SYNERGETICS USA INC

In addition, in connection with the transactions contemplated by the Merger Agreement, each option to purchase shares of common stock and each share of restricted common stock (“Restricted Share”) that is outstanding immediately prior to the effective time of the Merger will become fully vested as of the Effective Time. At the Effective Time, all outstanding options will be cancelled, and the holders of such options will receive at, or as soon as practicable following, the effective time of the Merger, the following: (i) an amount of cash equal to (A) the total number of shares of common stock subject to the option multiplied by (B) the excess, if any, of (x) the Cash Consideration over (y) the applicable per-share exercise price of such option, and (ii) one CVR for each share of common stock underlying such option, in each case without interest and subject to any applicable tax withholding. At the Effective Time, all outstanding Restricted Shares will be cancelled, and the holders of such Restricted Shares will receive at, or as soon as practicable following, the Effective Time, the following: (i) an amount of cash equal to the Cash Consideration for each Restricted Share held by such holder, and (ii) one CVR for each Restricted Share held by such holder, in each case without interest and subject to any applicable tax withholding.

In connection with the Offer, Valeant has entered into a Contingent Value Rights Agreement (the “CVR Agreement”) with American Stock Transfer & Trust Company, LLC, as rights agent, governing the terms and conditions of the Contingent Consideration Payments. Each CVR represents the right to receive contingent payments of up to $1.00 in cash in the aggregate, without interest thereon and less any applicable withholding taxes, if the following milestones (the “Contingent Consideration Milestones”) are achieved: (i) $0.50 per share in cash payable upon sales of the Surviving Corporation’s Ophthalmology Products (as defined in the CVR Agreement) achieving $55.0 million during any period of four consecutive calendar quarters during the period starting on the first day of the first calendar quarter following the Effective Time through June 30, 2018 (the “Milestone Achievement Period”); and (ii) $0.50 per share in cash payable upon sales of the Surviving Corporation’s Ophthalmology Products achieving $65.0 million over any period of four consecutive calendar quarters during the Milestone Achievement Period (the “Milestone 2 Target”). If the Milestone 2 Target is not achieved during the Milestone Achievement Period and net sales of Surviving Corporation’s Ophthalmology Products during the four calendar quarter period ending on June 30, 2018 are more than $55.0 million but less than $65.0 million, then Parent will pay an amount equal to (a) (i) net sales during the four calendar quarter period ending June 30, 2018, minus $55.0 million, divided by (ii) $10.0 million, multiplied by (b) $0.50. The CVRs are a contractual right only and will not be transferable, except in the limited circumstances specified in the CVR Agreement. Revenues from sales of Ophthalmology Products were $39.2 million for the fiscal year ended July 31, 2015.

Securities class action suits and derivative suits are often brought against companies who have entered into mergers and acquisition transactions.  Following the announcement of the execution of the Merger Agreement, four putative stockholder class actions were filed challenging the proposed transaction. On October 2, 2015, the Company, each of the members of the Board of Directors, Valeant and Merger Sub entered into a Memorandum of Understanding (the “MOU”) with the plaintiffs in the actions, which sets forth the parties’ agreement in principle for a settlement of the actions on the basis of the additional disclosures made in a supplement to the Schedule 14D-9 filed by the Company with the SEC on October 2, 2015. On October 8, 2015, the Delaware Court dismissed the class action filed in Delaware, and the parties to that action will proceed as part of the Missouri actions. The claims will not be released until such stipulation of settlement is approved by the court, and there can be no assurance that the parties will ultimately enter into a stipulation of settlement or that the court will approve such settlement even if the parties were to enter into such stipulation.   See Part 1, Item 3, “Legal Proceedings.”  Defending against these claims, even if meritless, can result in substantial costs to us and could divert the attention of our management.

We are also subject to adverse event reporting regulations that require us to report to the FDA or similar bodies in other countries if our products are associated with a death, serious injury or malfunction, even if there is no available evidence of a causal relationship between the adverse event and the product.  Such events may be publicly released by the FDA and other authorities.  For instance, the FDA maintains a public database, known as the Manufacturer and User Facility Device Experience (“MAUDE”) that posts reports of adverse events involving medical devices.  The submission of an adverse event report for a medical device product to the FDA and its public release on MAUDE, or other public database, does not, by regulation, reflect a conclusion by us or the FDA that the product caused or contributed to the adverse event.  However, as part of our post-marketing assessment, we routinely monitor the adverse event reports we received to identify potential safety issues, known as signals that may require us to take account with respect to the product, such as a recall or other market action.  The FDA and other regulatory authorities also monitor adverse event reports to identify safety signals, and may take action in connection with that monitoring.  We cannot assure you that the FDA will agree with our assessments of whether a safety signal exists for one of our products.  Furthermore, any adverse publicity associated with adverse events for our products could cause customers to seek alternatives to our products, and thereby cause our sales to decline, even if our products are ultimately determined not to have been the primary cause of the adverse event.

On October 2, 2015, the Company, each of the members of the Company’s Board of Directors, Valeant and Merger Sub entered into a Memorandum of Understanding (the “MOU”) with the plaintiffs in the Actions, which sets forth the parties’ agreement in principle for a settlement of the Actions on the basis of the additional disclosures made in a supplement to the Schedule 14D-9 filed by the Company with the SEC on October 2, 2015. As explained in the MOU, the Company, the members of the Company’s Board of Directors, Valeant and Merger Sub have agreed to the settlement solely to eliminate the burden, expense and uncertainties inherent in further litigation and without admitting any liability or wrongdoing. The MOU contemplates that (i) the parties will stipulate to the certification of the Missouri Actions as a class action, consisting of a mandatory non opt-out class, that includes any and all persons who held shares of the Company’s common stock (excluding defendants, and their immediate family members, and any successors in interest thereto) at any time during the period beginning on September 1, 2015, through the date of consummation or termination of the proposed transaction, and (ii) shall seek to enter into a stipulation of settlement providing for (a) the release by plaintiffs and any member of the class, whether individual, direct, class, derivative, representative, legal, equitable, or any other type or in any other capacity, of all claims relating to the allegations in the Actions, the Offer and the Merger Agreement, and other transactions contemplated therein, or disclosures made in connection therewith, other than any properly perfected claims for appraisal pursuant to Section 262 of the Delaware General Corporation Law, or claims to enforce the settlement, as set forth in the MOU; (b) dismissal with prejudice of the Missouri Actions upon final approval of the settlement; and (c) dismissal with prejudice of the Delaware Action within two business days of the final approval of the settlement. The claims will not be released until such stipulation of settlement is approved by the Circuit Court of St. Charles County in the State of Missouri. On October 8, 2015, the Delaware Court dismissed the class action filed in Delaware, and the parties to that action will proceed as part of the Missouri actions. There can be no assurance that the parties will ultimately enter into a stipulation of settlement or that the court will approve such settlement even if the parties were to enter into such stipulation. The settlement will not affect the consideration to be received by the Company’s stockholders in connection with the Offer and the Merger Agreement.