attorneys returned calls from the NEWS. But Carl Mitchell, former assistant economic development director for the Penobscots, said the tribe was giving up the right to produce the Mark 10 cassette.

In return, Shape will purchase 11 million Mark 10s from company stocks for a total of $1.1 million. The payment would include $700,000 in cash and the forgiveness of $400,000 in debt, according to Mitchell. All other contracts between Shape, Olamon and the Penobscots would be voided, he said.

Mitchell is a relative of ousted tribal Gov. Francis Mitchell. He has been a vocal critic of the nation’s management of Olamon.

The agreement also calls for a transfer of equipment between Shape and Olamon, according to Carl Mitchell. Shape will provide free technical assistance to Olamon for 90 days after the execution of the agreement, he said, to help Olamon convert its manufacturing process to other, unspecified products.

Shape personnel will be available to answer reasonable inquiries in writing or by telephone through August, according to Mitchell, but the Biddeford company will have no other responsibility to help Olamon.