10-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

(Mark One)

þ Annual report pursuant to section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended July 31, 2013 or

o Transition report pursuant to section 13 or 15(d) of the Securities Exchange Act of 1934 for the transition period from                     to

Commission file number 001-10382

SYNERGETICS USA, INC.

(Exact name of registrant as specified in its charter)

Delaware	20-5715943
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

3845 Corporate Centre Drive
O’Fallon, Missouri	63368
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code

(636) 939-5100

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Name of each exchange on which registered
Common stock	The Nasdaq Capital Market

Securities registered pursuant to Section 12(g) of the Act:

None

(Title of class)

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes o No þ

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.  Yes o No þ

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  Yes þ No o

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. þ

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.  See the definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large Accelerated Filer    o	Accelerated Filer þ
Non-Accelerated Filer  o	Smaller Reporting Company   o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).

Yes o No þ

The aggregate market value of voting stock held by non-affiliates of the registrant, computed by reference to the closing sales price as reported by The Nasdaq Stock Market as of January 31, 2013, the last business day of the registrant’s most recently completed second fiscal quarter, was $109,256,524.

At September 25, 2013, there were 25,292,960 shares of the registrant’s common stock outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the registrant’s Proxy Statement for its 2013 Annual Meeting of Stockholders, expected to be held on December 12, 2013, are incorporated by reference into Part III of this Form 10-K where indicated.

SYNERGETICS USA, INC.

FORM 10-K

FOR THE FISCAL YEAR ENDED JULY 31, 2013

TABLE OF CONTENTS

			Page
PART I
	Item 1.	Business	3
	Item 1A.	Risk Factors	15
	Item 1B.	Unresolved Staff Comments	26
	Item 2.	Properties	26
	Item 3.	Legal Proceedings	26
	Item 4.	Mine Safety Disclosures	26
PART II
	Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	27
	Item 6.	Selected Financial Data	28
	Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	29
	Item 7A.	Quantitative and Qualitative Disclosures about Market Risk	41
	Item 8.	Financial Statements and Supplementary Data	42
	Item 9.	Changes in and Disagreements With Accountants on Accounting and Financial Disclosure	42
	Item 9A.	Controls and Procedures	42
	Item 9B.	Other Information	43
PART III
	Item 10.	Directors, Executive Officers and Corporate Governance	43
	Item 11.	Executive Compensation	43
	Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	43
	Item 13.	Certain Relationships and Related Transactions, and Director Independence	44
	Item 14.	Principal Accountant Fees and Services	44
PART IV
	Item 15.	Exhibits, Financial Statement Schedules	44
Signatures			70
Index to Exhibits			71
Exhibit 21
Exhibit 23.1
Exhibit 31.1
Exhibit 31.2
Exhibit 32.1
Exhibit 32.2

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SYNERGETICS USA, INC.

PART I

Item 1. Business

Overview

Synergetics USA, Inc. (“Synergetics USA” or “the Company”) is a leading supplier of precision surgical devices. The Company’s primary focus is on the disciplines of ophthalmology and neurosurgery. Our distribution channels include a combination of direct and independent distributor sales organizations, both domestically and internationally, and important strategic alliances with market leaders. The Company’s product lines focus upon precision engineered, disposable and reusable devices, surgical equipment, procedural kits and the delivery of various energy modalities for the performance of surgery, including: (i) laser energy, (ii) ultrasonic energy, (iii) radio frequency energy for electrosurgery and lesion generation and (iv) visible light energy for illumination, and where applicable, simultaneous infusion (irrigation) of fluids into the operative field. Enterprise-wide sales information is included in Note 16 to the audited consolidated financial statements.

The Company is a Delaware corporation incorporated on June 2, 2005, in connection with the reverse merger of Synergetics, Inc. (“Synergetics”) and Valley Forge Scientific Corp. (“Valley Forge”) and the subsequent reincorporation of Valley Forge (the predecessor to Synergetics USA) in Delaware.  Synergetics was founded in 1991. Valley Forge was incorporated in 1980 and became a publicly-held company in November 1989.  The Company’s securities are listed on The NASDAQ Capital Market under the ticker symbol “SURG.”

Recent Developments

We had several developments from fiscal 2011 through fiscal 2013 that we expect will contribute to the growth of our business in the foreseeable future.

On December 9, 2010, the Company announced that it signed a product development and consulting agreement pertaining to ophthalmology with Retinal Solutions, LLC located in Michigan.

On December 14, 2010, the Company announced the introduction of its next generation of the Codman^® Malis^® electrosurgical generator, the CMC^® V.  The new electrosurgical generator is a state-of-the-art, digitally controlled system that provides surgeons with significant advancements in controls for intraoperative cutting and coagulating.

On December 22, 2010, Codman & Shurtleff, Inc. (“Codman”), an affiliate of Johnson and Johnson, elected to exercise its option of exclusive distribution with respect to the bipolar generators and related disposables and accessories and to pay a $600,000 exclusivity fee. The Company recognized $266,000 and $334,000 of this revenue during fiscal 2012 and fiscal 2011, respectively.

On February 16, 2011, the Company retired the debt on its O’Fallon, Missouri facility.

On October 27, 2011, the Company announced two new ophthalmic products for the vitrectomy market which were showcased at the 2011 Annual Meeting of the American Academy of Ophthalmology.  The Company also announced record sales leads generated from the showcasing of its ophthalmic products.

On November 30, 2011, the Company extended its revolving credit facility and its equipment line of credit through November 30, 2013.

On December 31, 2011, the Company’s agreements with Codman expired and were renewed for a period of three years.

On February 9, 2012, Mobius Therapeutics, LLC (“Mobius”), a St. Louis-based ophthalmic pharmaceutical company, announced that the U.S. Food and Drug Administration (“FDA”) had approved its orphan drug for glaucoma and that Synergetics would be manufacturing the kit for the administration of the drug.

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On February 13, 2012, Alcon, Inc. (“Alcon”) informed the Company that Alcon had decided to cancel the development project, orders and forecasts covering the two products to have been supplied under a Supply Agreement. Accordingly, the Company revised the deferred revenue recognition period to the remaining life of the patents which was 14 years at that time.

On June 27, 2012, the Company announced that it received 510(k) clearance from the FDA for VersaVIT^TM, a novel vitrectomy system for the retinal surgery market.  On July 20, 2012, the VersaVIT^TM vitrectomy system received clearance for the “CE” mark, allowing access to the European market.

On November 28, 2012, the Company announced the signing of the third amendment to its agreement with Stryker Corporation (“Stryker”) for supply and distribution of a multi-channel ablation generator and accessories, used for minimally invasive pain treatment, extending the termination date until June 30, 2015.

On July 9, 2013, the Company announced that it had acquired M.I.S.S. Ophthalmics Limited (“M.I.S.S.”), a private ophthalmology distribution company incorporated in England and Wales, for net cash consideration of $2.8 million.  M.I.S.S. was our distributor of ophthalmic products in the United Kingdom, and its wholesale distribution activities contributed approximately $1.1 million in revenue to the Company in fiscal 2013.  M.I.S.S. generated total revenue of approximately $3.2 million during its fiscal year ended March 31, 2013 and was solidly profitable on an operating basis.  The acquisition establishes a direct presence in one of the largest ophthalmic markets outside the U.S. which we believe will drive further operating efficiencies throughout our European operations, enhance sales management capabilities and drive both top and bottom line financial performance in fiscal 2014 and beyond.

On September 30, 2013, the Company extended its revolving credit facility and its equipment line of credit through September 30, 2016.

Summary of Financial Information

The following tables present net sales by category and our results of operations (dollars in thousands):

NET SALES BY CATEGORY

	Fiscal Year Ended July 31,
	2013		Mix			2012		Mix
Ophthalmic	$	35,446		56.4	%	$	35,240		58.7	%
Original Equipment Manufactured (“OEM”)(1)		26,469		42.2	%		23,973		40.0	%
Other (2)		881		1.4	%		801		1.3	%
Total	$	62,796		100.0	%	$	60,014		100.0	%

(1) Net sales from OEM represent sales of electrosurgery generators, disposable bipolar forceps and related accessories and royalties from Codman, multi-channel ablation generators, disposable ultrasonic aspirator tips and related accessories to Stryker, sales of certain disposable products to Mobius along with sales of certain laser probes to Iridex Corporation (“Iridex”) in the comparable 2012 period. In addition, recognition of deferred revenues of $1.3 million from Alcon is included in this category for the fiscal year ended July 31, 2013.  Recognition of deferred revenues of $266,000 and $1.2 million from Codman and Alcon, respectively, are included in this category for the fiscal year ended July 31, 2012.

(2) Net sales from Other represent direct neurosurgery revenues and other miscellaneous revenues.

The increase in sales during fiscal 2013 compared with fiscal 2012 was primarily due to an increase of $206,000 in ophthalmic sales, a $2.5 million increase in OEM sales and an $80,000 increase in other sales.  Currently, disposable product sales account for approximately 80.5 percent of our total product sales.  Overall sales of our disposable products grew $2.2 million, or 4.4 percent, in fiscal 2013 as compared to fiscal 2012. Sales of capital equipment increased by approximately $839,000, or 8.8 percent, in fiscal 2013 as compared to fiscal 2012.

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Information with respect to the breakdown of revenue for domestic and international sales is included in Note 16 to the consolidated audited financial statements.

RESULTS OF OPERATIONS

(dollars in thousands)

	Fiscal Year Ended July 31,
	2013			2012			Increase
							(Decrease)
Net Sales	$	62,796		$	60,014			4.6	%
Gross Profit		32,371			34,519			(6.2	%)
Gross Profit Margin %		51.5	%		57.5	%		(10.4	%)
Commercial Expenses
Research and Development		3,643			3,642			0.0	%
Sales and Marketing		13,805			11,881			16.2	%
General and Administrative		10,932			10,515			4.0	%
Medical Device Tax		289			--			N/M	(1)
Operating Income		3,702			8,481			(56.3	%)
Operating Margin		5.9	%		14.1	%		(58.2	%)
EBITDA(2)		5,501			10,203			(46.1	%)
Income from Continuing Operations		2,559			5,968			(57.1	)%
Net Income		2,559			5,586			(54.2	%)
Earnings per share		0.10			0.22			(54.5	%)
Earnings per share from Operations (2)		0.10			0.24			(58.3	%)
Operating Return on average equity (2)		4.4	%		11.1	%		(60.4	%)
Operating Return on average assets (2)		3.2	%		7.5	%		(57.3	%)

(1) Not Meaningful.

(2) EBITDA, earnings per share from operations, operating return on average equity and operating return on average assets are not financial measures recognized by U.S. generally accepted accounting principles (“GAAP”).  EBITDA is defined as net income before interest expense, income taxes, depreciation and amortization.  Earnings per share from operations is net of one-time events.  Operating return on average equity is defined as net income (net of one-time events) divided by average equity.  Operating return on average assets is defined as net income (net of one-time events) plus interest expense divided by average assets.  See disclosure following regarding the use of non-GAAP financial measures.

	Fiscal Year Ended July 31,
	(dollars in thousands)
	2013		2012
Income from Continuing Operations	$	2,559	$	5,968
Interest Expense		9		43
Income Taxes		1,130		2,499
Depreciation		1,123		1,093
Amortization		680		600
EBITDA	$	5,501	$	10,203

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	Fiscal Year Ended July 31, (dollars in thousands)
	2013			2012
Operating Return on Average Equity Calculation Income from Continuing Operations	$	2,559		$	5,968
Average Equity:
July 31, 2013	$	60,152
July 31, 2012		56,478		$	56,478
July 31, 2011					50,664
Average Equity	$	58,315		$	53,571
Operating Return on Average Equity		4.4	%		11.1	%
Operating Return on Average Assets Calculation Income from Continuing Operations	$	2,559		$	5,968
Interest		9			43
Net income from Operations + Interest Expense	$	2,568		$	6,011
Average Assets:
July 31, 2013	$	82,693
July 31, 2012		78,763		$	78,763
July 31, 2011					81,310
Average Assets	$	80,728		$	80,037
Operating Return on Average Assets		3.2	%		7.5	%

Non-GAAP Financial Measures

We measure our performance primarily through our operating profit.  In addition to our audited consolidated financial statements presented in accordance with GAAP, management uses certain non-GAAP measures, including EBITDA, earnings per share from operations, operating return on average equity and operating return on average assets, to measure our operating performance.  We provide a definition of the components of these measurements and reconciliation to the most directly comparable GAAP financial measure.

These non-GAAP measures are presented to enhance an understanding of our operating results and are not intended to represent cash flow or results of operations.  The use of these non-GAAP measures provides an indication of our ability to service debt and measure operating performance.  We believe these non-GAAP measures are useful in evaluating our operating performance compared to other companies in our industry, and are beneficial to investors, potential investors and other key stakeholders, including creditors who use this measure in their evaluation of performance.

These non-GAAP measures are not in accordance with, or an alternative to, measures prepared in accordance with GAAP and may be different from non-GAAP measures used by other companies.  In addition, these non-GAAP measures are not based on any comprehensive set of accounting rules or principles.  Non-GAAP measures have limitations in that they do not reflect all of the amounts associated with the Company’s results of operations as determined in accordance with GAAP.  These measures should only be used to evaluate our results of operations in conjunction with the corresponding GAAP measures.

Our Business Strategy

The Company’s strategy is to enhance shareholder value through profitable revenue growth in targeted segments of the ophthalmology and neurosurgery markets. This is accomplished through the identification and development of reusable and disposable devices in collaboration with leading surgeons and OEM partners. We are committed to establishing a strong operational infrastructure and financial foundation within which growth opportunities can be prudently evaluated, financed and pursued. We will remain vigilant and sensitive to new challenges which may arise from changes in the definition and delivery of appropriate healthcare in our fields of interest. In fiscal 2014 and beyond, our strategic priorities are to drive accelerating growth in the ophthalmology business, deliver improved profitability through our enterprise-wide lean initiatives, manage our neurosurgery and other OEM businesses for stable growth and strong cash flows and demonstrate consistent, solid financial performance.

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Drive Accelerating Growth in our Ophthalmology Business

We are focused on expanding our product platform into larger and faster-growing segments of the vitreoretinal device market. Thus, we have focused our internal research and development efforts on developing innovative technologies that will enable the Company to enhance its value to the vitreoretinal community. We are implementing several focused initiatives to capitalize on our recent new product introduction, the VersaVIT^TM, and other new products and capitalize on the current macroeconomic environment.In addition, we are also seeking business development opportunities to augment and complement our existing ophthalmic franchise.  Finally, we are improving our sales force productivity. For example, in the U.S., we are focused on enhancing our compensation programs to target the appropriate mix of product and rigorous development of our sales force capabilities through enhanced training and customer relationship management. In the international markets, we are working to optimize our sales capabilities and distribution infrastructure.  Our recent acquisition of M.I.S.S. demonstrates our commitment to enhancing our international distribution infrastructure.

Deliver Improved Profitability through our Enterprise-Wide Lean Initiatives

We have been developing comprehensive enterprise-wide initiatives aimed at creating a more efficient operating platform. The lean mindset has permeated our corporate culture.  We believe we have taken over $2.5 million out of our cost basis since we implemented our lean efforts.  In addition, we implemented our Enterprise Resource Planning (“ERP”) system in August 2011.  Continued improvements throughout the organization are expected to emerge as we optimize the ERP system.

Manage our Neurosurgery and OEM Businesses for Stable Growth and Strong Cash Flows

We have multi-year contracts established with our two largest OEM partners, Codman and Stryker. These relationships provide high visibility within the neurosurgery and pain control markets. We provide best-in-class technologies with our electrosurgical generators and disposable bipolar forceps being distributed by Codman and our multi-channel ablation generator and ultrasonic aspirator disposables being distributed by Stryker. We are working with both of these OEM partners to provide product line iterations to maintain their technological advantages. We also work to develop relationships with a select number of other potential OEM customers to develop relationships which would continue to enhance our OEM platform growth and profitability to complement our strategic focus.

Demonstrate Consistent, Solid Financial Performance

In the short and long-term, we expect to continue to deliver a growing revenue stream and meet increasing earnings objectives. We also will enhance our working capital usages by employing both our new lean philosophy and our ERP system to derive more free cash flow from the business. We will prudently manage our capital structure to allow for additional growth opportunities and optimal cash deployment.

Research and Development (“R&D”) Strategy

Our R&D strategy primarily focuses on developing new products in collaboration with leading retinal surgeons and our OEM partners utilizing our proprietary technology and our expertise in vitreoretinal surgery and neurosurgery.  We are continually engineering new products, systems and instrumentation, as well as enhancements to existing products, to meet the needs of surgeons in the ophthalmology and neurosurgery disciplines.  We have entered into consultation arrangements with leading ophthalmic surgeons, all of whom specialize in vitreoretinal procedures.  In neurosurgery, we have worked closely with our OEM partners to develop ultrasonic aspirator tips and other handheld devices.

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The Company has historically invested in specific R&D projects.  In fiscal 2013, we spent approximately 80 percent of our R&D expenditures on ophthalmic opportunities and 20 percent on neurosurgery and other OEM opportunities.

	Fiscal Year Ended July 31,
	2013			2012			2011
R&D expenditures (in thousands)	$	3,643		$	3,642		$	3,713
Percentage of net sales		5.8	%		6.1	%		6.7	%

We anticipate ongoing R&D costs in connection with the development of our products.  The Company’s R&D resources include:  an advanced technology group that works on longer-term, highly complex R&D initiatives, a device development group that works on strategically targeted products and an engineering team at the King of Prussia, Pennsylvania, location that develops new electrosurgery and pain control products.  The alignment of our R&D resources into these groups allows us greater flexibility to meet the ever-changing needs of our customers as well as allow the Company to focus on those products and technologies that fit within our strategic plan.

At July 31, 2013, the Company’s development pipeline included 29 active projects in various stages of completion.  The Company completed two of its most recent top priority ophthalmology R&D projects when it introduced the VersaPACK^TM vitrectomy packsand our novel VersaVIT^TM vitrectomy machine for use in vitreoretinal procedures. The launch of these two products allows the Company to compete in the estimated $336 million and $215 million segments of the annual vitreoretinal market, respectively, in which we previously did not compete. We have begun development work on several of the larger active projects which are a subset of the 29 and we believe will drive future growth in both our ophthalmic and neurosurgery businesses.  In fiscal 2014, our key objective is to continue to commercialize VersaVIT^TM globally.

The Company expects to invest in R&D at a rate of approximately 6 to 8 percent of net sales each fiscal year.  Substantially all of our R&D is conducted internally.  In fiscal 2014, we expect to fund all of our R&D projects with current assets and cash flows from operations.  We continuously review our R&D initiatives to ensure they remain consistent with and supportive of our strategic growth initiatives.

Marketing

Ophthalmic/Vitreoretinal

Markets

Vitreoretinal surgery refers to any surgical procedures involving the posterior portion of the eye, also commonly referred to as “the back of the eye.” Conditions associated with vitreoretinal surgery often require surgical treatment to prevent vision loss. These conditions include proliferative diabetic retinopathy, retinal detachments and tears, macular holes, macular puckers, vitreous hemorrhages and traumatic eye injuries as well as other diseases. The retinal surgeon requires a variety of devices and equipment to perform the surgery, such as a vitrectomy machine and vitrectomy cutter to remove the vitreous from the eye, a light source and endoilluminator to illuminate the eye and a laser and endolaser probe, which provides focused photocoagulation for the treatment of diabetic retinopathy and related conditions.

Based upon a study performed by Market Scope LLC (“Market Scope”), dated March 2012, there are approximately 2,000 practicing retinal specialists in the United States and an additional 7,600 throughout the rest of the world. It is estimated that approximately 324,000 vitrectomies will be performed in the United States and 1.26 million total vitrectomies will be performed throughout the world in 2013.  Market Scope estimates that these procedures are growing 2.4 percent annually.

Our business continues to grow and evolve as market conditions change. Due to the changing needs of the retina community, the Company designed the VersaVIT^TM vitrectomy machine and Core Essentials^TM vitrectomy pack to provide surgeons with a vitrectomy platform that is portable, versatile, space-saving and cost efficient.  The Company will continue to focus on market needs and market changes to provide surgeons with products that meet their needs.

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Marketing and Sales Force

In the United States, we have assembled a direct, dedicated sales organization, consisting of 23 sales representatives, six field sales management/support persons and seven marketing professionals. In fiscal 2014, we are expanding our application specialists by three and our marketing professionals by one to fully implement our VersaVIT^TM launch and we are also working on additional devices and accessories to complement our VersaVIT^TM Vitrectomy Systems.  Our team sells our vitreoretinal surgical products directly to end-users at hospitals, ambulatory surgery centers and surgeon offices throughout the country. We offer 650 separate catalogue items in the vitreoretinal surgical market. Our vitreoretinal products include a vitrectomy system under the VersaVIT^TM brand, procedural packs under VersaPACK^TM and Core Essentials^TM brands, fiberoptic endoilluminators and endolaser probes, a variety of disposable and reusable devices designed for intraocular manipulation of tissues, illumination equipment under the Photon^TM brand, laser equipment for the United States market under Ellex’s Solitaire^TM brand and Quantel’s Supra^TM and Vitra^TM brands, Volk’s line of ophthalmic lenses, Labtician’s scleral buckles and other miscellaneous products.

Internationally, we utilize a hybrid sales network comprised of direct and distributor sales. We have distribution agreements with independent representatives to sell and distribute our ophthalmic surgical products. On July 8, 2013, we acquired our United Kingdom distributor, M.I.S.S. which added four international employees.  At July 31, 2013, we had 16 international direct sales and distribution employees and were represented by over 50 non-U.S. distributors and independent sales representatives. Our vitreoretinal surgical products are offered for sale in approximately 65 countries outside the United States. The terms of sale to our non-U.S. distributors and our non-U.S. end-user customers do not differ materially from those to our domestic end-user customers. Selling prices are established based upon each country’s competitive pricing environment.

Competition

Competition in the vitreoretinal market is intense and is expected to increase. This market is characterized by technology innovation and change. We compete by providing products and services that are valued by our customers such as: sales relationships, product innovations, and responses to changing market/business needs. See Item 1A, Risk Factors.

Our ophthalmic surgical devices and equipment compete against manufacturers of similar products, including those sold by our major competitors, Alcon, a subsidiary of Novartis Corporation, a Bausch & Lomb, Inc., a subsidiary of Valeant Pharmaceuticals International, Inc., Dutch Ophthalmic Research Center and Iridex. In addition, our products compete with smaller and larger specialized companies that do not otherwise focus on ophthalmic and vitreoretinal surgery.

OEM Partners and OEM Markets

The Company has material OEM relationships with Codman and Stryker.

In the neurosurgical market, the bipolar electrosurgical system manufactured by Valley Forge prior to the merger has been marketed for over 30 years through a series of distribution agreements with Codman. On April 2, 2009, the Company executed a new, three-year distribution agreement (effective January 1, 2009) with Codman for the continued distribution by Codman of the fourth generation electrosurgical generator, certain other electrosurgery generators, related disposables and accessories. In addition, the Company entered into a three-year license agreement, which provides for the continued licensing of the Company’s Malis^® trademark to Codman for use with certain Codman products, including those covered by the distribution agreement. The initial term of both agreements expired on December 31, 2011, and both agreements were automatically renewed for three years.  In December 2010, Codman elected to exercise its option of exclusive distribution with respect to the electrosurgical generators and related disposables and accessories in the fields of neurocranial and neurospinal surgery.

On November 16, 2009, the Company announced the signing of an addendum to its three-year agreement with Codman. Under the terms of the revised agreement, Codman has the exclusive right to market and distribute the Company’s Spetzler^TM-Malis^® branded disposable bipolar forceps produced by Synergetics. Codman began distribution of the disposable bipolar forceps in 2009, domestically and in 2010, internationally.

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The Codman relationship has been proceeding well and is meeting the Company’s expectations for unit and dollar sales volumes. Sales to Codman in the fiscal year ended July 31, 2013 comprised 22.4 percent of the Company’s net sales.

The Company supplies a multi-channel ablation generator used for minimally invasive pain control treatment to Stryker pursuant to a supply and distribution agreement dated as of October 25, 2004, as amended.  The agreement expires on June 30, 2015.  The agreement covers the manufacture and supply of the multi-channel ablation generator unit together with certain accessories. The pain control generator can be utilized for facet denervation, rhizotomy, percutaneous cordotomy, dorsal root entry zone lesions, peripheral neuralgia, trigeminal neuralgia and ramus communications. Pain relief is achieved by the controlled heating of the area surrounding the electrode tip. A thermosensor in the probe is used to control tissue temperature. Impedance values are displayed for the user to guard against unsafe conditions. The system provides an electrical stimulator for nerve localization and various coagulating outputs that are selectable based on the procedures undertaken. The pain control generator is configured for bipolar output to minimize current spread, as well as monopolar operation. The agreement also provides Stryker the right of first refusal for the distribution of other products for use in the field of pain control or for use in conjunction with a multi-channel ablation generator technically the same as the products distributed under this agreement.

On March 31, 2010, the Company entered into a supply agreement with Stryker pursuant to which the Company agreed to supply Stryker with disposable ultrasonic aspirator instrument tips and certain other consumable products used in conjunction with Stryker’s ultrasonic aspirator console and handpieces.  The agreement expires on March 31, 2016.

The Stryker relationship has been proceeding well and is meeting the Company’s expectations for unit and dollar sales volumes. Sales to Stryker in the fiscal year ended July 31, 2013 comprised 17.2 percent of the Company’s net sales.

Markets

Neurosurgical procedures on a global basis continue to rise at an estimated 1 to 3 percent growth rate driven by an aging global population, new technologies, advances in surgical techniques and a growing global market resulting from ongoing improvements in healthcare delivery in emerging markets, among other factors. Based upon this growth in procedures, sales of neurosurgical products worldwide are forecasted to increase by approximately 4 percent.

Competition

In the field of neurosurgery, we develop, design and manufacture precision-engineered, surgical devices and instruments. In addition, we believe we are the premier manufacturer of bipolar electrosurgical systems sold through Codman for use in neurosurgery. Our neurosurgical bipolar electrosurgical systems and accessories compete against the Valleylab division of Covidien Ltd., Kirwan Surgical Products, Inc., Erbe Elektromedizin GmbH and Aesculap, including Aesculap Inc., USA and Aesculap GmbH, divisions of B. Braun Medical Inc. Ultrasonic aspirator and accessory tips sold through Stryker compete against Integra Life Sciences Holdings, Corp., the manufacturer of the CUSA^TM and the Selector^TM ultrasonic aspirator systems. Additionally, the products we manufacture compete with smaller and larger specialized companies that do not otherwise focus on neurosurgery. Our products also compete with other technologies, such as handheld instruments and a variety of tissue removal systems designed for removing skull-based tumors.

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Operations

Manufacturing and Supplies

We design, manufacture and assemble the majority of our ophthalmic, direct neurosurgical and certain of our OEM products in our facility in O’Fallon, Missouri.  The bipolar electrosurgical generators (including the neurosurgical, pain control and other generator units) are manufactured in our facility in King of Prussia, Pennsylvania.  The Solitaire^TM, Supra^TM and Vitra^TM lasers and the Volk lenses are purchased by the Company from their respective manufacturers.  Our products are assembled from raw materials and components supplied to us by third parties.  Most of the raw materials and components we use in the manufacture of our products are available from more than one supplier.  For some components, there are relatively few alternate sources of supply.  For a portion of our disposable product line and for several key components of our Photon^TM light sources, our VersaVIT^TM vitrectomy system and our electrosurgical generators, we rely upon single source suppliers or contract manufacturers.

During the fiscal year ended July 31, 2013, we continued our lean journey and have introduced all of our manufacturing lines to the lean methodology.  These manufacturing lines are at varying degrees of maturity with respect to implementing the lean methodology.  In fiscal 2014, we expect to continue the maturation process.  Throughout the year, we have been able to increase the sales per employee by 10 percent without any increase in the manufacturing footprint.

Government Regulations

Medical devices manufactured by the Company are subject to extensive regulation by governmental authorities, including federal, state and non-U.S. governmental agencies.  The principal regulator in the United States is the FDA.

FDA regulations are wide-ranging and govern the development, production and marketing of medical devices, the observance of certain standards with respect to the design, manufacture, testing, labeling and promotion of devices, the maintenance and retention of certain records, the ability to track devices in distribution, the reporting of potential product defects and patient incidents, the export of devices and other matters.

All medical devices introduced into the market since 1976, which include all of our products, are required by the FDA as a condition of sale and marketing to secure either a 510(k) Premarket Notification clearance or an approved Premarket Approval Application (“PMA”) unless specifically exempted by regulation.  A Premarket Notification clearance indicates FDA agreement with an applicant’s determination that the product for which clearance has been sought is substantially equivalent to another medical device that was on the market before 1976 or that has received 510(k) Premarket Notification clearance since that time.  The process of obtaining a Premarket Notification clearance can take several months or potentially years and may require the submission of limited clinical data and supporting information.  The PMA process typically requires the submission of significant quantities of clinical data and manufacturing information and involves significant review costs.  The Company does not anticipate any of our new devices in development at this time will require a PMA.

The Company had one 510(k) issued during fiscal 2013 for bipolar forceps.

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Under FDA regulations, after a device receives 510(k) clearance, any modification that could significantly affect its safety or effectiveness, or that would constitute a major change in the intended use of the device, technology, materials or packaging, requires a new 510(k) clearance.  The FDA requires a manufacturer to make this determination in the first instance, but the FDA can review any such decision.   If the FDA disagrees, it can require a manufacturer to obtain a new 510(k) clearance or it can seek enforcement action against the manufacturer.

We are also required to register with the FDA as a device manufacturer and to maintain compliance with the FDA’s Quality System Regulations (“QSR”).  The QSR incorporates the requirements of Good Manufacturing Practice as well as other regulatory requirements of the FDA, which mandate detailed quality assurance and record-keeping procedures and subject manufacturers to unscheduled periodic quality system inspections.  We conduct internal quality assurance audits to ensure compliance throughout the manufacturing process.

We may not promote or advertise our products for uses not within the scope of our clearances or approvals or make unsupported safety or effectiveness claims.  Further, we are required to comply with various FDA regulations for labeling and promotion.  The Medical Device Reporting regulations require that we provide information to the FDA whenever there is evidence to reasonably suggest that one of our devices may have caused or contributed to a death or serious injury.  In addition, the FDA prohibits us from promoting a medical device before marketing clearance has been received or promoting a cleared device for unapproved indications. Noncompliance with applicable regulatory requirements can result in enforcement action, which is more fully described in Part 1, Item 1A, “Risk Factors” section of this Annual Report on Form 10-K.

Medical device regulations also are in effect in many of the countries outside the United States in which our products are sold.  These laws range from comprehensive device approval and quality system requirements for some or all of our medical device products to simpler requests for product data or certifications.  The number and scope of these requirements are increasing.  In June 1998, the European Union Medical Device Directives became effective, and all medical devices sold in the European common market must meet the Medical Device Directives standards. The Company sells its products in the European medical device market; as such, we have voluntarily chosen to participate in audits established by the European Union through which we have obtained “CE marking” for many of our products.  The Company is subjected to annual audits at both of our manufacturing facilities for compliance to the quality system standards established by the International Standards Organization (“ISO”) and Medical Device Directives established by European law.  The Company is certified to ISO 13485:2003, the international standard for quality systems as applied to medical devices.  Failure to correct deficiencies discovered during an audit could result in the removal of the CE mark on our products, which would effectively bar the sale of the Company’s products in the European market.  Such a result would have a significant and material negative impact on the Company and its business.  In addition, there are several other countries that require additional regulatory clearances.

Management believes that we are in material compliance with the government regulations governing our business in the countries where we market our products.

Safety Approvals

The majority of our capital equipment products also require electrical safety testing, and in some cases electromagnetic compatibility testing, either as a product registration requirement and/or to gain market acceptance.  Testing to internationally recognized standards is provided by third party vendors, who certify our products’ compliance to these standards.  The primary standard to which our capital equipment must comply requires that we provide detailed risk management documentation to support the electrical safety testing.

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Intellectual Property

Our continuing technological innovations and superior engineering designs, as well as the goodwill associated with our products, provide us with competitive advantages, many of which are proprietary to the Company.  We protect our proprietary advantages, in large part, by obtaining legal rights in issued patents, the filing of patent applications, maintaining trade secrets and confidential know how, and through the use of trademarks.

Patented and/or patent pending technology is used in most of our product lines, from our most recently released surgical equipment, the VersaVIT^TM vitrectomy system and its associated disposables, to our line of Directional Laser Probe^TM devices, our DDMS^TM membrane scrapers, our Photon^TM line of illumination technology with complimentary accessories, and further, to the products we make for our OEM partners, such as our Malis^® line of bipolar electrosurgical generators, forceps and other accessories, as well as certain surgical ultrasonic aspiration tips.  When deemed appropriate for our business success, we have chosen to and will continue to choose to enforce and defend these patent rights.

We generally seek patent protection on those technological advancements that are believed to be patentable and are planned or likely to be used in our products or product improvements.  Currently, the Company owns 97 unexpired patents around the world, 37 of which have been issued in the United States.  Our oldest, unexpired patent was issued in the United States almost 15 years ago, in 1998.  Given the range of ages of the patents in our portfolio, we expect that patent expiration will be a routine event going forward for some time.  We do not believe that the expiration of any one patent, or the expiration over time of each of our currently unexpired patents, will have a material, adverse effect on our business.  Furthermore, we manage our patent portfolio such that we will delete a patent application or an issued patent from our portfolio when we determine that the offensive and defensive value of such patent or application is outweighed by its costs of maintenance.

Through our research and development efforts, we are continually creating new intellectual property, and continue to file patent applications around the world to protect our rights in these developments.  The Company has numerous, pending patent applications in the United States and in other countries.  We believe that these patent applications will mature into issued patents in due course; however, we also know that other legal rights, whether of other inventors or of the public, ultimately may prevent our applications from issuing as patents.

We do not rely exclusively on our patents to provide us with intellectual property protections, but also rely on trade secrets, know-how, and trademarks.  In an effort to protect our trade secrets and know-how, we generally require our employees, consultants, and advisors to enter into confidentiality agreements with us upon the commencement of their respective relationships with us.  These confidentiality agreements typically provide that all confidential information developed or disclosed by us during the course of the relationship must be kept confidential and cannot be used except to further the purposes of the relationship.  To the extent that such confidential information is likely to include inventions, our agreements with our employees, consultants, and advisors may also contain provisions requiring these individuals to assign to us any inventions conceived or reduced to practice in the course of the relationship.

Regarding our trademarks, the Company relies on protections from both formal registrations and common law rights.  The Synergetics brand name is a registered trademark of the Company.  Other trademarks used in association with the Company’s products include the diamond logo, Vision for Life, VersaVIT, VersaPACK, Core Essentials, Bullseye, Corona, Diamond Black, DDMS, Directional Laser Probe, Extendable Directional Laser Probe, Inverted Directional Laser Probe, FullView, I-Pack, Kryoptonite, Maxillum, Microfiber, Microserrated, One-Step, Photon, Photon I, Photon II, P1, P2, Pinnacle, Syntrifugal, Apex, Synerport, TruCurve and Vivid.  Other trademark registrations owned by the Company include Malis, the Malis waveform logo, Bident, and Finest Energy Source Available for Surgery.  Other trademarks owned by us and for which use inures to the benefit of the Company include Burst, Barracuda, Gentle Gel, Lumen, Lumenator and TruMicro.  All other trademarks appearing in this Annual Report on Form 10-K are the property of their respective owners.

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Backlog

As of July 31, 2013, our backlog was approximately $1.9 million.

Employees

On July 31, 2013, we had approximately 336 employees, of which 335 were full-time employees.  As part of our lean manufacturing philosophy, we currently utilize temporary staffing agencies to provide us with approximately 15% of our manufacturing staff in order to remain flexible. Including the temporary staff and planned replacements, our head count would be approximately 387 employees. From time to time, we retain temporary employees, part-time employees, engineering consultants, scientists and other consultants.  All full-time employees are eligible to participate in our health benefit plan.  None of our employees are represented by a union or covered by a collective bargaining agreement.  We consider our relationship with our employees to be satisfactory.

Executive Officers of the Registrant

The following table sets forth certain information, as of the date of this Annual Report on Form 10-K, with respect to the executive officers of the Company.

Name	Age	Position(s) with the Company
David M. Hable	58	President, Chief Executive Officer & Director
Pamela G. Boone	50	Executive Vice President, Chief Financial Officer, Treasurer & Secretary
Jerry L. Malis	81	Executive Vice President & Chief Scientific Officer
Jason J. Stroisch	38	Vice President of Marketing and Technology
Michael R. Fanning	47	Vice President of Domestic Sales

David M. Hable joined the Company as its President, Chief Executive Officer (“CEO”) and director in January 2009.  Prior to joining the Company, Mr. Hable served as President and Chief Executive Officer of Afferent Corporation, a venture capital backed medical device company focused on neuro stimulation therapies. Previously, he was Chairman of the Board of ONI Medical Systems, Inc., a developer and marketer of magnetic resonance imaging equipment for extremity applications in non-hospital settings. Mr. Hable also spent over 20 years with Codman, which develops and markets a wide range of diagnostic and therapeutic products for the treatment of central nervous system disorders. Mr. Hable was engaged at Codman in several sales and marketing positions.  From 1998 to 2003, Mr. Hable served as Codman’s Worldwide President leading all functions in the company, both domestically and internationally.Mr. Hable has overall responsibility for the management of the Company.

Pamela G. Boone joined the Company as its Chief Financial Officer in May 2005. Prior to this, Ms. Boone served as Vice President and Chief Financial Officer of Maverick Tube Corporation (“Maverick”) from 2001 until January 2005 and as Vice President, Treasurer and acting Chief Financial Officer until May 2005. Maverick, a Missouri-based company, was a leading North American producer of welded tubular steel products used in energy and industrial applications. From 1997 to 2001, Ms. Boone served as Maverick’s Corporate Controller.  Ms. Boone coordinates and supervises the finance, treasury, budgeting, investor relations, accounting and information technology functions of the Company.

Jerry L. Malis is the Company’s Executive Vice President and Chief Scientific Officer and has served in these positions and as director since 2005. Immediately prior to the consummation of the merger with Valley Forge, Dr. Malis served as Valley Forge’s Chief Executive Officer, President and Chairman of the Board. He has published over 50 articles in the biological science, electronics and engineering fields, and has been issued ten United States patents. Dr. Malis coordinates and supervises the scientific developments of the Company’s electrosurgery products.

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Jason J. Stroisch joined the Company in the Engineering division in September 1995.  In his 18 years with the Company, Mr. Stroisch has had increasing levels of responsibility within the organization, including International Product Manager, International Sales Manager and Vice President of Ophthalmic Sales.  In April 2009, he was promoted to Vice President of International Sales and Marketing.  In August 2012, oversight of our R&D efforts was added to his responsibilities.  Mr. Stroisch coordinates and supervises the marketing efforts of the Company and the scientific development of the Company’s ophthalmic and OEM products.

Michael R. Fanning joined the Company as a territory manager in June 2003.  He was promoted to National Sales Manager in May 2006 and became Vice President of Domestic Sales in April 2009.  Prior to this, Mr. Fanning worked for GE Capital for over ten years.  Mr. Fanning coordinates and supervises the domestic sales and customer service operations of the Company.

Available Information

We make available free of charge our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports filed or furnished as required by Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), through our internet website at www.synergeticsusa.com as soon as reasonably practicable after we electronically file such material with, or furnish it to, the Securities and Exchange Commission (“SEC”).

Special Note Regarding Forward-Looking Information

The Private Securities Litigation Reform Act of 1995 and Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Exchange Act, provide a safe harbor for forward-looking statements made by or on behalf of the Company. The Company and its representatives may from time to time make written or oral statements that are “forward-looking,” including statements contained in this report and other filings with the SEC and in our reports and presentations to stockholders or potential stockholders. In some cases forward-looking statements can be identified by words such as “believe,” “expect,” “anticipate,” “plan,” “potential,” “continue” or similar expressions. Such forward-looking statements include risks and uncertainties and there are important factors that could cause actual results to differ materially from those expressed or implied by such forward-looking statements. These factors, risks and uncertainties can be found in Part I, Item 1A, “Risk Factors.”

Although we believe the expectations reflected in our forward-looking statements are based upon reasonable assumptions, it is not possible to foresee or identify all factors that could have a material effect on the future financial performance of the Company. The forward-looking statements in this report are made on the basis of management’s assumptions and analyses, as of the time the statements are made, in light of their experience and perception of historical conditions, expected future developments and other factors believed to be appropriate under the circumstances.

In addition, certain market data and other statistical information used throughout this report are based on independent industry publications. Although we believe these sources to be reliable, we have not independently verified the information and cannot guarantee the accuracy and completeness of such sources.

Except as otherwise required by the federal securities laws, we disclaim any obligation or undertaking to publicly release any updates or revisions to any forward-looking statement contained in this Annual Report on Form 10-K and the information incorporated by reference in this report to reflect any change in our expectations with regard thereto or any change in events, conditions or circumstances on which any statement is based.

Item 1A. Risk Factors

In addition to the other information contained in this Annual Report on Form 10-K, we have identified the following risks and uncertainties that may have a material adverse effect on our business, financial condition or results of operations.  You should carefully consider the risks described below before making an investment decision.

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Risks related to Our Business

The medical device industry is highly competitive and subject to technological change.  If our competitors are better able to develop and market products that are safer, more effective, less costly, easier to use, or are otherwise more attractive, we may be unable to compete effectively with other companies.

The medical technology industry is characterized by intense competition and technology change.  We compete with established medical technology companies and early stage companies that have alternative solutions for the markets we serve or intend to serve.  Many of our competitors have several advantages over us; including:

· access to greater financial and human resources for product development, sales and marketing and patent litigation;

· greater name recognition;

· long established relationships with physicians and customers;

· additional lines of products and the ability to offer rebates or bundle products to offer greater discounts or incentives;

· more established sales and marketing programs, and distribution networks; and

· greater experience in conducting research and development, manufacturing, preparing regulatory submissions and obtaining regulatory clearance or approval for products and marketing approved products.

Our competitive position depends on multiple, complex factors, including our ability to achieve market acceptance for our products, develop new products, implement production and marketing plans, secure regulatory approvals for products under development and protect our intellectual property.  We may need to develop new applications for our products to remain competitive.  Technological advances outside of our field, such as in pharmacology, by one or more of our current or future competitors could render our present or future products obsolete or uneconomical.  Our future success depends, among other things, upon our ability to compete effectively against current technology, as well as to respond effectively to technological advances, and upon our ability to successfully implement our marketing strategies and execute our R&D plan.

Our products may not be accepted in the market.

We cannot be certain that our current products or any other products we have or may develop or market will achieve or maintain market acceptance.  We cannot be certain that our devices and the procedures they perform will be able to replace established treatments or that physicians or the medical community in general will accept and utilize our devices or any other medical products that we may develop.

Market acceptance of our products depends on many factors, including our ability to:

• convince key opinion leaders to provide recommendations regarding our products;

• convince distributors and customers that our technology is an attractive alternative to other technologies;

• price our products competitively in light of the current macroeconomic environment where healthcare systems and healthcare operators are becoming increasingly price sensitive;

• manufacture products in sufficient quantities; and

• supply and service sufficient quantities of our products directly or through marketing alliances.

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If we do not introduce new commercially successful products in a timely manner, our products may become obsolete over time, thereby decreasing our revenue and profitability.

Demand for our products may change as a result of evolving customer needs, the introduction of new products and technologies, the discovery of cures for certain medical problems, including pharmacology technologies and discoveries, evolving surgical practices and evolving industry standards.  Without the timely introduction of new commercially successful products and enhancements, our products may become obsolete over time causing our sales and operating results to suffer.  The success of our new products will depend on several factors, including our ability to:

• properly identify and anticipate customer needs;

• obtain regulatory approval for new products;

• achieve positive clinical outcomes;

• commercialize new products in a cost-effective and timely manner;

• manufacture and deliver products in sufficient volumes on time;

• differentiate our products from those of our competitors;

• satisfy the increased demands by health care payers, providers and patients for lower-cost procedures and shorter hospital stays and recovery times;

• innovate and develop product designs and surgical techniques; and

• provide adequate medical and/or customer education relating to new products and attract key surgeons to advocate these new products.

New products and enhancements usually require a substantial investment in R&D before we can determine the viability of the product.  We spent 5.8 percent of our sales on R&D during the fiscal year ended July 31, 2013 and we expect to spend 6 to 8 percent of our sales for this purpose in future periods.  Our R&D process entails considerable uncertainty.  Moreover, new products and enhancements may not produce revenues in excess of the R&D costs, and they may become obsolete by changing customer preferences or the introduction by our competitors of new technologies or features.  Failure to develop our manufacturing capability may mean that even if we develop promising new products, we may not be able to produce them profitably, as a result of delays and additional capital investment costs.

A significant part of our product sales comes from two customers, which makes us vulnerable to the loss of those customers.

During the fiscal year ended July 31, 2013, revenue from sales of our bipolar electrosurgical generators, disposable bipolar forceps, cord tubing sets and royalty payments from Codman represented approximately 22.4 percent of the Company’s total net sales.  Under our existing agreement with Codman, it distributes all contract products on an exclusive basis and has exclusive rights to distribute all monopolar and bipolar generators for use in neurocranial and neurospinal surgery.  The initial term of our existing agreement with Codman expired on December 31, 2011, after which the agreement entered into a single, automatic, three-year renewal term.  We continue to enhance the contract products and to develop new generators and additions to the disposable bipolar forceps line for Codman which we expect will expand their reach to additional markets.

In addition, revenue from the sales of our pain control generators, the ultrasonic aspirator tips and accessories by Stryker accounted for 17.2 percent of the Company’s total net sales for fiscal 2013.  Under our existing agreements with Stryker, it distributes the pain control generator and ultrasonic aspirator tips on an exclusive basis.  The pain control generator agreement expires on June 30, 2015, and the ultrasonic aspirator tip agreement expires on March 31, 2016.  We continue to develop new ultrasonic aspirator tips for Stryker which will expand their reach to additional markets.

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Our international operations subject us to certain operating risks, which could adversely impact our net sales, results of operations and financial condition.

Sales of our products outside the U.S. represent approximately 26 percent of our revenue in 2013.  As of July 31, 2013, we sell our products outside the U.S. through five direct sales organizations in Australia, France, Germany, Italy and the United Kingdom, after our acquisition of M.I.S.S. on July 8, 2013.  The results of operations and the financial position of certain of our foreign operations are reported in the relevant local currencies and then translated into U.S. dollars at the applicable exchange rates for inclusion in our consolidated financial statements, exposing us to translation risk.  Our most significant currency exposure is to the euro.  The exchange rates between the euro and the U.S. dollar may fluctuate substantially.  We have not attempted to offset our exposure to these risks by investing in derivatives or engaging in hedging activities.

In addition to our direct sales outside the U.S., we have over 50 independent distributors selling our products in over 65 countries.  The sales of our products across international borders subject us to extensive U.S. and foreign government trade, import, export and custom regulations and laws.  Compliance with these regulations is costly and may expose us to penalties for non-compliance.  Other laws and regulations that can significantly impact us are various anti-bribery laws including the U.S. Foreign Corrupt Practices Act, the U.K. Bribery Act and anti-boycott laws.  Any failure to comply with applicable legal and regulatory obligations could impact us in a variety of ways that include, but are not limited to, significant criminal, civil and administrative penalties, including imprisonment of individuals, fines and penalties, denial of export privileges, seizure of shipments, restrictions of certain business activities and exclusion or debarment from government contracting.  Also, the failure to comply with applicable legal and regulatory obligations could result in delays and other disruptions of our shipping and sales activities.

In addition, many countries in which we sell our products are, to some degree, subject to political, economic or social instability.  Our international operations expose us and our distributors to risks inherent in operating in foreign jurisdictions.  These risks include:

• changes in foreign medical reimbursement and coverage policies and programs;

• cultural differences;

• shortage of high-quality sales personnel and distributors;

• the ability and motivation of our independent distributors to sell our products;

• pricing pressure from local and regional competitors;

• foreign certification requirements, including the ability to use the “CE” mark in Europe, and other local regulatory requirements;

• difficulties in enforcing or defending our intellectual property rights;

• fluctuations in currency exchange rates and foreign currency translation adjustments;

• unexpected changes in international or local market regulatory requirements, including imposition of currency exchange controls;

• longer accounts receivable collection cycles;

• import or export licensing requirements;

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• potentially adverse tax consequences;

• political and economic instability;

• obtaining regulatory approvals for our products;

• end-market and/or regional competition that may have competitive advantages; and

• subjectivity of foreign laws.

Continuing worldwide macroeconomic instability, including challenges faced by the European Union and Emerging Markets, could adversely affect our revenues, financial condition or results of operations.

Since fiscal 2008, the global economy has been impacted by the sequential effects of an ongoing global financial crisis which has caused extreme disruption in the financial markets, including severely diminished liquidity and credit availability.  There can be no assurance that further deterioration will not occur.  Our customers may experience financial difficulties or be unable to borrow money to fund their operations which may adversely impact their ability to purchase our products or to pay for them on a timely basis, if at all.   A significant portion of our trade receivables are with many countries significantly impacted by the financial crises (including, but not limited to, France, Greece, Italy, Spain and Turkey).  Payment by our customers of our receivables is dependent upon the financial stability of the economies of those countries.  In light of the current economic state of many countries outside of the U.S., we continue to monitor the creditworthiness of our customers.  Failure to receive payment of all or a significant portion of our receivables could adversely affect our results of operations.  Further, there are concerns for the overall stability and suitability of the euro as a single currency, given the economic and political challenges facing the European Union.   Continuing deterioration in the creditworthiness of the eurozone countries, the withdrawal of one or more member countries from the European Union or the failure of the euro as the common European currency could adversely affect our net sales, financial condition or results of operations.

We may face manufacturing and quality control challenges which could impact our competitive advantage.

The manufacturing of our surgical equipment and disposable accessories is a highly complex and precise process.  We assemble critical components and sub-assemblies and substantially all our final products at our facilities in O’Fallon, Missouri and King of Prussia, Pennsylvania. We may experience manufacturing difficulties, quality control issues or manufacturing constraints particularly with regards to new products and increased production demands.  If our sales increase substantially, we may need to increase our production and quality control capacity and may not be able to do so in a timely, effective or cost efficient manner.  We may not be able to manufacture sufficient quantities of our products which may require us to qualify other manufacturers of our products.  Furthermore, we may experience delays, disruptions, capacity constraints or quality control problems in our manufacturing operations and as a result, product shipments to our customers could be delayed, which would negatively impact our net sales.

If any of our single source or limited source suppliers were to cease providing components, we may not be able to produce certain products.

Our products are assembled from raw materials and components supplied to us by third parties.  Most of the raw materials and components used in the manufacturing of our products are available from more than one supplier.  For some components, there are relatively few alternate sources of supply.  However, we rely upon single source suppliers or contract manufacturers for a portion of our disposable product line and for several key components of our Photon^TM light sources, our VersaVIT^TM vitrectomy system and our electrosurgical generators.  Our profit margins and our ability to develop and deliver products on a timely basis may be adversely affected by the lack of alternative supply in the required timeframe.

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There are risks associated with the use of independent manufacturers including unavailability, shortage or limitations on the ability to obtain supplies of components in the quantities we require, delays in delivery or failure of suppliers to deliver critical components on the dates we require, failure of suppliers to manufacture our components to our specifications and potentially reduced quality and inability to obtain components at acceptable prices.  In addition, these suppliers must also adhere to the FDA’s rigorous manufacturing standards.

Pursuant to the conflict minerals requirements promulgated by the SEC as part of Dodd-Frank Act, we are required to report on the source on any conflict minerals used in our products, as well as the process we use to determine the source of such materials.  We may incur expenses as we work with our suppliers to evaluate the source of any conflict minerals in our products.

The loss of key personnel or failure to integrate replacement personnel could harm our business.

Our future success depends upon the continued service of key management, technical sales and other critical personnel, including Messrs. Hable, Malis, Fanning and Stroisch and Mmes. Boone and Kraus, our Chief Executive Officer, our Chief Scientific Officer, our Vice President of Domestic Sales, our Vice President of Marketing and Technology, our Chief Financial Officer and our Vice President of Regulatory/Quality Assurance, respectively.  We maintain key person life insurance for Mr. Hable and Ms. Boone.  Our officers and other key personnel are employees-at-will, and we cannot assure you that we will be able to retain them.  The loss of any key employee could result in a disruption to our operations and could materially harm our business.  In addition, the integration of replacement personnel could be time consuming, may cause additional disruptions to our operations, and may be unsuccessful.

Our operating results may fluctuate.

Our operating results have fluctuated in the past and can be expected to fluctuate from time to time in the future. Some of the factors that may cause these fluctuations include, but are not limited to:

• general economic uncertainties and political concerns;

• changes in demand for our base ophthalmology and neurosurgery products;

• changes in customer capital availability and customer budgets as a result of, among other things, reimbursement policies of government programs and private insurers for treatments that use our products;

• receipt of necessary regulatory approvals;

• the introduction of new products or product lines;

• product modifications;

• the level of market acceptance of new products;

• the timing of R&D and other expenditures;

• timing of the receipt of orders from, and product shipments to, distributors and customers;

• changes in the distribution arrangements for our products;

• manufacturing or supply delays including the ability of our sole or limited source suppliers to timely deliver components at the times and prices that we have planned;

• the time needed to educate and train additional sales and manufacturing personnel;

• increased costs associated with product introductions;

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• costs associated with defending our intellectual property; and

• product returns.

In addition to these factors, current expenditures are based, in part, on expected future sales.  If sales levels in a particular quarter do not meet expectations, we may be unable to adjust operating expenses quickly enough to compensate for the shortfall of sales, and our results of operations may be adversely affected.  We have historically made a significant portion of each quarter’s product shipments near the end of such quarter.

We may have product liability claims, and our insurance may not cover all claims.

The development, manufacture, sale and use of medical products entail significant risk of product liability claims.  We maintain product liability coverage at levels we have determined are reasonable.  We cannot assure you that such coverage limits are adequate to protect us from any liabilities we might incur in connection with the development, manufacture, sale or use of our products.  In addition, we may require increased product liability coverage as our sales increase in their current product applications and new applications, and with respect to new products.  Product liability insurance is expensive and in the future may not be available on acceptable terms, if at all.  A successful product liability claim or series of claims brought against us in excess of our insurance coverage could adversely affect our business.

Efforts to acquire additional companies or product lines may consume managerial resources and we may incur or assume additional liabilities or experience integration problems.

We seek to acquire additional businesses or product lines for strategic reasons, including adding new products, new customers and increasing penetration with existing customers, adding new manufacturing capabilities or expanding into new geographic markets.  Our recent acquisition of M.I.S.S. establishes a direct presence in one of the largest ophthalmic markets outside the U.S. Our ability to successfully grow through the M.I.S.S. acquisition and through additional acquisitions depends upon our ability to identify, negotiate, complete and integrate suitable acquisitions and to obtain any necessary financing.  Upon completion of any acquisition, including the M.I.S.S. acquisition, we may also experience:

• difficulties integrating any acquired products into our existing business;

• delays in realizing the benefits of the acquired products;

• difficulties integration acquired systems or processes;

• difficulties integrating business cultures; or

• diversion of our management’s time and attention from ongoing business.

If our facilities were to experience catastrophic loss, our operations would be seriously harmed.

Our facilities could be subject to catastrophic loss such as fire, flood, tornados or earthquake. A substantial portion of our R&D and manufacturing activities, our corporate headquarters and other critical business operations are located in O’Fallon, Missouri near a major fault line which could result in an earthquake. We maintain property and business interruption insurance coverage at levels we have determined are reasonable.  Any such loss at any of our facilities could disrupt our operations, delay production, shipments and revenue and result in large expenses to repair and replace our facilities.

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Risks related to Our Financial Condition

We are subject to credit risk from our accounts receivable related to our product sales, which include sales within European and Emerging Market countries that are currently experiencing economic turmoil.

The majority of our accounts receivable arise from product sales in the U.S. Our accounts receivable in the U.S. are primarily due from OEM partners, public and private hospitals and ambulatory surgery centers.  However, we also have receivable balances from customers within the European Union, Turkey, Canada, Japan, Russia and Brazil.  Our accounts receivable outside the U.S. are due from independent distributors and, to a lesser extent, public and private hospitals.  Our historic write-offs of accounts receivable have not been significant.

We monitor the financial performance and creditworthiness of our customers so that we can properly assess and respond to changes in their credit profile.  Our independent distributors operate in Spain, Italy and Greece, among other countries, where economic conditions continue to present challenges to our independent distributors’ businesses, and thus, could place at risk the amount due to us from them.

Our cash maintained with a bank may not be fully insured.

We maintain significant amounts of cash and cash equivalents at a financial institution that is in excess of federally insured limits.  Given the current instability of financial institutions, we cannot be assured that we will not experience losses on these deposits.

Risks related to the Regulation of our Industry

The recent U.S. healthcare reform legislation and other healthcare regulatory changes could adversely affect our revenue and financial condition.

The Patient Protection and Affordable Care Act and Health Care and Education Affordability Reconciliation Act were enacted into law in March 2010.  The Patient Protection and Affordable Care Act imposes an excise tax on domestic sales of class I, II and III medical devices at the rate of 2.3 percent of sales revenue, for which medical device manufacturers became liable beginning in January 2013.  Substantially all of our products are class I and II medical devices.  The inability to offset this tax could have a material impact on results of operations.

The law also focuses on a number of Medicare provisions aimed at improving quality and decreasing costs, though we are not certain of the impact that these provisions will have on patient access to new technologies and medical procedures.

Changes in government legislation or regulation or in private third-party payers’ policies toward reimbursement for procedures employing our products may prohibit adequate reimbursement.  There have been a number of legislative and regulatory proposals to change the healthcare system, reduce the cost of healthcare and change medical reimbursement policies.  Further proposed legislation or regulation and policy changes affecting third-party reimbursement are likely.  We cannot predict what legislation or regulation, if any, relating to the health care industry or third-party coverage and reimbursement may be enacted in the future, or what the effect of such legislation or regulation may have on us.  However, any changes that lower reimbursement for our products or reduce medical procedure volumes could adversely affect our business and results of operations.

Our industry is experiencing greater scrutiny and regulation by governmental authorities, which may lead to greater governmental regulation in the future.

Medical device companies are subject to rigorous regulation, including by the FDA and numerous other federal, state and foreign governmental authorities.  These authorities and members of the United States Congress have been increasing their scrutiny of our industry.  In addition, certain states have recently passed or are considering legislation restricting our interactions with health care providers and requiring disclosure of payments to them.  As a result, we are required by law to disclose payments and other transfers of value to health care providers licensed by certain states and, starting with payments or other transfers of value made on or after August 1, 2013, to all U.S. physicians and U.S. teaching hospitals at the federal level.  Any failure to comply with these legal and regulatory requirements could impact our business.  Also, while recent case law has clarified that the FDA’s authority over medical devices preempts state tort laws, legislation has been introduced at the federal level to allow state intervention.  We anticipate that the various governments will continue to closely scrutinize our industry, and additional regulations by governmental authorities may increase compliance costs, exposure to litigation and other adverse effects to our operations.

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Delays in the receipt of or our failure to receive regulatory clearances or approvals, the loss of previously received clearances or approvals, or failure to comply with existing or future regulatory requirements could have a material adverse effect on our business, financial condition, results of operations and future growth prospects.

Our R&D activities and the manufacturing, labeling, distribution and marketing of our existing and future products are subject to regulation by governmental agencies in the United States and in other countries.  The FDA and comparable agencies in other countries impose mandatory procedures and standards for the conduct of clinical trials and the production and marketing of products for medical diagnostic and therapeutic use.

Products under development are subject to FDA approval or clearance prior to commercial use.  The process of obtaining necessary FDA approvals or clearances is not only costly but can potentially take years and the outcome may be uncertain.  Our inability to obtain required regulatory approval or clearance in a timely manner could harm our business.  Further, approval or clearance may place substantial restrictions on the indications for which the product may be marketed or to whom it may be marketed.  Additional studies may be required to gain approval or clearance for the use of a product for clinical indications other than those for which the product was initially approved or cleared or for changes to the product.

Furthermore, an additional risk relates to the regulatory classification of new products or proposed new uses for existing products.  With each application, we are required to make a judgment about the appropriate form and content of the application.  If the FDA disagrees with our judgment in any particular case and, for example, requires us to file a premarket approval application rather than a Section 510(k) premarket notification or requires clinical data be added to our application, the time and expense required to obtain the approval might be significantly increased and approval may become less likely.

Once approved or cleared for marketing, our products are subject to continuing FDA requirements, such as those relating to quality control and quality assurance, maintenance of records, reporting of adverse events and product recalls, documentation and labeling and restrictions on promotion of medical devices.  Failure to precisely follow any of these requirements may lead to unanticipated costs of remediation, a product recall and/or an order to cease production and sales of a product. A recall could divert management’s attention, cause us to incur significant expenses, harm our reputation with customers and negatively affect our future net sales.

There can be no assurance that we will be able to obtain necessary clearances or approvals to market any new products, or to market existing products for new intended uses, on a timely basis, if at all.  There can be no assurance that we will be able to continue to market existing products without interruption due to regulatory oversight.

Moreover, for the majority of our non-direct, foreign sales, our distributors assist with and control regulatory approval or clearance for product marketing.  We cannot be certain that such approvals or clearances are actually effective.  Nor can we be assured that approval or clearance for product marketing in any given country would continue to be effective for any distributor other than our current distributor in that same country, if any of our current distributors cease to distribute our products.  A change in our distributor in any country could lead to delays in continued sales in that country while regulatory approval or clearances are sought to be renewed.  Such a delay could have significant impacts on our net sales outside the U.S.

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We may be subject to penalties and may be precluded from marketing our products if we fail to comply with extensive governmental regulations.

The FDA and non-U.S. regulatory authorities require that our products be manufactured according to rigorous standards.  These regulatory requirements may significantly increase our production costs and may even prevent us from making our products in amounts sufficient to meet market demand.  If we change our approved manufacturing process, the FDA may need to review the process before it may be used.  Failure to comply with applicable regulatory requirements discussed could subject us to enforcement actions, including:

• warning letters;

• fines, injunctions and civil penalties against us;

• recall or seizure of our products;

• operating restrictions, partial suspension or total shutdown of our production;

• refusing our requests for premarket clearance or approval of new products;

• withdrawing product approvals already granted; and

• criminal prosecution.

Federal, state and non-U.S. regulations, regarding the manufacture and sale of medical devices are subject to future changes.  The complexity, timeframes and costs associated with obtaining marketing clearances are unknown.  Although we cannot predict the impact, if any, these changes might have on our business, the impact could be material.

Changes in tax laws or exposure to additional income tax liabilities could have a material impact on our financial condition and results of operations.

We are subject to income taxes as well as non-income based taxes, in both the U.S. and various jurisdictions outside the U.S.  We are subject to ongoing tax audits in various jurisdictions.  Tax authorities may disagree with certain positions we have taken and assess additional taxes and penalties.  We regularly assess the likely outcomes of these audits in order to determine the appropriateness of our tax provision.  However, there can be no assurance that we will accurately predict the outcomes of these audits, and the actual outcomes of these audits could have a material impact on our consolidated earnings and financial condition.  Additionally, changes in tax laws or tax rulings could materially impact our effective tax rate.  Proposals for fundamental U.S. corporate tax reform, if enacted, could have a material impact on our future results of operations.

Our intellectual property rights may not provide meaningful commercial protection for our products, which could adversely affect our ability to compete in the market.

Our ability to compete effectively depends, in part, on our ability to maintain the proprietary nature of our technologies and manufacturing processes, which includes the ability to obtain, protect and enforce patents on our technology and to protect our trade secrets.  We own patents that cover significant aspects of our products.  Certain patents of ours have expired and others will expire in the future.  Competitors may develop products similar to ours that our patents do not cover.  In addition, our current and future patent applications may not result in the issuance of patents in the United States or other countries.  Further, there is a substantial backlog of patent applications in the U.S. Patent and Trademark Office and the approval or rejection of patent applications may take several years.  In addition, challenges may be made to our patents in the courts or any of various patent offices around the world, and as a result our patents could be narrowed, invalidated or rendered unenforceable.

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Our competitive position depends, in part, upon unpatented trade secrets, which can be difficult to protect. Others may independently develop substantially equivalent proprietary information and techniques or gain access to our trade secrets.  In an effort to protect our trade secrets, we require consultants, advisors and most of our employees to execute confidentiality agreements and certain of them to sign invention assignment agreements upon commencement of employment or a consulting relationship with us.  Some jurisdictions limit the enforceability and scope of these agreements, and these agreements may not provide meaningful protection for our trade secrets or other proprietary information in the event of the unauthorized use or disclosure of confidential information.

The intellectual property rights of others may adversely affect our ability to introduce new products or continue to sell existing products.

The medical device industry is characterized by frequent litigation regarding patent and other intellectual property rights.  Companies in the medical device industry have employed intellectual property litigation to gain a competitive advantage.  Numerous patents are held by others, including academic institutions and our competitors.  These patents may be employed to limit our ability to market our products, for example, through patent infringement litigation.  Patent applications generally will be published 18 months after the filing date.  However, since patent applications continue to be maintained in secrecy for at least some period of time, we cannot assure you that our technology does not infringe any patents, patent applications held by third parties, prior patents, or prior art.  We have, from time to time, been notified of, or have otherwise been made aware of, claims that we are infringing upon patents or other proprietary intellectual property owned by others.  If it appears necessary or desirable, we may seek licenses under such patents or proprietary intellectual property.  Although patent holders may offer such licenses, licenses under such patents or intellectual property may not be offered or the terms of any offered licenses may not be reasonable.  Any infringement claims, with or without merit, and regardless of whether we are successful on the merits, could be time-consuming, result in costly litigation and diversion of technical and management personnel, cause shipment delays or require us to develop non-infringing technology or enter into royalty or licensing agreements.  An adverse determination could prevent us from manufacturing or selling our products, which could have a material adverse effect on our business, results of operations and financial condition.

Risks related to Ownership of Our Common Stock

The market price of our stock may be highly volatile.

Our stock price has fluctuated widely.  It ranged from $2.93 to $5.45 per share during the year ended July 31, 2013.  Our stock price could continue to experience significant fluctuations in response to certain factors, some of which are beyond our control, such as:

• our ability to successfully commercialize our products;

• the execution of new agreements and material changes in our relationships with companies with whom we contract;

• quarterly fluctuations in results of operations;

• announcements regarding technological innovations or new commercial products by us or our competitors or the results of regulatory filings;

• market reaction to trends in sales, marketing and R&D and reaction to acquisitions;

• sales of common stock by existing shareholders;

• changes in key personnel;

• economic and political conditions, including worldwide geopolitical events; and

• fluctuations in the United States financial markets.

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In addition, our common stock may experience an imbalance between supply and demand resulting from low trading volumes, and therefore broad market fluctuations could have a significant impact on the market price of our common stock regardless of our performance.

Synergetics USA, Inc. has anti-takeover defenses that could delay or prevent an acquisition and could adversely affect the price of its common stock.

Provisions of our certificate of incorporation, bylaws and Delaware law may have the effect of deterring hostile takeovers or delaying or preventing changes in the control of the Company, including transactions in which our shareholders might otherwise receive a premium for their shares over then current market prices.  In addition, these provisions may limit the ability of our shareholders to approve transactions that they may deem to be in their best interest.  Also, our Board of Directors is divided into three classes, as nearly equal in size as practicable, with three-year staggered terms.  This provision may deter a potential acquirer from engaging in a transaction with us because it will be unable to gain control of our Board of Directors until at least two annual meetings have been held in which directors are elected by our shareholders.

Item 1B. Unresolved Staff Comments

None.

Item 2. Properties

Our primary office and manufacturing operations are conducted in a 60,000 square foot building owned by our wholly owned subsidiary, Synergetics Development Company, LLC, a Missouri limited liability company.  The facility is located in O’Fallon, Missouri, approximately 25 miles west of St. Louis, Missouri.  We also lease 19,200 square feet of additional space adjacent to our headquarters in O’Fallon, Missouri pursuant to a lease that expires on February 29, 2016.  The additional space houses the advanced technology R&D Group and the manufacturing of the ophthalmic capital equipment.

We also lease 13,500 square feet of office, assembly and manufacturing space in King of Prussia, Pennsylvania, which serves as office, engineering, and manufacturing space.  The lease for this facility expires on October 31, 2015.

In addition, we acquired a 1,703 square foot building owned by M.I.S.S. approximately 90 kilometers outside of London which houses our warehouse for our United Kingdom operations.  In fiscal 2014, this facility will be used as our European warehouse.

We believe that these facilities are suitable and adequate for our operations.  Given our lean manufacturing initiative, we believe that we have the ability to generate additional production capacity using our existing manufacturing facilities.

Item 3. Legal Proceedings

From time to time we may become subject to litigation claims that may greatly exceed our product liability insurance limits.  An adverse outcome of such litigation may adversely impact our financial condition, results of operations or liquidity.  We record a liability when a loss is known or considered probable and the amount can be reasonably estimated. If a loss is not probable, a liability is not recorded. As of July 31, 2013, the Company has no litigation reserve recorded.

Item 4. Mine Safety Disclosures

Not applicable.

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PART II

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

The Company’s common stock is listed on The NASDAQ Capital Market under the ticker symbol “SURG.”  The table below sets forth the range of high and low sales prices per share of the Company’s common stock as reported by The NASDAQ Capital Market for each of the quarterly periods within the fiscal years ended July 31, 2013 and 2012.  None of the prices shown reflect retail mark-ups, mark-downs or commissions.  For current price information, you are urged to consult publicly available sources.

	High		Low
Year ended July 31, 2012
Quarter ended October 31, 2011	$	6.97	$	4.61
Quarter ended January 31, 2012	$	7.55	$	5.39
Quarter ended April 30, 2012	$	7.03	$	5.40
Quarter ended July 31, 2012	$	6.62	$	3.30
Year ended July 31, 2013
Quarter ended October 31, 2012	$	5.13	$	3.92
Quarter ended January 31, 2013	$	5.45	$	4.06
Quarter ended April 30, 2013	$	5.31	$	2.95
Quarter ended July 31, 2013	$	4.37	$	2.93

The number of shareholders of Synergetics USA, Inc. as of September 25, 2013, was approximately 4,598.

The Company has not paid a dividend to holders of its common stock.  We currently intend to retain earnings to finance growth and development of our business and do not anticipate paying cash dividends in the near future.  Our revolving credit facility restricts the payment of dividends, if, following the distribution, the fixed charge coverage ratio would fall below the required minimum ratio.

STOCK PERFORMANCE GRAPH

The following graph is not “soliciting material,” is not deemed filed with the SEC, and is not to be incorporated by reference into any of the Company’s filings under the Securities Act of 1933 or the Securities Exchange Act of 1934, as amended, respectively.

The graph below compares the cumulative total stockholder return on an investment in our common stock, and the stocks of The NASDAQ Composite Stock Market and The NASDAQ Medical Devices, Instruments and Supplies Index for the five-year period ended July 31, 2013.  The Previous Peer Group is composed of six small companies with sales ranging from approximately $28 million to $106 million and whose primary business is medical devices: Bovie Medical Corporation, Endologix, Inc., Iridex Corporation, STAAR Surgical Company, Stereotaxis, Inc. and Vascular Solutions, Inc.The graph assumes the value of an investment of $100 in the common stock of each group or entity at August 1, 2008 and that all dividends were reinvested.

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Item 6. Selected Financial Data

The selected financial data set forth below should be read in conjunction with Management’s Discussion and Analysis of Financial Condition and Results of Operations and the consolidated financial statements and notes thereto appearing elsewhere in this Annual Report on Form 10-K. The statements of income data for the years ended July 31, 2013, 2012 and 2011 and the balance sheet data as of July 31, 2013 and 2012 have been derived from audited consolidated financial statements of the Company included elsewhere in this report. The consolidated statements of income for the year ended July 31, 2010 and 2009 and the balance sheets data as of July 31, 2011, 2010 and 2009 have been derived from audited consolidated financial statements that are not included in this Annual Report on Form 10-K.  The historical results are not necessarily indicative of the results of operations to be expected in the future.

	For the Fiscal Years Ended July 31,
		2013	*		2012	**		2011		2010		2009	***
	(in thousands, except per share data)
Statements of Income Data:
Sales	$	62,796		$	60,014		$	55,657	$	52,010	$	52,965
Cost of sales		30,425			25,495			22,876		22,050		23,550
Gross profit		32,371			34,519			32,781		29,960		29,415
Operating income		3,702			8,481			8,349		6,091		3,125
Income from continuing operations		2,559			5,968			5,669		5,767		1,595
Earnings per common share from income from continuing operations – basic	$	0.10		$	0.24		$	0.23	$	0.23	$	0.07
Earnings per common share from income from continuing operations – diluted	$	0.10		$	0.24		$	0.23	$	0.23	$	0.07
Net income		2,559			5,586			5,633		5,733		1,595
Earnings per common share – Basic	$	0.10		$	0.22		$	0.23	$	0.23	$	0.07
Earnings per common share –Diluted	$	0.10		$	0.22		$	0.23	$	0.23	$	0.07

*           In the second quarter of fiscal 2013, the Company recorded an inventory write-down of approximately $2.1 million, or approximately $0.06 earnings per share, net of tax.  We have included M.I.S.S.’s results operations in our financial statements from the date of acquisition.

**       In the third quarter of fiscal 2012, the Company recorded an inventory write-down of approximately $367,000, or approximately $0.01 earnings per share, net of tax.

***     In the fourth quarter of fiscal 2009, the Company recorded an adjustment of approximately $975,000, or approximately $0.03 earnings per share, net of tax, primarily due to excess and discontinued inventory which was either contributed to a charitable organization or was discarded.

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	As of July 31,
	2013		2012		2011		2010		2009
	(in thousands)
Balance Sheets Data:
Cash and cash equivalents	$	12,470	$	12,680	$	18,399	$	18,669	$	160
Current assets		44,797		42,227		44,250		41,066		25,358
Total assets		82,693		78,763		81,310		73,095		58,080
Current liabilities		8,011		6,467		12,586		6,349		11,948
Long-term liabilities		14,530		15,818		18,060		22,520		8,002
Retained earnings		33,097		30,538		24,952		19,319		13,586
Stockholders’ equity		60,152		56,478		50,664		44,226		38,130

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Overview

The following “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” commonly referred to as MD&A, is intended to help the reader understand Synergetics USA, its operations and its business environment.  MD&A is provided as a supplement to, and should be read in conjunction with, our consolidated audited financial statements and accompanying notes.  This overview summarizes the MD&A, which includes the following sections:

• Our Business — a general description of the key drivers that affect our business and the industries in which we operate.

• Our Business Strategy — a description of the strategic initiatives on which we focus and the goals we seek to achieve.

• Results of Operations — an analysis of the Company’s results of operations for the three years presented in our financial statements.

• Liquidity and Capital Resources — an analysis of cash flows, sources and uses of cash, currency exchange and an overview of our financial position.

• Contractual Obligations — an analysis of contracts entered into in the normal course of business that will require future payments.

• Use of Estimates and Critical Accounting Policies — a description of critical accounting policies, including those that affect the more significant judgments and estimates used in the preparation of our consolidated financial statements.

Our Business

The Company is a medical device company. Through continuous improvement and development of our people, our mission is to design, manufacture and market innovative surgical devices, surgical equipment and consumables of the highest quality in order to assist and enable surgeons who perform surgery around the world to provide a better quality of life for their patients. The Company’s primary focus is on the surgical disciplines of ophthalmology (vitreoretinal) and neurosurgery. Our distribution channels include a combination of direct and independent sales organizations and important strategic alliances with market leaders. The Company’s product lines focus upon precision engineered disposable and reusable devices, surgical equipment, procedural kits and the delivery of laser energy, ultrasound, electrosurgery, aspiration, illumination and irrigation, often delivered in multiple combinations. Enterprise-wide sales information is included in Note 16 to the consolidated audited financial statements.

Demand Trends

The Company’s sales increased 4.6 percent during the fiscal year ended July 31, 2013 (including $1.3 million of deferred revenue recognized) compared with the previous fiscal year.  The two most significant factors impacting this increase were a $206,000 increase in ophthalmic sales and a $2.5 million increase in OEM sales.  The increased sales were augmented by an $80,000 increase in our other sales. Currently, disposable product sales account for approximately 80.5 percent of our total product sales.  Overall sales of our disposable products grew $2.2 million, or 4.4 percent, in fiscal 2013 as compared to fiscal 2012. Sales of capital equipment increased by approximately $839,000, or 8.8 percent, in fiscal 2013 as compared to fiscal 2012.

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A study performed by Market Scope in March 2012 predicts a steady growth of 2.4 percent per year in retinal procedures worldwide driven by an increase in the elderly population worldwide, an increase in the number of surgeons, an increase in the number of diseases treated with vitrectomy and an increase in frequency of diabetic complications due to the obesity epidemic.

Neurosurgical procedures on a global basis continue to rise at an estimated 1 to 3 percent growth rate driven by an aging global population, new technologies, advances in surgical techniques and a growing global market resulting from ongoing improvements in healthcare delivery in emerging market countries, among other factors. Based upon this growth in procedures, sales of neurosurgical products worldwide are forecasted to increase by approximately 4 percent.

In addition, the Company believes that the demand for high quality, innovative products and new technologies consistent with the Company’s devices and disposables will continue to favorably impact procedure growth in the ophthalmic and neurosurgical markets.

Pricing Trends

The Company has generally been able to maintain the average selling prices for its products in the face of downward pricing pressure in the healthcare industry. However, increased competition, in combination with customer budget constraints, capital scarcity and the transition of procedures to the ambulatory surgery center, has the potential to negatively impact the Company’s selling prices on these devices. The Company has no major domestic group purchasing agreements.

Economic Trends

Economic conditions may continue to negatively impact capital expenditures at the hospital, ambulatory surgical center and physician level. Further, global economic conditions continue to negatively impact the volume and average selling price of the Company’s products in our European markets.

Regulatory Developments

In March 2010, significant U.S. healthcare reform legislation, the Patient Protection and Affordable Care Act along with the Health Care and Education Reconciliation Act of 2010, was enacted into law. As a U.S.-headquartered company with significant sales in the United States, this new law will likely have a material impact on our results of operations.  A number of provisions of the new health care reform legislation are not yet finalized and effective, and as such, we are unable to predict the full impact of the laws and regulations promulgated thereunder.

Among other matters, the law imposes a 2.3 percent excise tax on all U.S. medical device sales which became effective in January 2013.  Approximately 74% of our consolidated fiscal 2013 sales were in the U.S.  If we are unable to offset the taxes that will be levied on these sales, such as through the increase of efficiencies through our lean manufacturing initiatives, we expect that the new tax will materially and adversely affect our business, cash flows and results of operations.

The law also focuses on a number of Medicare provisions aimed at improving quality and decreasing costs and includes provisions such as value-based payment programs and increased funding of comparative research.  Furthermore, the law includes a reduction in the annual rate of inflation for hospitals that began in 2011 and the establishment of an independent payment advisory board to recommend ways of reducing the rate of growth in Medicare spending beginning in 2014.  We cannot predict what healthcare programs and regulations will be ultimately implemented at the federal or state level, or the effect of any future legislation or regulation.  However, any changes that lower reimbursement for our products or reduce medical procedure volumes could adversely affect our business and results of operations.

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Our Business Strategy

The Company’s key strategy is to enhance shareholder value through profitable revenue growth in targeted segments of the ophthalmology and neurosurgery markets. This is accomplished through the identification and development of reusable and disposable devices and surgical equipment in collaboration with leading surgeons and OEM partners. We are committed to establishing a strong operational infrastructure and financial foundation within which growth opportunities can be prudently evaluated, financed and pursued. We will remain vigilant and sensitive to new challenges which may arise from changes in the definition and delivery of appropriate healthcare in our fields of interest. In fiscal 2014 and beyond, our strategic priorities are to drive accelerating growth in the ophthalmology business, deliver improved profitability through our lean initiatives, manage our neurosurgery and OEM business for stable growth and strong cash flows and demonstrate consistent, solid financial performance.  Enterprise-wide sales information is included in Note 16 to the consolidated audited financial statements.  For additional detail on the Company’s Strategy, see Part I, Item 1, “Business – Our Business Strategy.”

Results of Operations

Year Ended July 31, 2013 Compared to Year Ended July 31, 2012

Net Sales

The following table presents net sales by category (dollars in thousands):

	Fiscal Year Ended July 31,
	2013			2012			%
Net Sales
Ophthalmic		$	35,446		$	35,240		0.6	%
OEM (1)			26,469			23,973		10.4	%
Other (2)			881			801		10.0	%
Total		$	62,796		$	60,014		4.6	%

(1) Net sales from OEM represent sales of electrosurgery generators, disposable bipolar forceps and related accessories and royalties from Codman, multi-channel ablation generators, disposable ultrasonic aspirator tips and related accessories to Stryker, sales of certain disposable products to Mobius along with sales of certain laser probes to Iridex in the comparable 2012 period. In addition, recognition of deferred revenues of $1.3 million from Alcon is included in this category for the fiscal year ended July 31, 2013.  Recognition of deferred revenues of $266,000 and $1.2 million from Codman and Alcon, respectively, are included in this category for the fiscal year ended July 31, 2012.

(2) Net sales from Other represent direct neurosurgery revenues and other miscellaneous revenues.

Ophthalmic sales grew 0.6 percent in fiscal 2013 compared to fiscal 2012. Domestic ophthalmic sales decreased 0.3 percent primarily due to decreased sales of base business capital equipment and disposables partially offset by increased sales of VersaVIT^TM vitrectomy systems and procedural kits.  International ophthalmic sales increased 1.7 percent primarily due to increased sales of VersaVIT^TM vitrectomy systems and procedural kits and decreased foreign currency losses, partially offset by sales of base business capital equipment and disposables. OEM sales increased by $2.5 million in fiscal 2013 as compared to fiscal 2012. Total OEM sales rose 10.4 percent to $26.5 million in fiscal 2013 (including $1.3 million of deferred revenue recognized) compared with $23.8 million in fiscal 2012 (including $1.5 million of deferred revenue recognized). The increase was primarily due to strong disposable forceps and electrosurgical generator sales to Codman and strong multi-channel ablation generator sales to Stryker. Other sales increased $80,000 in the fiscal 2013, or 10.0 percent, compared to the fiscal 2012.

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Currently, disposable product sales account for approximately 80.5 percent of our total product sales.  Overall sales of our disposable products grew $2.2 million, or 4.4 percent, in fiscal 2013 as compared to fiscal 2012. Sales of capital equipment increased by approximately $839,000, or 8.8 percent, in fiscal 2013 as compared to fiscal 2012.

The following table presents domestic and international net sales (dollars in thousands):

	Fiscal Year Ended July 31,
	2013			2012			%
Net Sales
Domestic		$	46,489		$	44,047		5.5	%
International			16,307			15,967		2.1	%
Total		$	62,796		$	60,014		4.6	%

Domestic sales increased 5.5 percent in fiscal 2013 due to increases in OEM sales.  All OEM sales are recorded as domestic sales.  The increase in international sales of 2.1 percent was primarily due to the increased sales of VersaVIT^TM vitrectomy systems and procedural kits and decreased foreign currency losses, partially offset by decreased sales of base business capital equipment and disposables.

Gross Profit

Gross profit as a percentage of net sales was 51.5 percent in fiscal 2013, compared to 57.5 percent in fiscal 2012.  Gross profit as a percentage of net sales for fiscal 2013 compared to fiscal 2012 decreased 6.0 percentage points due to the following factors:  (i) an approximate $1.6 million increase in the reserve for excess and obsolete inventory and its associated labor and overhead in the second fiscal quarter impacted our margin by 2.5 percentage points; (ii) weak demand for our disposables reduced our ability to absorb labor and overhead by 1.0 percentage point; and (iii) the decreased benefit from deferred revenue negatively impacted margin by 0.3 percentage point.  Gross profit was also negatively impacted by product mix including both the products within our ophthalmology product line and the OEM sales, as they now comprise 42.2% of our sales mix.  

Operating Expenses (dollars in thousands)

	Fiscal Year Ended July 31,
	2013					2012
	Dollars		% of Sales			Dollars		% of Sales
R&D costs	$	3,643		5.8	%	$	3,642		6.1	%
Sales and Marketing expenses		13,805		22.0	%		11,881		19.8	%
Medical Device Excise tax		289		0.5	%		-		0.0	%
General and Administrative expenses		10,932		17.4	%		10,515		17.5	%

R&D costs remained flat at $3.6 million for fiscal 2013 when compared to fiscal 2012.  As of July 31, 2013, there were 29 active product development projects in various stages of completion.  The Company’s R&D investment is driven by the opportunities to develop new products to meet the needs of its surgeon customers, and reflects the Company’s R&D budget.  This results in an investment rate that is comparable to such spending by other medical device companies.  The Company expects over the next few years to invest in R&D at a rate of approximately 6 to 8 percent of net sales.

Sales and marketing expenses, which consist of salaries, commissions and direct expenses, increased $1.9 million to $13.8 million, or 22.0 percent of sales, for the fiscal year ended July 31, 2013, compared to $11.9 million, or 19.8 percent of net sales, for the fiscal year ended July 31, 2012.  The Company has added three territory managers and has incurred other promotional costs as it launches the VersaVIT^TM vitrectomy system and related procedural kits.

Medical device excise tax was $289,000, or 0.5 percent of net sales, for the fiscal 2013 as the Company began paying the medical device excise tax in January 2013.

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General and administrative (“G&A”) expenses increased by approximately $417,000 during the fiscal year ended July 31, 2013 and as a percentage of net sales were 17.4 percent for the fiscal year ended July 31, 2013 as compared to 17.5 percent for the fiscal year ended July 31, 2012.  The increase in G&A expenses was primarily due to stock compensation granted to directors, executive officers and senior managers of the organization in December 2012 and various other cost increases.

Stock-based compensation cost is measured at the grant date, based on the fair value of the award calculated using the Black-Scholes option pricing model, and is recognized over the directors’ and employees’ requisite service period.  The Company will continue to grant options to its independent directors and officers but uses restricted stock to provide incentive compensation for its non-officer employees.  As of July 31, 2013, the future compensation cost expected to be recognized is approximately $333,000 in fiscal 2014, $254,000 in fiscal 2015, $226,000 in fiscal 2016 and $88,000 in fiscal 2017.  However, the major portion of our stock compensation cost arises from our stock option grants to our directors, which is recognized pro-ratably over the year as the options vest.  As of July 31, 2013, there was approximately $1.1 million of total unrecognized compensation cost related to non-vested restricted stock-based compensation arrangements granted under the Company’s 2001 Stock Plan.  The cost is expected to be recognized over a weighted average period of four years, which is generally the vesting period.

Other Income/Expense

Other expense in fiscal 2013 decreased to $13,000 compared to $14,000 in fiscal 2012.

Operating Income, Income Taxes and Net Income

Operating income for fiscal 2013 was $3.7 million, as compared to operating income of $8.5 million in fiscal 2012. The decrease in operating income was primarily the result of a 19.3 percent increase in cost of goods sold partially offset by a 4.6 percent increase in net sales (including $1.3 million of deferred revenue recognized) for a net decrease in gross profit of $2.1 million.  In addition, operating income was reduced in fiscal 2013 by an increase of $1.9 million in sales and marketing expenses, $289,000 in medical device excise tax and an increase of $417,000 in G&A expenses.

For the fiscal year ended July 31, 2013, the Company recorded a $1.1 million income tax provision on a pre-tax income of $3.7 million, or 30.6 percent effective tax rate.  The effective tax rate was impacted by the re-enactment of the Research and Experimentation credit from December 2011.  For the fiscal year ended July 31, 2012, the Company recorded a $2.5 million income tax provision on pre-tax income of $8.5 million, or 29.5 percent effective tax rate.  The effective tax rate was primarily due to the favorable impact of the Company’s state tax planning strategies implemented and recorded in fiscal 2012.

Income from continuing operations decreased by $3.4 million to $2.6 million for the fiscal year ended July 31, 2013 from $6.0 million for the same period in fiscal 2012.  Basic and diluted earnings per share from continuing operations for the fiscal year ended July 31, 2013 decreased to $0.10 from $0.24 when compared to the fiscal year ended July 31, 2012.  Basic weighted average shares outstanding increased to 25,243,010 at July 31, 2013 from 25,100,064 at July 31, 2012.

The Company also experienced a $382,000 loss in fiscal 2012, or $0.02 basic and diluted earnings per share, from the discontinued operations of its plastic injection molding operations.

Net income was $5.6 million, or $0.22 basic and diluted earnings per share, for fiscal 2012.

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Year Ended July 31, 2012 Compared to Year Ended July 31, 2011

Net Sales

The following table presents net sales by category (dollars in thousands):

	Fiscal Year Ended July 31,
	2012			2011			%
Net Sales
Ophthalmic		$	35,240		$	34,547		2.0	%
OEM (1)			23,973			19,456		23.2	%
Other (2)			801			1,654		(51.6	%)
Total		$	60,014		$	55,657		7.8	%

(2) Net sales from OEM represent sales of electrosurgery generators, disposable bipolar forceps and related accessories and royalties from Codman, multi-channel ablation generators, disposable ultrasonic aspirator tips and related accessories to Stryker and certain laser probes to Iridex. In addition, recognition of deferred revenues of $266,000 and $1.2 million from Codman and Alcon, respectively, are included in this category for the fiscal year ended July 31, 2012, respectively.  Recognition of deferred revenues of $334,000 and $696,000 from Codman and Alcon, respectively, are included in this category for the fiscal year ended July 31, 2011.

(2) Net sales from Other represent direct neurosurgery revenues and other miscellaneous revenues.

Ophthalmic sales grew 2.0 percent in fiscal 2012 compared to fiscal 2011. Domestic ophthalmic sales increased 5.3 percent primarily due to sales of the Company’s new disposable products.  However, international ophthalmic sales decreased 1.8 percent primarily due to organic weakness in Europe and Canada. OEM sales increased by $4.5 million in fiscal 2012 as compared to fiscal 2011. Total OEM sales rose 23.2 percent to $24.0 million in fiscal 2012 (including $1.5 million of deferred revenue recognized) compared with $19.5 million in the fiscal 2011 (including $1.0 million of deferred revenue recognized). The increase was primarily due to strong volumes of disposable products sold to Stryker and new product sales to Mobius. Other sales decreased $853,000 in the fiscal 2012, or 51.6 percent, compared to the fiscal 2011. This decline in other sales was the result of the transition of the majority of our direct neurosurgery distribution to Codman and Stryker under OEM partner agreements.

Disposable product sales accounted for approximately 81.5 percent of our total product sales.  Overall sales of our disposable products grew $4.0 million, or 8.8 percent, in fiscal 2012 as compared to fiscal 2011.  Sales of capital equipment declined by approximately $267,000, or 2.7 percent, in fiscal 2012 compared to fiscal 2011.

The following table presents domestic and international net sales (dollars in thousands):

	Fiscal Year Ended July 31,
	2012			2011			%
Net Sales
Domestic		$	44,047		$	38,997		12.9	%
International			15,967			16,660		(4.2	%)
Total		$	60,014		$	55,657		7.8	%

Domestic sales increased 12.9 percent in fiscal 2012 due to increases in ophthalmic and OEM sales.  All OEM sales are recorded as domestic sales.  The decrease in international ophthalmology sales of 1.8 percent was exacerbated by the decline in international neurosurgery sales in fiscal 2012 due to the shift in sales from direct international neurosurgery sales to our OEM partners, as these sales are included in domestic revenue.

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Gross Profit

Gross profit as a percentage of net sales was 57.5 percent in fiscal 2012, compared to 58.9 percent in fiscal 2011.  Gross profit as a percentage of net sales for fiscal 2012 compared to fiscal 2011 decreased 1.4 percentage points due to the impact of an inventory write-down of approximately $367,000 in the third fiscal quarter and the impact of the mix of OEM sales, partially offset by the impact of the improved margins on our ophthalmology products and the recognition of deferred revenue from our OEM business.

Operating Expenses (dollars in thousands)

	Fiscal Year Ended July 31,
	2012					2011
	Dollars		% of Sales			Dollars		% of Sales
R&D costs	$	3,642		6.1	%	$	3,713		6.7	%
Sales and Marketing expenses		11,881		19.8	%		11,474		20.6	%
G&A expenses		10,515		17.5	%		9,245		16.6	%

R&D costs decreased $71,000 to $3.6 million for fiscal 2012 when compared to fiscal 2011.  As of July 31, 2012, there were 26 active projects in various stages of completion.  The Company’s R&D investment is driven by the opportunities to develop new products to meet the needs of its surgeon customers, and reflects the Company’s R&D budget.  This results in an investment rate that is comparable to such spending by other medical device companies.

Sales and marketing expenses, which consist of salaries, commissions and direct expenses, increased $407,000 to $11.9 million, or 19.8 percent of sales, for the fiscal year ended July 31, 2012, compared to $11.5 million, or 20.6 percent of net sales, for the fiscal year ended July 31, 2011.  The decrease in sales and marketing as a percentage of net sales was primarily due to the impact of the mix of OEM sales.

G&A expenses increased by approximately $1.3 million during the fiscal year ended July 31, 2012 and as a percentage of net sales were 17.5 percent for the fiscal year ended July 31, 2012 as compared to 16.6 percent for the fiscal year ended July 31, 2011.  The increase in G&A expenses was primarily due to stock compensation granted to directors, executive officers and senior managers of the organization and additional employees required to manage the implementation of our lean and quality improvement initiatives.

Other Income/Expense

Other expense in fiscal 2012 decreased to $14,000 compared to $213,000 in fiscal 2011. The decrease was primarily due to lower interest expense on a reduced level of debt and the $99,000 loss on sale of product line which the Company experienced in fiscal 2011.

Operating Income, Income Taxes and Net Income

Operating income for fiscal 2012 was $8.5 million, as compared to operating income of $8.3 million in the comparable 2011 fiscal period. The increase in operating income was primarily the result of a 7.8 percent increase in net sales (including $1.5 million of deferred revenue recognized) partially offset by a 11.4 percent increase in cost of goods sold for a net increase in gross profit of $1.7 million.  In addition, operating income was unfavorably impacted in fiscal 2011 by an increase of $1.3 million in G&A expenses and $407,000 in sales and marketing expenses offset by a $71,000 decrease in R&D costs, respectively.

For the fiscal year ended July 31, 2012, the Company recorded a $2.5 million income tax provision on a pre-tax income of $8.5 million, or 29.5 percent effective tax rate.  For the fiscal year ended July 31, 2011, the Company recorded a $2.5 million income tax provision on pre-tax income of $8.1 million, or 30.3 percent effective tax rate.  The Company’s effective tax rate decreased for the fiscal year ended July 31, 2012 primarily due to the increase in the production deduction from 6.0 percent to 9.0 percent and the impact of the Company’s state tax planning strategies, partially offset by the expiration of the research and development tax credit as of December 31, 2011.

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Income from continuing operations increased by $299,000 to $6.0 million for the fiscal year ended July 31, 2012 from $5.7 million for the same period in fiscal 2011.  Basic and diluted earnings per share from continuing operations for the fiscal year ended July 31, 2012 increased to $0.24 from $0.23 when compared to the fiscal year ended July 31, 2011.  Basic weighted average shares outstanding increased to 25,100,064 at July 31, 2012 from 24,901,832 at July 31, 2011.

The Company also experienced a $382,000 loss in fiscal 2012, or $0.02 basic and diluted earnings per share, from the discontinued operations of its plastic injection molding operations.

Net income was $5.6 million, or $0.22 basic and diluted earnings per share for fiscal 2012.

Liquidity and Capital Resources

The Company had $12.5 million in cash and cash equivalents and no interest-bearing debt as of July 31, 2013.

Working capital, including the management of inventory and accounts receivable, is a management focus. At July 31, 2013, the Company had an average of 84 days of sales outstanding (“DSO”) in accounts receivable.  The 84 days of DSO at July 31, 2013 was 12 days unfavorable when compared to July 31, 2012 and 11 days unfavorable when compared to July 31, 2011 utilizing the trailing 12 months of sales. The DSO was impacted by the sales progression during the fourth quarter and the fiscal year and the impact of the M.I.S.S. acquisition on July 8, 2013.

At July 31, 2013, the Company had 178 days of inventory on hand.  The inventory on hand was favorable by 46 days when compared to July 31, 2012 and favorable by 15 days when compared to July 31, 2011 utilizing the trailing 12 months of cost of sales.  The Company had invested approximately $2.1 million in inventory for new products and new product launches at the end of fiscal 2013.  However, the Company had $1.9 million in backlog as of July 31, 2013.

Cash flows provided by operating activities were $3.7 million for the year ended July 31, 2013, compared to cash flows used by operating activities of approximately $2.4 million for the comparable fiscal 2012 period.  The improvement in cash flows of approximately $6.1 million was primarily attributable to the increase in income taxes payable of $5.6 million, a decrease in inventory of $4.9 million and an increase in accrued expenses of $0.8 million. This decrease was partially offset by a decrease in income from continuing operations of $3.4 million, an increase in accounts receivable of $1.7 million and $0.1 million change in various other adjustments.

Cash flows used by investing activities were $3.8 million for the year ended July 31, 2013, compared to cash used by investing activities of $2.0 million for the comparable fiscal 2012 period.  During the year ended July 31, 2013, the Company invested $2.8 million net cash in the acquisition of M.I.S.S.  In addition, during the year ended July 31, 2013, cash additions to property and equipment and patents were $0.6 million and $0.4 million, compared to $1.8 million and $0.2 million for fiscal 2012, respectively.

 Cash flows provided by financing activities were approximately $0.1 million for the year ended July 31, 2013, compared to cash used in financing activities of $1.0 million for the year ended July 31, 2012.  The increase in net cash provided by financing activities was due to the payment on long-term debt of $0.7 million and the payment on debt incurred from the acquisition of the Malis^® trademark of $0.3 million in fiscal 2012, which was not required in fiscal 2013 as these debts were retired in April 2012 and December 2011, respectively.  In addition, the Company received proceeds of $65,000 and a $72,000 income tax benefit from the exercise of stock options during the fiscal year ended July 31, 2013.

 The Company had the following committed financing arrangements as of July 31, 2013:

Revolving Credit Facility: The Company has a credit facility with a bank which allows for borrowings of up to $9.5 million with an interest rate based on either the one-, two- or three-month LIBOR plus 2.00 percent and adjusting each quarter based upon our leverage ratio. As of July 31, 2013, interest under the facility is charged at 2.27 percent. The unused portion of the facility is charged at a rate of 0.20 percent. There were no borrowings under this facility at July 31, 2013. Outstanding amounts are collateralized by the Company’s domestic receivables and inventory. This credit facility was amended on September 30, 2013, to extend the termination date through September 30, 2016.

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The facility has two financial covenants: a maximum leverage ratio of 3.75 times and a minimum fixed charge coverage ratio of 1.1 times. As of July 31, 2013, the Company’s leverage ratio was 0.65 times and the minimum fixed charge coverage ratio was 488.6 times. Collateral availability under the line as of July 31, 2013 was approximately $9.5 million. The facility restricts the payment of dividends if, following the distribution, the fixed charge coverage ratio would fall below the required minimum.

Equipment Line of Credit: Under this credit facility, the Company may borrow up to $1.0 million, with interest currently at one-month LIBOR plus 3.0 percent. Pursuant to the terms of the equipment line of credit, under no circumstance shall the rate be less than 3.5 percent per annum. The unused portion of the facility is not charged a fee. There were no borrowings under this line as of July 31, 2013. The equipment line of credit was amended on September 30, 2013 to extend the maturity date to September 30, 2016.

Management believes that cash flows from operations, together with available cash, will be sufficient to meet the Company’s working capital and capital expenditure needs for the next twelve months.  In addition, the remaining deferred revenue from the Alcon settlement will flow through our statement of income over approximately the next 13 years.  However, as the cash has already been collected, it will not impact our future liquidity and will reduce our cash flow from operations.

Contractual Obligations

The Company has entered into contracts with various third parties in the normal course of business that will require future payments.  The following illustrates the Company’s contractual obligations as of July 31, 2013:

			Payments due by Period
Contractual Obligations	Total		Less than 1 Year		1-3 Years		4-5 Years		More than 5 Years
Operating Leases (1)	$	740,000	$	388,000	$	352,000	$	--	$	--
Total Contractual Obligations	$	740,000	$	388,000	$	352,000	$	--	$	--

(1) We enter into operating leases in the normal course of business.  Some lease agreements provide us with the option to renew the lease.  Our future cash payment would change if we exercised these renewal options or if we entered into additional operating lease agreements.

Use of Estimates and Critical Accounting Policies

The financial results of the Company are affected by the selection and application of accounting policies and methods. Significant accounting policies which require management’s judgment are discussed below.

Revenue Recognition

The Company primarily records revenue from product sales when the revenue is realized and the product is shipped from its facilities.  This includes satisfying the following criteria: the arrangement with the customer is evident, usually through receipt of a purchase order; the sales price is fixed and determinable; delivery to the carrier has occurred; and collectability is reasonably ensured.  Freight and shipping billed to customers is included in net sales, and the cost of shipping is included in cost of sales.  Sales tax billed to customers is included as a liability as products are shipped.

The terms and conditions of sales to both our domestic and international distributors do not differ materially from the terms and conditions of sales to our domestic and international end-user customers.

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Service revenue substantially relates to repairs of products and is recognized when the service has been completed.  Revenue from royalty fees is recorded as the products bearing the trademark are shipped.

Deferred Revenue

On April 23, 2010, the Company entered into a Settlement and License Agreement with Alcon  pursuant to which Alcon paid to the Company $32.0 million. The net proceeds to the Company were $21.4 million after contingency payments to attorneys. The Company recognized a gain from this agreement of $2.4 million in the third quarter of fiscal 2010. The remaining $19.0 million has been accounted for as an up-front license fee under the Confidential Settlement and License Agreement and was deferred and recognized as earned over a period estimated to be 15 years based upon estimated shipments to Alcon under a related Supply Agreement executed pursuant to the settlement.  On February 13, 2012, Alcon informed the Company that it had decided to cancel the project, orders and forecasts covering the two products to have been supplied under the Supply Agreement. However, the Supply Agreement remains in effect and the Company has continuing performance obligations associated with the Supply Agreement. Therefore, the Company plans on recognizing the remaining deferred revenue associated with the Supply Agreement ratably over the next 13 years which is the remaining life of the patents and associated Supply Agreement.The Company recognized $1.3 million, $1.2 million and $696,000 of this deferred revenue for the fiscal years ended July 31, 2013, 2012 and 2011, respectively.

Inventories

Inventories, consisting of purchased materials, direct labor and manufacturing overhead, are stated at the lower of cost or market, with cost being determined using the first-in, first-out method.  The Company’s inventory is very dynamic and new products are added frequently.  Thus, the Company reviews the valuation of its inventory on a quarterly basis and determines if a valuation allowance is necessary for items that have not had their values updated recently.

In addition, the Company evaluates inventories for excess quantities and identified obsolescence quarterly.  The Company’s evaluation includes an analysis of historical experience and monitoring current inventory activity by product.  As part of this analysis, the Company considers several factors, including the inventory’s length of time on hand, historical sales, product life cycle and product obsolescence.  Estimates are used to determine the necessity of these reserves based on periodic detailed analysis using both quantitative and qualitative factors.  If future cost valuations, future demand or market conditions are different from the Company’s projects, a change in recorded inventory valuation reserves may be required and would be reflected in cost of sales in the period the revision is made.  To the extent that it determines there are some excess quantities based on historical levels of sales and other requirements, or obsolete material in inventory, the Company records valuation reserves against all or a portion of the value of the related parts or products.

Amortization Periods

The Company records amortization of intangible assets using the straight-line method over the estimated useful lives of these assets.  It bases the determination of these useful lives on the period over which it expects the related assets to contribute to its cash flows or in the case of patents, their legal life, whichever is shorter.  If the Company’s assessment of the useful lives of intangible assets changes, it may change future amortization expense (see Impairment of Long-Lived Assets).

Allowance for Doubtful Accounts

The Company evaluates the collectability of accounts receivable based on a combination of factors. In circumstances where a specific customer is unable to meet its financial obligations to the Company, the Company records an allowance against amounts due to reduce the net recognized receivable to the amount that management reasonably expects to collect. For all other customers, the Company records allowances for doubtful accounts based on the length of time the receivables are past due, the current business environment and historical experience. Accounts receivable are written off when deemed uncollectible.  Recoveries of accounts receivable previously written off are recorded when received.  The Company generally does not charge interest on past-due amounts in accounts receivable.  The Company has a history of minimal uncollectible accounts.  If the financial condition of customers or the length of time that receivables are past due were to change, the Company may change the recorded amount of allowances for doubtful accounts in the future.

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Patents and Research and Development

Incremental legal and other costs to obtain patents are capitalized to a patent asset.  Salaries, benefits and other direct costs of product development are expensed as operating expenses in R&D costs.  Patents are amortized to operations under the straight-line method over the shorter of the remaining statutory life of the patent or the cash flow stream associated with that patent.

Goodwill

As of July 31, 2013, we have recorded $12.2 million of goodwill.  We perform purchase price allocations including recognition of intangible assets when we have a business combination.  The excess of the purchase price after the allocation of fair values to tangible assets and identifiable intangibles is allocated to goodwill.  We make judgments and estimates in conjunction with the carrying value of these assets, including amounts to be capitalized and whether the assets have finite or indefinite lives for amortization purposes.  Currently, we have one reporting unit.

Carrying values for goodwill are reviewed annually in the fourth quarter and whenever events or changes in circumstances indicate the carrying amount may be impaired in accordance with the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 350, “Intangibles – Goodwill and Other” (“ASC 350”).  We have adopted the provisions of Accounting Standards Update (“ASU”) No. 2011-08, “Intangibles – Goodwill and Other:  Testing Goodwill for Impairment,” which permits us to first assess qualitative factors to determine whether or not the existence of events or circumstances leads to a determination that it is more likely than not that the estimated fair value of a reporting unit is less than its carrying amount. We have determined, based upon the qualitative factors, that it is more likely than not that goodwill is not impaired and no further testing was performed.  If we determine that it is not more likely than not that the fair value of such an intangible asset is less than its carrying amount, then we are not required to perform any additional tests for assessing intangible assets for impairment. However, if we conclude otherwise or elect not to perform the qualitative assessment, then we are required to perform a quantitative impairment test that involves a comparison of the estimated fair value of the intangible asset with its carrying value. If the carrying value of the intangible asset exceeds its fair value, an impairment loss is recognized in an amount equal to that excess.

If further testing is required, our tests may include three approaches to determine the fair value of our reporting unit.  The first approach is Discounted Cash Flows methodology, which focuses on our expected cash flows available for common equity owners.  Net cash flows to equity is defined as our earnings plus depreciation, amortization and interest expense, or EBITDA, less our estimated usage of cash for debt, capital expenditures and working capital changes.  The resulting net cash flows and the terminal value (our value of invested capital at the end of the five year projection period) are then discounted to derive an indication of the present value of the Company’s invested capital.  Interest-bearing debt is then subtracted to arrive at the Company’s fair value of equity.  This valuation method is dependent upon management’s assumptions made regarding future cash flow and cash requirements and the discount factor used to determine the present value of our future cash flows.  If necessary, we would also analyze two additional valuation methods:  the Guideline Company approach and the Market Capitalization approach.

Future changes in the judgments, assumptions and estimates that are used in our impairment testing for goodwill, including discount and tax rates or future cash flow projections, could result in significantly different estimates of the fair values.  A significant reduction in the estimated fair values could result in impairment charges that could materially affect our financial statements.

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Other Intangibles

As of July 31, 2013, we have recorded $5.9 million of indefinite-lived intangible assets for the Malis^® trademark.  The life of a trademark is inextricably related to the life of the product bearing the mark or the life of the business entity owning the trademark.  The Company intends to use the trademark indefinitely, and therefore, its useful life is not limited to any specific product.

Carrying values for intangibles are reviewed annually in the fourth quarter and whenever events or changes in circumstances indicate the carrying amount may be impaired in accordance with the ASC 350.  We have adopted the provisions of ASU No. 2012-02, “Intangibles – Goodwill and Other:  Testing Indefinite-Lived Intangible Assets for Impairment,” which permits us to first assess qualitative factors to determine whether or not the existence of events or circumstances leads to a determination that it is more likely than not that the estimated fair value of an intangible asset is less than its carrying amount.  We have determined, based upon the qualitative factors that it is more likely than not that intangible assets are not impaired and no further testing was performed.  If we determine that it is not more likely than not that the fair value of such an intangible asset is less than its carrying amount, then we are not required to perform any additional tests for assessing intangible assets for impairment. However, if we conclude otherwise or elect not to perform the qualitative assessment, then we are required to perform a quantitative impairment test that involves a comparison of the estimated fair value of the intangible asset with its carrying value. If the carrying value of the intangible asset exceeds its fair value, an impairment loss is recognized in an amount equal to that excess.

If further testing is required, we utilize the Discounted Cash Flow methodology, which focuses on our expected cash flows derived from the use of the intangible asset.  With respect to the trademark, the expected cash flows are reduced by the related income taxes and debt.  Significant and unanticipated changes to the market for the Malis^® branded products or our contract authorizing the use of the Malis^® trademark could require a provision for impairment in a future period.

Future changes in judgments, assumptions and estimates that are used in our impairment testing for intangibles, including discount and tax rates or future cash flow projections, could result in significantly different estimates of the fair values. Significant and unanticipated changes to either the market for the Malis^® branded products or our contract authorizing the use of the Malis^® trademark could require a provision for impairment in a future period.

Impairment of Long-Lived Assets

Long-lived assets and certain identifiable intangible assets to be held and used are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of such asset may not be recoverable.  Determination of recoverability is based on an estimate of undiscounted future cash flows resulting from the use of the group of assets and their eventual disposition.  Measurement of an impairment loss for long-lived assets and certain identifiable intangible assets that management expects to hold and use is based on the fair value of the asset. Long-lived assets and certain identifiable intangible assets to be disposed of are reported at the lower of carrying amount or fair value less costs to sell.

Tax Assets and Liabilities

We account for income taxes in accordance with FASB ASC Topic 740, “Income Taxes” (“ASC Topic 740”), which requires that deferred tax assets and liabilities be recognized using enacted tax rates for the effect of temporary differences between the book and tax bases of recorded assets and liabilities.  ASC Topic 740 also requires that deferred tax assets be reduced by a valuation allowance if its “more likely than not” that some portion or all of the deferred tax asset may not be realized.  In our annual evaluation of the need for a valuation allowance, we take into account various factors, including the expected level of future taxable income in our tax jurisdictions and available tax planning strategies.  If actual results differ from these assumptions made in our annual evaluation of our valuation allowance, we may record a change in valuation allowance through income tax expense in the period this determination is made.  At July 31, 2013, we had deferred tax assets related to net foreign operating loss carryforwards with a tax value of $2.1 million.  These net foreign operating loss carryforwards have various expiration dates, depending on the country and period in which they occurred.  The Company has not established a valuation allowance for these deferred tax assets based upon the Company’s ability to use these losses by implementing tax planning strategies, projected future taxable income and the expiration dates of these carryforwards.

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In addition, the calculations of our tax liabilities involve dealing with uncertainties in the application of complex tax regulation.  On August 1, 2007, we adopted the provisions of ASC Topic 740 related to uncertain tax positions.  It is inherently difficult and subjective to estimate such amounts, as we have to determine the probability of certain outcomes.  We reevaluate these positions on a quarterly basis including an analysis of changes in facts or circumstances, changes in tax law, effectively settled issues or net audit activity.  Such a change in recognition or measurement would result in the recognition of an additional charge to the tax provision.

Stock-Based Compensation

The Company utilizes FASB ASC Topic 718, “Compensation – Stock Compensation” in accounting for its employee stock options.  Stock-based compensation cost is measured at the grant date, based on the fair value of the award and is recognized over the directors’ and employees’ requisite service period.  Compensation expense is calculated using the Black-Scholes option pricing model.  Of the inputs into the Black-Scholes option pricing model, the one that can impact the value of the options the most is the volatility factor.  For awards occurring in fiscal year ended July 31, 2013, the Company has utilized a volatility factor of 70.5 percent in this calculation.  In addition, the Company utilized an expected average risk-free interest rate of 1.72 percent, an expected average life of 10 years and no expected dividends.

Recent Accounting Pronouncements

Information about recent accounting pronouncements is included in Note 19 to the consolidated audited financial statements.

Item 7A. Quantitative and Qualitative Disclosures about Market Risk

The Company’s primary market risks include fluctuations in interest rates and exchange rate variability.

The Company has $12.5 million in cash and cash equivalents with a substantial portion of this cash held in short-term money market funds bearing interest at 20 basis points. Interest income from these funds is subject to market risk in the form of fluctuations in interest rates. A reduction in the interest on these funds to 10 basis points would decrease the amount of interest income from these funds by approximately $12,500.

The Company currently has a revolving credit facility and an equipment line of credit facility in place. The revolving credit facility had no outstanding balance at July 31, 2013, bearing interest at a current rate of LIBOR plus 2.0 percent. The equipment line of credit facility had no outstanding balance at July 31, 2013, bearing interest at one-month LIBOR plus 3.0 percent. Interest expense from these credit facilities is subject to market risk in the form of fluctuations in interest rates. Because the current levels of borrowings are zero, there would be no market risk associated with the interest rates. The Company does not perform any interest rate hedging activities related to these two facilities.

Additionally, the Company has exposure to foreign currency fluctuations through export sales to international accounts. As only approximately 11.0 percent of our sales revenue is denominated in foreign currencies, we estimate that a change in the relative strength of the dollar to foreign currencies would not have a material impact on the Company’s results of operations. The Company does not conduct any hedging activities related to foreign currency.

41

Item 8. Financial Statements and Supplementary Data

Financial statements and financial statement schedules specified by this Item, together with the report thereon by UHY LLP, are filed pursuant to Item 15 of this Annual Report on Form 10-K.

Information on quarterly results of operations is set forth in Note 18, “Quarterly Financial Data (Unaudited)” to our consolidated audited financial statements.

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

None.

Item 9A. Controls and Procedures

Evaluation of Disclosure Controls and Procedures — We maintain disclosure controls and procedures designed to ensure that information required to be disclosed in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC, and that such information is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.  Our management, including our Chief Executive Officer and Chief Financial Officer, reviewed and evaluated the effectiveness of our disclosure controls and procedures as of July 31, 2013.  Based upon such review and evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of the date of such evaluation to provide reasonable assurance that information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified by the SEC’s rules and forms and that such information is accumulated and communicated to the Company’s management, including the Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

Management’s Annual Report on Internal Control over Financial Reporting — Our management is responsible for establishing and maintaining adequate internal control over financial reporting.  Our internal control over financial reporting includes policies and procedures designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with U.S. GAAP.  All internal control systems, no matter how well designed, have inherent limitations.  Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation.

We conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework of Internal Control over Financial Reporting issued by the Committee of Sponsoring Organizations of the Treadway Commission.  This evaluation included review of the documentation of controls, evaluation of the design effectiveness of controls, testing of the operating effectiveness of controls and a conclusion of this evaluation.  Based on its evaluation, management concluded our internal control over financial reporting was effective as of July 31, 2013.

Changes in Internal Control Over Financial Reporting — There were no changes in the Company’s internal control over financial reporting identified in connection with the evaluation required by paragraph (d) of Rule 13a-15 or 15d-15 of the Exchange Act that occurred during the fiscal quarter ended July 31, 2013 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

Attestation Report of Registered Public Accounting Firm — This Annual Report on Form 10-K includes an attestation report of our independent registered public accounting firm regarding internal control over financial reporting.

42

Item 9B. Other Information

On September 30, 2013, the Company and Synergetics executed the Tenth Amendment to Credit and Security Agreement (the “Tenth Amendment”) with Regions Bank, as Lender, relating to the Company’s revolving credit facility and equipment line of credit. In addition, on September 30, 2013, the Company and Synergetics executed the Third Amended and Restated Revolving Note in favor of Regions Bank and the  Second Amended and Restated 2008 Equipment Purchase Note in favor of Regions Bank (together, the “Amended Notes”). The Tenth Amendment and Amended Notes extend the maturity date of the Company’s revolving credit facility and equipment line of credit and related promissory notes to September 30, 2016.

PART III

Item 10. Directors, Executive Officers and Corporate Governance

The information under the heading, “Executive Officers of the Registrant” in Part I, Item I of this Annual Report on Form 10-K is incorporated herein by reference. In addition, certain information required by this Item 10 will be included in the Company’s definitive proxy materials to be filed with the SEC within 120 days after the end of the Company’s fiscal year covered by this Annual Report on Form 10-K and is incorporated herein by reference.  The following sections of such proxy materials are herein incorporated by reference:  “Proposal 1 -- Election of Directors,” information regarding the identification of the members of the Audit Committee of the Company included in the section “Corporate Governance – Audit Committee,” and “Section 16(a) Beneficial Ownership Reporting Compliance.”

The Board of Directors has determined that Ms. Juanita Hinshaw, one of the Company’s independent directors, qualifies as the Audit Committee financial expert because she has served in an oversight role in finance and accounting.

The Company has established a Code of Business Conduct and Ethics, which is applicable to all of its employees, officers and directors.  The Code is available on the Company’s website at www.synergeticsusa.com and also is available to stockholders in print upon request.  The Company intends to satisfy the disclosure requirement under Item 10 of Form 8-K regarding the amendment to, or a waiver from, a provision of this policy that applies to the Company’s principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions and that relates to any element of the code of ethics definition enumerated in Item 406(b) of Regulation S-K by posting such information on its website.

During the fourth quarter of fiscal 2013, there were no material changes to the procedures by which stockholders may recommend nominees to the Board.

Item 11. Executive Compensation

Information required pursuant to this Item 11 will be included in the Company’s definitive proxy materials to be filed with the SEC within 120 days after the end of the Company’s fiscal year covered by this Annual Report on Form 10-K under the sections “Executive Compensation,” “Director Compensation,” “Change in Control Agreements” and “Compensation Committee Interlocks and Insider Participation” and is incorporated herein by reference.

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

Certain information required pursuant to this Item 12 will be included in the Company’s definitive proxy materials to be filed with the SEC within 120 days after the end of the Company’s fiscal year covered by this Annual Report on Form 10-K under the section “Principal Stockholders” and is incorporated herein by reference.

43

EXISTING EQUITY COMPENSATION PLAN INFORMATION

The table below shows information with respect to all of our equity compensation plans as of July 31, 2013.

						Number of Securities
						Available for Future
						Issuance
						Under Equity
	Number of Securities		Weighted Average			Compensation Plans
	to be Issued Upon Exercise of		Exercise Price of			(Excluding Securities
	Outstanding Options,		Outstanding Options,			Reflected in the First
Plan Category	Warrants and Rights		Warrants and Rights			Column)
Equity Compensation Plans Approved By Security Holders		747,662		$	4.17		398,632
Equity Compensation Plans Not Approved By Security Holders		—			—		—
Total		747,662		$	4.17		398,632

Item 13. Certain Relationships and Related Transactions, and Director Independence

Information required pursuant to this Item 13 concerning certain relationships and related transactions, as applicable, will be included in the Company’s definitive proxy materials to be filed with the SEC within 120 days after the end of the Company’s fiscal year covered by this Annual Report on Form 10-K under the section “Certain Relationships and Related Transactions” and is incorporated herein by reference.  Information required pursuant to this Item 13 concerning director independence will be included in the Company’s definitive proxy materials to be filed with the SEC within 120 days after the end of the Company’s fiscal year covered by this Annual Report on Form 10-K under the section “Corporate Governance – Director Independence” and is incorporated herein by reference.

Item 14. Principal Accountant Fees and Services

Information required pursuant to this Item 14 concerning our principal accountant fees and services will be included in our definitive proxy materials to be filed with the SEC within 120 days after the end of the Company’s fiscal year covered by this Annual Report on Form 10-K under the section Proposal 2 – “Ratification of the Appointment of the Company’s Independent Registered Public Accounting Firm” and is incorporated herein by reference.

PART IV

Item 15. Exhibits, Financial Statement Schedules

(a) The following documents are filed as part of this report.

1.	Financial Statements
	The consolidated financial statements and supplemental schedule of Synergetics USA, Inc. and subsidiaries, together with the report thereon of the Company’s independent registered public accounting firm, are included following Item 15 of this Annual Report on Form 10-K.
2.	Financial Statement Schedules
	Schedule II — Valuation Allowances and Qualifying Accounts is included in Note 20 to the consolidated financial statements, which are included following Item 15 of this Annual Report on Form 10-K.  See Index to Financial Statements and Financial Statement Schedules on page 45 herein.
3.	Exhibits
	The exhibits required to be filed as part of this Annual Report on Form 10-K are listed in the attached Index to Exhibits.

(b) The exhibits filed with this Annual Report on Form 10-K are listed in the attached Index to Exhibits.

(c) None.

44

INDEX TO FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES

Audited Financial Statements
Reports of Independent Registered Public Accounting Firm	46
Consolidated Balance Sheets as of July 31, 2013 and 2012	48
Consolidated Statements of Income and Comprehensive Income for the years ended July 31, 2013, 2012 and 2011	49
Consolidated Statements of Stockholders’ Equity for the years ended July 31, 2013, 2012 and 2011	50
Consolidated Statements of Cash Flows for the years ended July 31, 2013, 2012 and 2011	51
Notes to Consolidated Financial Statements	52
Financial Statement Schedules
Schedule II - Valuation Allowances and Qualifying Accounts	69

45

Report of Independent Registered Public Accounting Firm

To the Board of Directors and Stockholders of

Synergetics USA, Inc.

We have audited the accompanying consolidated balance sheets of Synergetics USA, Inc. and Subsidiaries as of July 31, 2013 and 2012 and the related consolidated statements of income and comprehensive income, stockholders’ equity, and cash flows for each of the years in the three-year period ended July 31, 2013.  Synergetics USA, Inc.’s management is responsible for these consolidated financial statements.  Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States).  Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement.  An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements.  An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation.  We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of Synergetics USA, Inc. and Subsidiaries as of July 31, 2013 and 2012, and the consolidated results of their operations and their cash flows for each of the years in the three-year period ended July 31, 2013, in conformity with accounting principles generally accepted in the United States of America.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), Synergetics USA, Inc. and Subsidiaries' internal control over financial reporting as of July 31, 2013, based on criteria established in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commissions (COSO),and our report dated October 1, 2013 expressed an unqualified opinion.

/s/ UHY LLP

St. Louis, Missouri

October 1, 2013

46

Report of Independent Registered Public Accounting Firm

To the Board of Directors and Stockholders of

Synergetics USA, Inc.

We have audited Synergetics USA, Inc. and Subsidiaries’ internal control over financial reporting as of July 31, 2013, based on criteria established in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Synergetics USA, Inc.’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting included in Management’s Annual Report on Internal Control over Financial Reporting in Part II, Item 9A of this Form 10-K. Our responsibility is to express an opinion on the company’s internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk.  Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, Synergetics USA, Inc. and Subsidiaries maintained, in all material respects, effective internal control over financial reporting as of July 31, 2013, based on criteria established in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets and the related consolidated statements of income and comprehensive income, stockholders’ equity, and cash flows of Synergetics USA, Inc. and Subsidiaries, and our report dated October 1, 2013 expressed an unqualified opinion.

/s/ UHY LLP

St. Louis, Missouri

October 1, 2013

47

Synergetics USA, Inc. and Subsidiaries

Consolidated Balance Sheets

July 31, 2013 and 2012

(Dollars in thousands, except share and per share data)

	2013			2012
Assets
Current Assets
Cash and cash equivalents	$	12,470		$	12,680
Accounts receivable, net of allowance for doubtful accounts of $495 and $319, respectively		14,425			11,796
Inventories		14,825			15,679
Income taxes refundable		254			--
Prepaid expenses		996			825
Deferred income taxes		1,827			1,247
Total current assets		44,797			42,227
Property and Equipment, net		8,962			9,239
Intangible and Other Assets
Goodwill		12,155			10,660
Other intangible assets, net		11,715			11,277
Deferred income taxes		3,557			4,088
Patents, net		1,411			1,179
Cash value of life insurance		96			93
Total assets	$	82,693		$	78,763
Liabilities and Stockholders’ Equity
Current Liabilities
Accounts payable	$	3,237		$	2,144
Accrued expenses		3,486			2,844
Income taxes payable		--			191
Deferred revenue		1,288			1,288
Total current liabilities		8,011			6,467
Long-Term Liabilities
Deferred revenue		14,530			15,818
Total long-term liabilities		14,530			15,818
Total liabilities		22,541			22,285
Commitments and Contingencies (Notes 10 and 17)
Stockholders’ Equity
Common stock at July 31, 2013 and July 31, 2012, $0.001 par value, 50,000,000 shares authorized; 25,292,960 and 25,160,069 shares issued and outstanding, respectively		25			25
Additional paid-in capital		27,489			26,421
Retained earnings		33,097			30,538
Accumulated other comprehensive loss:
Foreign currency translation adjustment		(459	)		(506	)
Total stockholders’ equity		60,152			56,478
Total liabilities and stockholders’ equity	$	82,693		$	78,763

See Notes to Consolidated Financial Statements.

48

Synergetics USA, Inc. and Subsidiaries

Consolidated Statements of Income and Comprehensive Income

Years Ended July 31, 2013, 2012 and 2011

(Dollars in thousands, except share and per share data)

	2013			2012			2011
Net sales	$	62,796		$	60,014		$	55,657
Cost of sales		30,425			25,495			22,876
Gross profit		32,371			34,519			32,781
Operating expenses
Research and development		3,643			3,642			3,713
Sales and marketing		13,805			11,881			11,474
Medical device excise tax		289			--			--
General and administrative		10,932			10,515			9,245
		28,669			26,038			24,432
Operating income		3,702			8,481			8,349
Other income (expenses)
Investment income		31			40			99
Interest expense		(9	)		(43	)		(202	)
Loss on sale of product line		--			--			(99	)
Miscellaneous		(35	)		(11	)		(11	)
		(13	)		(14	)		(213	)
Income from continuing operations before provision for income taxes		3,689			8,467			8,136
Provision for income taxes		1,130			2,499			2,467
Income from continuing operations	$	2,559		$	5,968		$	5,669
Loss from discontinued operations, net of income tax benefit of $--, $193 and $24, respectively		--			382			36
Net income	$	2,559		$	5,586		$	5,633
Earnings per share:
Basic
Income from continuing operations	$	0.10		$	0.24		$	0.23
Loss from discontinued operations		--			(0.02	)		0.00
Net income	$	0.10		$	0.22		$	0.23
Diluted
Income from continuing operations	$	0.10		$	0.24		$	0.23
Loss from discontinued operations		--			(0.02	)		0.00
Net income	$	0.10		$	0.22		$	0.23
Basic weighted average common shares outstanding		25,243,010			25,100,064			24,901,832
Diluted weighted average common shares outstanding		25,337,525			25,256,584			25,035,095
Net income	$	2,559		$	5,586		$	5,633
Foreign currency translation adjustment		47			(595	)		112
Comprehensive income	$	2,606		$	4,991		$	5,745

See Notes to Consolidated Financial Statements.

49

Synergetics USA, Inc. and Subsidiaries

Consolidated Statements of Stockholders’ Equity

Years Ended July 31, 2013, 2012 and 2011

(Dollars in thousands, except share data)

	Number of Shares		Common Stock		Additional Paid in  Capital		Retained Earnings		Accumulated Other Comprehensive Income (Loss)			Total
Balance, August 1, 2010		24,772,155	$	25	$	24,905	$	19,319	$	(23	)	$	44,226
Net income		--		--		--		5,633		--			5,633
Foreign currency translation adjustment		--		--		--		--		112			112
Restricted stock grants		43,846		--		153		--		--			153
Stock-based compensation		13,466		--		205		--		--			205
Proceeds from stock options exercised		141,417		--		210		--		--			210
Tax benefit associated with stock option exercised		--		--		125		--		--			125
Balance July 31, 2011		24,970,884		25		25,598		24,952		89			50,664
Net income		--		--		--		5,586		--			5,586
Foreign currency translation adjustment		--		--		--		--		(595	)		(595	)
Restricted stock grants		166,707		--		336		--		--			336
Stock-based compensation		5,593		--		428		--		--			428
Proceeds from stock options exercised		16,885		--		35		--		--			35
Tax benefit associated with stock options exercised		--		--		24		--		--			24
Balance, July 31, 2012		25,160,069		25		26,421		30,538		(506	)		56,478
Net income						--		2,559		--			2,559
Foreign currency translation adjustment		--		--		--		--		47			47
Restricted stock grants		58,272		--		293		--		--			293
Stock-based compensation		15,309		--		638		--		--			638
Proceeds from stock options exercised		59,310		--		65		--		--			65
Tax benefit associated with stock options exercised		--		--		72		--		--			72
Balance, July 31, 2013		25,292,960	$	25	$	27,489	$	33,097	$	(459	)	$	60,152

See Notes to Consolidated Financial Statements.

50

Synergetics USA Inc. and Subsidiaries

Consolidated Statements of Cash Flows

Years Ended July 31, 2013, 2012 and 2011

(Dollars in thousands)

	2013			2012			2011
Cash Flows from Operating Activities
Net income	$	2,559		$	5,586		$	5,633
Plus: Loss from discontinued operations – net of tax		--			382			36
Income from continuing operations		2,559			5,968			5,669
Adjustments to reconcile net income to net cash (used in) provided by operating activities
Depreciation		1,123			1,093			972
Amortization		680			600			653
Provision for doubtful accounts receivable		207			50			(9	)
Stock-based compensation		931			764			358
Deferred income taxes		(49	)		153			(6,388	)
Loss on sale of equipment		35			--			50
Loss on sale of product line		--			--			99
Changes in assets and liabilities
(Increases) decreases in:
Accounts receivable		(2,553	)		(843	)		(2,095	)
Inventories		1,191			(3,695	)		(291	)
Prepaid expenses		(130	)		93			(150	)
Income taxes refundable		(254	)		219			--
Increases (decreases) in:
Accounts payable		845			615			(253	)
Accrued expenses		603			(183	)		427
Deferred revenue		(1,288	)		(1,494	)		(430	)
Income taxes payable		(235	)		(5,848	)		6,243
Net cash provided by (used in) operating activities		3,665			(2,508	)		4,855
Net cash provided by (used in) discontinued operations		--			59			(68	)
Net cash provided by (used in) operating activities		3,665			(2,449	)		4,787
Cash Flows from Investing Activities
Proceeds on the sale of equipment		55			--			11
Purchase of property and equipment		(550	)		(1,809	)		(1,687	)
Acquisition of patents and other intangibles		(412	)		(214	)		(273	)
Acquisitions, less cash acquired		(2,848	)		--			--
Increase in cash value of life insurance		(3	)		(11	)		(10	)
Net cash used in continuing investing activities		(3,758	)		(2,034	)		(1,959	)
Net cash used in discontinued operations		--			--			(382	)
Net cash used in investing activities		(3,758	)		(2,034	)		(2,341	)
Cash Flows from Financing Activities
Principal payments on revenue bonds payable		--			--			(1,728	)
Payment on debt incurred for acquisition of trademark		--			(313	)		(598	)
Principal payments on long-term debt		--			(740	)		(685	)
Tax benefit associated with the exercise of non-qualified stock options		72			24			125
Proceeds from the issuance of common stock		65			35			210
Net cash provided by (used in) financing activities		137			(994	)		(2,676	)
Foreign exchange rate effect on cash and cash equivalents		(254	)		(242	)		(40	)
Net decrease in cash and cash equivalents		(210	)		(5,719	)		(270	)
Cash and cash equivalents
Beginning		12,680			18,399			18,669
Ending	$	12,470		$	12,680		$	18,399
Supplemental Disclosures of Cash Flow Information
Cash paid for:
Interest	$	9		$	63		$	223
Income taxes paid		1,568			7,950			2,488
Supplemental Schedule of Non-cash Investing and Financing Activity
Purchase of equipment included in accounts payable		120			--			14

See Notes to Consolidated Financial Statements.

51

Synergetics USA, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

Note 1. Nature of Business and Significant Accounting Policies

Nature of business: Synergetics USA, Inc. (“Synergetics USA” or the “Company”) is a Delaware corporation incorporated on June 2, 2005, in connection with the reverse merger of Synergetics, Inc. (“Synergetics”) and Valley Forge Scientific Corp. (“Valley Forge”) and the subsequent reincorporation of Valley Forge (the predecessor to Synergetics USA) in Delaware. Synergetics USA is a leading supplier of precision surgical devices.  Through continuous improvement and development of its people, the Company’s mission is to design, manufacture and market innovative surgical devices, surgical equipment and consumables of the highest quality in order to assist and enable surgeons who perform surgery around the world to provide a better quality of life for their patients.   The Company’s primary focus is on targeted segments within the surgical disciplines of ophthalmology and neurosurgery. Its distribution channels include a combination of direct and independent distributor sales organizations and important strategic alliances with market leaders. The Company is located in O’Fallon, Missouri, King of Prussia, Pennsylvania and Corby, United Kingdom.  During the ordinary course of its business, the Company grants unsecured credit to its domestic and international customers.

A summary of the Company’s significant accounting policies follows:

Use of estimates in the preparation of financial statements: The preparation of consolidated financial statements in conformity with U.S. generally accepted accounting principles (“U.S. GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenue and expenses during the reporting period.  Actual results could differ from those estimates.

Principles of consolidation: The consolidated financial statements include the accounts of Synergetics USA and its wholly owned subsidiaries: Synergetics, Synergetics IP, Inc., Synergetics Development Company, LLC and Synergetics Delaware, Inc.  All significant intercompany accounts and transactions have been eliminated.

Cash and cash equivalents: For purposes of the consolidated statements of cash flows, the Company considers all highly liquid debt instruments purchased with maturity of three months or less to be cash equivalents.

Accounts receivable: During the ordinary course of its business, the Company grants unsecured credit to its domestic and international customers.  Accounts receivable are carried at original invoice amount less an estimate made for doubtful accounts based on a review of all outstanding amounts on a monthly basis.  Collateral is not generally required on the Company’s accounts receivable.  Accounts receivable are generally considered past due based upon their specific terms.  Management determines the allowance for doubtful accounts by regularly evaluating individual customer receivables and considering a customer’s financial condition, credit history and current economic conditions.  Accounts receivable are written off when deemed uncollectible.  Recoveries of accounts receivable previously written off are recorded when received.  The Company generally does not charge interest on past-due amounts in accounts receivable.  The Company has a history of minimal uncollectible accounts.

Concentration of credit risk: Financial instruments, which potentially subject the Company to concentrations of credit risk, consist principally of cash and cash equivalents and accounts receivable.  The Company’s cash and cash equivalents are primarily held in a money market account in a bank and currently exceed the FDIC insurance limit.  Generally these deposits can be redeemed upon demand and therefore, bear minimal risk.

Inventories: Inventories, consisting of purchased materials, direct labor and manufacturing overhead, are stated at the lower of cost, with cost being determined using the first-in, first-out method, or market.  The Company’s inventory is very dynamic and new products are added frequently.  Thus, the Company reviews the valuation of its inventory on a quarterly basis and determines if a valuation allowance is necessary for items that have not had their values updated recently.

52

In addition, the Company evaluates inventories for excess quantities and identified obsolescence quarterly.  The Company’s evaluation includes an analysis of historical experience and monitoring current inventory activity by product.  As part of this analysis, the Company considers several factors, including the inventory’s length of time on hand, historical sales, product life cycle and product obsolescence.  Estimates are used to determine the necessity of recording these reserves based on periodic detailed analysis using both quantitative and qualitative factors.   If future cost valuations, future demand or market conditions are different from the Company’s projections, a change in recorded inventory valuation reserves may be required and would be reflected in cost of sales in the period the revision is made.  To the extent that the Company determines there are some excess quantities based on its projected levels of sales and other requirements, or obsolete material in inventory, the Company records a valuation reserves against all or a portion of the value of the related parts or products. During the second quarter of fiscal 2013, the Company completed a detailed analysis of its inventory and recorded a reserve for excess inventory of approximately $1,629,000.  In its continuous effort to manage its inventory, the Company had previously conducted an inventory analysis of obsolete inventory and recorded a provision for same in the third quarter of fiscal 2012.   The reserve was necessary to reflect not only the Company’s changing base ophthalmic business but also to reflect the appropriate level and mix identified in accordance with the Company’s lean methodology with respect to its inventory.

Property and equipment: Property and equipment are depreciated using the straight-line method over their estimated useful lives as follows:

	Useful lives (in years)
Building and improvements	7-39
Machinery and equipment	5-7
Furniture and fixtures	5-7
Software	3-10

Goodwill and other intangibles: Absent any impairment indicators, goodwill is tested for impairment on an annual basis.  The Company performs its goodwill impairment tests during the fourth fiscal quarter.  The Company has adopted the provisions of Accounting Standards Update (“ASU”) No. 2011-08, “Intangibles – Goodwill and Other:  Testing Goodwill for Impairment” and ASU No. 2012-12, “Intangibles – Goodwill and Other:  Testing Indefinite-Lived Intangible Assets for Impairment,” which permits the Company to assess qualitative factors to determine whether the existence of events or circumstances leads to a determination that it is more likely than not that that, goodwill and other intangibles have been impaired.  The Company has determined, based upon as assessment of qualitative factors, that it is more likely than not that goodwill and other intangibles have not been impaired and no further testing was performed.  Other intangible assets, consisting of licensing agreements and proprietary know-how, are amortized to operations under the straight-line method over their estimated useful lives or statutory lives, whichever is shorter.  These periods range from two to seventeen years.  The life of a trademark is inextricably related to the life of the product bearing the mark or the life of the business entity owning the trademark.  The Company intends to use the Malis® trademark indefinitely, and therefore, its useful life is not limited to any specific product. The trademark constitutes an indefinite-lived intangible that will be used in perpetuity.  Proprietary know-how consists of the patented technology which is included in the Company’s core product lines, bipolar electrosurgical generators.  As a proprietary technology is a distinguishing feature of the Company’s products, it represents a valuable intangible asset.

Patents: Incremental legal and other costs to obtain the patent are capitalized to a patent asset.  Salaries, benefits and other direct costs of product development are expensed as operating expenses in research and development (“R&D”) costs.  Patents are amortized to operations under the straight-line method over the remaining statutory life of the patent.  Total amortization for other intangibles including patents for the years ended July 31, 2013, 2012 and 2011 was $680,000, $600,000 and $653,000, respectively.

Deferred revenue:During the second quarter of fiscal 2011, the Company received a payment from Codman & Shurtleff, Inc. (“Codman”), a OEM partner, to establish exclusivity on certain generator products and accessories.  Revenue from the agreement has been deferred and is being amortized over its expected term.  The Company recognized $-, $266,000 and $334,000 in revenue for the fiscal years ended July 31, 2013, 2012 and 2011, respectively, under the terms of the exclusivity agreement.

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On April 23, 2010, the Company entered into a Settlement and License Agreement with Alcon, Inc. (“Alcon”)  pursuant to which Alcon paid to the Company $32.0 million. The net proceeds to the Company were $21.4 million after contingency payments to attorneys. The Company recognized a gain from this agreement of $2.4 million in the third quarter of fiscal 2010. The remaining $19.0 million has been accounted for as an up-front license fee under the Confidential Settlement and License Agreement and was deferred and recognized as earned over a period estimated to be 15 years based upon estimated shipments to Alcon under a related Supply Agreement.  On February 13, 2012, Alcon informed the Company that it had decided to cancel the project, orders and forecasts covering the two products to have been supplied under the Supply Agreement. However, the Supply Agreement remains in effect and the Company has continuing performance obligations associated with the Supply Agreement. Therefore, the Company plans on recognizing the remaining deferred revenue associated with the Supply Agreement ratably over the next 13 years which is the remaining life of the patents and associated Supply Agreement.The Company recognized $1.3 million, $1.2 million and $696,000 of this deferred revenue for the fiscal years ended July 31, 2013, 2012 and 2011, respectively.

	July 31, 2013		July 31, 2012
Deferred revenue – Alcon settlement	$	15,818	$	17,106
Less:  Short-term		1,288		1,288
Long-term portion	$	14,530	$	15,818

Impairment of long-lived assets (excluding goodwill and other intangibles): The Company reviews long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.  Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to future undiscounted cash flows expected to be generated by the asset.  Measurement of an impairment loss for long-lived assets and certain identifiable assets that management expects to hold and use is based on the fair value of the asset.  Assets to be sold are reported at the lower of the carrying amount or the fair value less costs to sell.

Product warranty: The Company provides a warranty against manufacturing and workmanship defects. Under the Company’s general terms and conditions of sale, liability during the warranty period (typically three years) is limited to repair or replacement of the defective item. The Company’s warranty cost is not material.

Income taxes: The Company accounts for income taxes under Accounting Standards Codification (“ASC”) Topic 740, “Income Taxes” (“ASC Topic 740”).  Under ASC Topic 740, the deferred tax provision is determined using the liability method whereby deferred tax assets are recognized for deductible temporary differences and operating loss, tax credit carry-forwards and deferred tax liabilities are recognized for taxable temporary differences.  Temporary differences are the differences between the reported amounts of assets and liabilities and their tax bases.  Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized.  Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment.

In addition, under ASC Topic 740, the Company may recognize tax liabilities when, despite the Company’s belief that its tax return positions are supported, the Company believes that certain positions may not be fully sustained upon review by tax authorities.  The Company has identified no uncertain tax positions subsequent to the adoption of this standard on August 1, 2007.

The Company’s policy is to recognize interest and penalties through income tax expense.  As of July 31, 2013, the 2010 to 2012 tax years remain subject to examination by major tax jurisdictions.  There are no federal income tax audits in process as of July 31, 2013. There are one foreign audit and one state audit currently in progress.

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Fair value of financial instruments: The Company’s financial instruments consist of cash and cash equivalents, accounts receivable, accounts payable, accrued expenses and debt.  As of July 31, 2013, 2012 and 2011, the carrying amounts of financial instruments, including cash and cash equivalents, accounts receivable, accounts payable and accrued expenses approximate fair value due to the short maturity of these instruments.

Non-financial assets such as goodwill, intangible assets and property, plant and equipment are measured at fair value when there is an indicator of impairment and recorded at fair value only when impairment is recognized.  No impairment indicators existed as of July 31, 2013.

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.  The fair value hierarchy distinguishes between (1) market participant assumptions developed based on market data obtained from independent sources (observable inputs) and (2) an entity’s own assumptions about market participant assumptions developed based on the best information available in the circumstances (unobservable inputs).  The fair value hierarchy consists of these broad levels, which gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3).  The Company’s Level 1 financial assets are money market funds, whose fair values are based on quoted market prices.  The Company does not have any Level 2 or Level 3 financial assets.

Foreign currency translation:  All balance sheet accounts have been translated using the exchange rates in effect at the balance sheet date.  Statements of income amounts have been translated using the average exchange rate for the year.  The gains and losses resulting from the changes in exchange rates from year to year have been reported in other comprehensive income (loss).  The foreign currency translation adjustment is the only component of accumulated other comprehensive loss.  Foreign currency translation adjustments exclude income tax expense (benefit) given that the Company’s investments in foreign subsidiaries are deemed to be reinvested for an indefinite period of time.

Revenue recognition: The Company primarily records revenue from product sales when the revenue is realized and the product is shipped from its facilities.  This includes satisfying the following criteria: the arrangement with the customer is evident, usually through the receipt of a purchase order; the sales price is fixed and determinable; delivery to the carrier has occurred; and collectability is reasonably ensured. Freight and insurance billed to customers is included in net sales, and the cost of freight and insurance is included in cost of sales.  Sales tax billed to customers is included as a liability as products are shipped.

The terms and conditions of sales to both the Company’s domestic and international distributors do not differ materially from the terms and conditions of sales to its domestic and international end-user customers.

Service revenue substantially relates to repairs of products and is recognized when the service has been completed.  Revenue from royalty fees is recorded as the products bearing the trademark are shipped.

Advertising: The Company follows the policy of charging the costs of advertising to expense as incurred. Advertising expense was approximately $146,000, $153,000 and $119,500 for the years ended July 31, 2013, 2012 and 2011, respectively.

Royalties: The Company pays royalties to doctors and medical institutions for providing assistance in the design and development of various devices and components.  Royalties are paid quarterly based on the sales of the instrument or components.  Royalty expense was approximately $331,300, $281,600 and $318,000 for the years ended July 31, 2013, 2012 and 2011, respectively.

Stock compensation: The Company has a stock plan for employees and consultants allowing for incentive and non-qualified stock options, restricted stock and stock awards which have been granted to certain employees and consultants of the Company.  In addition, the Company has a stock option plan for non-employee directors allowing for non-qualified stock options.  Options under this plan have been granted to all non-employee directors.  Stock-based compensation cost is measured at the grant date, based on the fair value of the award, and is recognized over the directors’ and employees’ requisite service period. Compensation expense is calculated using the Black-Scholes option pricing model.  In addition, compensation expense equal to number of shares granted multiplied by the market value on the date of the grant over the restriction period is recognized in net earnings for restricted stock awards.

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Earnings per share: Basic earnings per share (“EPS”) data has been computed on the basis of the weighted average number of common shares outstanding during each period presented.  Diluted EPS data has been computed on the basis of the assumed conversion, exercise or issuance of all potential common stock instruments, unless the effect is to reduce the loss or increase the net income per common share (dollars in thousands, except share and per share data):

	Year Ended July 31,
	2013		2012			2011
Numerator:
Income from continuing operations	$	2,559	$	5,968		$	5,669
Loss from discontinued operations net of income tax		--		382			36
Net income		2,559		5,586			5,633
Denominator:
Weighted average common shares and denominator for basic calculation		25,243,010		25,100,064			24,901,832
Stock options and restricted stock		94,515		156,520			133,263
Denominator for diluted calculation		25,337,525		25,256,584			25,035,095
Earnings per share – basic
Income from continuing operations	$	0.10	$	0.24		$	0.23
Loss from discontinued operations		--		(0.02	)		--
Net income	$	0.10	$	0.22		$	0.23
Earnings per share – diluted
Income from continuing operations	$	0.10	$	0.24		$	0.23
Loss from discontinued operations		--		(0.02	)		--
Net income	$	0.10	$	0.22		$	0.23

Stock option shares excluded from computation of dilutive income per share because the effect would be antidilutive for the years ended July 31, 2013, 2012 and 2011 were 533,079, 215,734 and 60,000, respectively.

Segment reporting: Operating segments are defined as components of an enterprise about which separate financial information is available that is evaluated regularly by the chief decision maker or group in deciding how to allocate resources and in assessing performance.  The Company’s chief decision maker reviews the results of operations and requests for capital expenditures based on one industry segment: producing and selling products and procedures for surgery, primarily for vitreoretinal surgery and neurosurgery.  The Company’s entire revenue is generated through this segment.  Revenues are attributed to countries based upon the location of end-user customers or distributors.

Reclassifications: Certain reclassifications have been made to the prior year financial statements to conform to the current year’s presentation.

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Note 2.  Acquisition of M.I.S.S. Ophthalmics LTD

On July 8, 2013, the Company acquired M.I.S.S. Ophthalmics Limited (“M.I.S.S.”), a private ophthalmology distribution company incorporated in England and Wales, for net cash consideration of $2.8 million.  M.I.S.S. was the Company’s distributor of ophthalmic products in the United Kingdom, and its wholesale distribution activities contributed approximately $1.1 million in revenue to the Company in fiscal 2013.  M.I.S.S. generated total revenue of approximately $3.2 million during its fiscal year ended March 31, 2013.

The Company has preliminarily allocated the purchase price to the tangible and intangible assets acquired and liabilities assumed based on their estimated fair value at the date of acquisition resulting in the recognition of $0.9 million of intellectual property and $1.5 million of goodwill.  The results of operations for M.I.S.S. have been included in the Consolidated Statements of Income for the period July 8, 2013 through July 31, 2013.

No supplemental pro-forma information is presented for the acquisition due to the immaterial effect of the acquisition on the Company's financial statements. The Company recognized $70,000 of transaction related costs that were expensed in the quarter ended July 31, 2013.

Note 3.  Discontinued Operations

In September 2011, the Company adopted a plan to close its plastic injection molding operations and transitioned this production to an outside vendor.  During the Company’s first quarter of fiscal 2012, substantially all operational activities of this unit were discontinued and the Company classified them as discontinued operations.  The Company completed the sale of these assets prior to the end of the second quarter of fiscal 2012.  The assets included in the disposal group were primarily equipment.  The following table summarizes the results of the discontinued operations fiscal years ended July 31, 2013, 2012 and 2011 (dollars in thousands):

	Year Ended July 31
	2013		2012			2011
Net sales	$	--	$	23		$	188
Operating costs		--		(191	)		(248	)
Impairment, restructuring and other charges		--		(253	)		--
Write-off of goodwill		--		(29	)		--
Loss on sale of fixed assets		--		(125	)		--
Loss from discontinued operations before benefit for income taxes		--		(575	)		(60	)
Income tax benefit		--		193			24
Loss from discontinued operations	$	--	$	(382	)	$	(36	)

Note 4. OEM Partner Agreements

The Company sells all of its generators and a majority of its neurosurgery instruments and accessories to two U.S. based national and international OEM partners as described below:

Codman

In the neurosurgical market, the bipolar electrosurgical system manufactured by Valley Forge prior to the merger has been sold for over 30 years through a series of distribution agreements with Codman, an affiliate of Johnson & Johnson.  On April 2, 2009, the Company executed a new, three-year distribution agreement with Codman for the continued distribution by Codman of certain bipolar generators and related disposables and accessories, effective January 1, 2009.  In addition, the Company entered into a new, three-year license agreement, which provides for the continued licensing of the Company’s Malis^® trademark to Codman for use with certain Codman products, including those covered by the distribution agreement.  Both agreements expired on December 31, 2011 and have renewed for three years.  In December 2010, Codman elected to exercise its option of exclusive distribution with respect to the bipolar generators and related disposables and accessories.

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On November 16, 2009, the Company announced the signing of an addendum to its three-year agreement with Codman.  Under the terms of the revised agreement, Codman has the exclusive right to market and distribute the Company’s Malis^® branded disposable bipolar forceps produced by Synergetics.  Codman began distribution of the disposable bipolar forceps on December 1, 2009, domestically, and on February 1, 2010, internationally.

Total sales to Codman and its respective percent of the Company’s net sales for the years ended July 31, 2013, 2012 and 2011, including the historical sales of generators, accessories and disposable cord tubing that the Company has supplied in the past, as well as the disposable bipolar forceps sales resulting from the addendum to the existing distribution agreement, were as follows (dollars in thousands):

	Year Ended July 31,
	2013			2012			2011
Net sales	$	14,097		$	11,150		$	10,507
Percent of net sales		22.4	%		18.6	%		18.9	%

Stryker Corporation (“Stryker”)

The Company supplies a multi-channel ablation generator, used for minimally invasive pain treatment, to Stryker pursuant to a supply and distribution agreement dated as of October 25, 2004, as amended.  The agreement expires on June 30, 2015.

On March 31, 2010, the Company entered into a supply agreement with Stryker pursuant to which the Company agreed to supply Stryker with disposable ultrasonic aspirator instrument tips and certain other consumable products used in conjunction with Stryker’s ultrasonic aspirator console and handpieces.  The agreement expires on March 31, 2016.

Total sales to Stryker and its respective percent of the Company’s net sales for the years ended July 31, 2013, 2012 and 2011, including the historical sales of pain control generators, and accessories that the Company has supplied in the past, as well as the disposable ultrasonic aspirator instrument tips sales and certain other consumable products resulting from the new agreements, were as follows (dollars in thousands):

	Year Ended July 31,
	2013			2012			2011
Net sales	$	10,815		$	10,398		$	7,710
Percent of net sales		17.2	%		17.3	%		13.9	%

No other customer comprises more than 10 percent of sales in any given quarter.

Note 5. Inventories

Inventories as of July 31, 2013 and 2012 were as follows (dollars in thousands):

	2013		2012
Raw material and component parts	$	7,418	$	8,670
Work in progress		1,133		1,663
Finished goods		6,274		5,346
	$	14,825	$	15,679

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Note 6.  Property and Equipment

Property and equipment as of July 31, 2013 and 2012 were as follows (dollars in thousands):

	2013		2012
Land	$	730	$	730
Building and improvements		6,365		5,896
Machinery and equipment		8,665		7,974
Furniture and fixtures		1,058		1,222
Software		1,107		1,014
Construction in progress		177		287
		18,102		17,123
Less accumulated depreciation		9,140		7,884
	$	8,962	$	9,239

Depreciation expense is included in both cost of sales, selling and general and administrative expenses.  There are minimal long-lived assets outside of the United States.  Depreciation expense for the years ended July 31, 2013, 2012 and 2011 was approximately $1,123,000, $1,093,000 and $972,000, respectively.

Note 7.  Other Intangible Assets

Information regarding the Company’s other intangible assets is as follows (dollars in thousands):

	Gross Carrying Value		Accumulated Amortization		Net
	July 31, 2013
Proprietary know-how	$	4,057	$	2,286	$	1,771
Trademark		5,938		--		5,938
Licensing agreement		5,834		2,766		3,068
Customer relationships		531		--		531
Other intangibles		407		--		407
Patents		2,270		859		1,411
	$	19,037	$	5,911	$	13,126
	July 31, 2012
Proprietary know-how	$	4,057	$	2,039	$	2,018
Trademark		5,923		--		5,923
Licensing agreement		5,834		2,498		3,336
Patents		1,873		694		1,179
	$	17,687	$	5,231	$	12,456

Goodwill of $1,495,000 and other intangibles of $1,530,000 are a result of the acquisition of M.I.S.S completed on July 8, 2013. Goodwill of $10,660,000 and proprietary know-how of $4,057,000 are a result of the reverse merger transaction completed on September 21, 2005. The Company did not incur costs to renew or extend the term of acquired intangible assets during the fiscal year ended July 31, 2013.

Amortization is included in general and administrative expense and was $680,000, $600,000 and $653,000 for the years ended July 31, 2013, 2012 and 2011, respectively.  Amortization for the next five years is expected to approximate $800,000 annually.

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Note 8. Accrued Expenses

Accrued expenses as of July 31, 2013 and 2012 consisted of the following (dollars in thousands):

	2013		2012
Payroll, commissions and employee benefits	$	1,131	$	786
Royalties		147		62
Warranty		15		15
Other		2,193		1,981
	$	3,486	$	2,844

Note 9.  Pledged Assets, Short and Long-Term Debt

Revolving Credit Facility: The Company has a credit facility with a bank which allows for borrowings of up to $9.5 million (collateral available on July 31, 2013 permits borrowings up to $9.5 million) with an interest rate based on either the one-, two- or three-month LIBOR plus 2.0 percent and adjusting each quarter based upon the Company’s leverage ratio. As of July 31, 2013, interest under the facility is charged at 2.27 percent. The unused portion of the facility is charged at a rate of 0.20 percent. There were no borrowings under this facility at July 31, 2013. Outstanding amounts are collateralized by the Company’s domestic receivables and inventory. This credit facility was amended on September 30, 2013, to extend the termination date through September 30, 2016.

The facility has two financial covenants: a maximum leverage ratio of 3.75 times and a minimum fixed charge coverage ratio of 1.1 times. As of July 31, 2013, the leverage ratio was 0.65 times and the minimum fixed charge coverage ratio was 488.6 times. Collateral availability under the line as of July 31, 2013, was approximately $9.5 million. The facility restricts the payment of dividends if, following the distribution, the fixed charge coverage ratio would fall below the required minimum.

Equipment Line of Credit: Under this credit facility, the Company may borrow up to $1.0 million, with interest at one-month LIBOR plus 3.0 percent.  Pursuant to the terms of the equipment line of credit, under no circumstances shall the rate be less than 3.5 percent per annum.  The unused portion of the facility is not charged a fee. There were no borrowings under this facility at July 31, 2013. The equipment line of credit was amended on September 30, 2013, to extend the maturity date to September 30, 2016.

Note 10. Operating Leases

The Company leases various equipment, a portion of its facilities in O’Fallon, Missouri and the facility in King of Prussia, Pennsylvania under operating leases.  The O’Fallon, Missouri lease expires in February 2016 and the King of Prussia, Pennsylvania lease has been renewed through October 2015.

The approximate minimum rental commitment under non-cancelable operating leases as of July 31, 2013 is due as follows (dollars in thousands):

Year Ending July 31,	Amount
2014	$	388
2015		265
2016		87
2017		--
2018		--
	$	740

Rent expense incurred and charged to cost of sales and selling, general and administrative expenses was approximately $364,000, $353,000 and $358,000 for the years ended July 31, 2013, 2012 and 2011, respectively.

Note 11. Income Tax Matters

The Company and its wholly owned subsidiaries file as a single entity for income tax reporting purposes.  The net deferred income tax amounts included in the accompanying consolidated balance sheets as of July 31, 2013 and 2012 include the following amounts as deferred income tax assets and liabilities (dollars in thousands):

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	2013		2012
Deferred tax assets:
Accounts receivable	$	119	$	85
Inventories		847		185
Accrued liabilities		186		165
Deferred revenue		5,940		6,423
Other		133		813
Loss on foreign subsidiaries		2,080		1,949
		9,305		9,620
Deferred tax liability
Property and equipment		1,561		1,362
Other intangible assets		2,360		2,923
		3,921		4,285
	$	5,384	$	5,335

The deferred tax amounts noted above have been classified on the accompanying consolidated balance sheets as of July 31, 2013 and 2012, as follows (dollars in thousands):

	2013		2012
Current assets	$	1,827	$	1,247
Long-term asset		3,557		4,088
	$	5,384	$	5,335

The provision for income taxes for the years ended July 31, 2013, 2012 and 2011, consisted of the following (dollars in thousands):

	2013			2012		2011
Current payable	$	1,179		$	2,153	$	8,831
Deferred		(49	)		153		(6,388	)
	$	1,130		$	2,306	$	2,443

Reconciliation of the Company’s income tax at the statutory rate to the Company’s effective rate is as follows:

	2013			2012			2011
Computed at the statutory rate		34.0	%		34.0	%		35.0	%
State taxes, net of federal tax benefit		2.5			2.4			2.3
Production deduction for domestic manufacturers		(4.3	)		(2.9	)		(2.9	)
Research and experimentation		(5.3	)		(0.8	)		(3.5	)
Other		3.7			(3.2	)		(0.6	)
		30.6	%		29.5	%		30.3	%

Note 12. Employee Benefit Plan

The Company has a 401(k) savings plan, which covers employees who have attained the age of 18 and who have been credited with at least one year of service.  Company contributions are made at the discretion of the Board of Directors.  The Company contributed $203,000, $79,000 and $51,000 to the plan for the years ended July 31, 2013, 2012 and 2011.

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Note 13. Stock-Based Compensation Plans

Stock Option Plans

In addition to the historical options outstanding for Synergetics prior to the merger, the Company has options outstanding under two existing active option plans and two terminated plans of Valley Forge.  The first active plan, the Amended and Restated Synergetics USA, Inc. (the “2001 Plan”) was adopted by Valley Forge on January 16, 2001 pursuant to which 1,345,000 shares of common stock are authorized for issuance to employees, officers and consultants of the Company.  There were 53,632 options and restricted shares not yet awarded at July 31, 2013 under the 2001 Plan.  On September 19, 2005, the stockholders of Valley Forge voted to adopt the Valley Forge Scientific Corp. 2005 Non-Employee Directors’ Stock Option Plan (the “Non-Employee Directors’ Plan”) pursuant to which 700,000 shares of common stock are authorized for issuance to non-employee directors.  There were 345,000 options available for future grants at July 31, 2013 under the Non-Employee Directors’ Plan.  Generally, options were granted with an exercise price equal to fair market value at the date of grant and expire ten years from the date of the grant.  Generally, stock options granted under these plans vest over a three to five-year period, with the exception of the non-employee director options, which vest over a 12-month period.

A summary of the status of the fixed awards at July 31, 2013, 2012 and 2011 and changes during the years ended on those dates is as follows:

	Shares			Weighted Average Exercise Price		Weighted Average Fair Value
Options outstanding, July 31, 2010		576,695		$	2.08	$	1.71
For the period from August 1, 2010 through July 31, 2011:
Granted		108,751		$	4.43	$	3.56
Forfeited		(27,000	)	$	3.21	$	2.71
Exercised		(141,417	)	$	1.49	$	1.29
Options outstanding, July 31, 2011		517,029		$	2.68	$	2.16
For the period from August 1, 2011 through July 31, 2012
Granted		235,734		$	6.21	$	4.75
Forfeited		(56,133	)	$	4.11	$	3.22
Exercised		(16,885	)	$	2.07	$	1.99
Options outstanding, July 31, 2012		679,745		$	3.80	$	2.98
For the period from August 1, 2012 through July 31, 2013
Granted		142,227		$	4.52	$	3.42
Forfeited		(15,000	)	$	4.54	$	3.66
Exercised		(59,310	)	$	1.10	$	0.95
Options outstanding, July 31, 2013		747,662		$	3.23	$	4.17
Options exercisable, July 31, 2013		514,451		$	2.92	$	3.84

A further summary about awards outstanding at July 31, 2013 is as follows:

	Shares			Weighted Average Grant Date Value
Unvested options, beginning of period		230,646		$	5.24
Granted		142,227		$	4.52
Vested		(134,662	)	$	4.89
Forfeited		(5,000	)	$	4.52
Unvested options, period end		233,211		$	5.20

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Proceeds, related tax benefits realized from options exercised and intrinsic value of options exercised were as follows (dollars in thousands), except exercise price:

	Fiscal Year Ended
	July 31, 2013		July 31, 2012		July 31, 2011
Proceeds of options exercised	$	65	$	35	$	210
Related tax benefit recognized		72		24		125
Intrinsic value of options exercised		56		34		183

The following table provides information about options outstanding and exercisable options at July 31, 2013 (dollars in thousands):

	Options Outstanding		Exercisable Options
Number		747,662		514,451
Weighted average exercise price	$	3.23	$	2.92
Aggregate intrinsic value	$	2,414	$	1,501
Weighted average contractual term	7.0 years		6.3 years

The weighted average remaining life for options outstanding and weighted average exercise price per share for exercisable options at July 31, 2013 were as follows:

		Options Outstanding			Exercisable Options
		Shares		Weighted Average Remaining Contractual Life (in years)	Shares		Weighted Average Remaining Contractual Life (in years)
<$ 2.00			174,583	5.8 years		154,750	5.7 years
$	2.01 to $3.00		40,000	4.5 years		40,000	4.5 years
$	3.01 to $4.00		40,000	3.5 years		40,000	3.5 years
$	4.01 to $5.00		257,345	8.0 years		150,385	7.2 years
$	5.01 to $6.21		235,734	8.0 years		129,316	7.5 years
Total			747,662	7.0 years		514,451	6.3 years

During the second quarter of fiscal 2013, there were options to purchase 60,000 shares of common stock granted to the Company’s independent directors, which vest pro-ratably on a quarterly basis over the next year of service.  Each independent director receives an option to purchase 10,000 shares of the Company’s common stock each year in which he or she is elected, appointed, or re-elected to serve as a director pursuant to the Amended and Restated 2005 Non-Employee Directors’ Stock Option Plan. These options vest pro-ratably on a quarterly basis over the next year of service on the Board.  The Company recorded $117,000 of compensation expense for the fiscal year ended July 31, 2013, with respect to these options.  The Company recorded $113,000 of compensation expense for the fiscal year ended July 31, 2013 for previously granted options.

During the second quarter of fiscal 2013, there were options to purchase 82,227 shares of common stock granted to the officers of the Company.  These options were granted in conjunction with the Company’s annual review of compensation as of August 1, 2012 and vest on a quarterly basis over the next five years of service. The Company recorded $41,000 of compensation expense for the fiscal year ended July 31, 2013, related to these options.  In addition, the Company recorded $192,000 of compensation expense for the fiscal year ended July 31, 2013 for previously granted options.

The Company expects to issue new shares as options are exercised. As of July 31, 2013, the future compensation cost expected to be recognized for currently outstanding stock options is approximately $333,000 in fiscal 2014, $254,000 in fiscal 2015, $226,000 in fiscal 2016 and $88,000 in fiscal 2017.

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The following table provides the weighted average fair value of options granted and the assumptions used in the Black-Scholes model:

	Fiscal Year Ended July 31,
	2013			2012			2011
Expected average risk-free interest rate		1.72	%		1.92	%		3.30	%
Expected average life (in years)		10			10			10
Expected volatility		70.5	%		71.4	%		75.4	%
Expected dividend yield		0.0	%		0.0	%		0.0	%

The expected average risk-free rate is based on 10-year U.S. treasury yield curve in December of 2012.  The expected average life represents the period of time that options granted are expected to be outstanding giving consideration to vesting schedules, historical exercise and forfeiture patterns.  Expected volatility is based on historical volatilities of Synergetics USA, Inc.’s common stock.  The expected dividend yield is based on historical information and management’s plan.

Restricted Stock Plans

Under the Company’s 2001 Plan, the Company’s common stock may be granted at no cost to certain employees and consultants of the Company.  Certain plan participants are entitled to cash dividends and voting rights for their respective shares.  Restrictions limit the sale or transfer of these shares during a vesting period whereby the restrictions lapse either pro-ratably over a three-year or five-year vesting period or at the end of the third or fifth year.  These shares also vest upon a change of control event.  Upon issuance of stock under the 2001 Plan, unearned compensation equivalent to the market value at the date of the grant is charged to stockholders’ equity and subsequently amortized to expense over the applicable restriction period.  As of July 31, 2013, there was approximately $1.1 million of total unrecognized compensation cost related to non-vested share-based compensation arrangements granted under the Company’s 2001 Plan.  The cost is expected to be recognized over a weighted average period of four years which is generally the vesting period.

In addition, during the fiscal year ended July 31, 2013, 15,309 shares were granted to advisory consultants under the 2001 Plan.  Compensation expense related to these shares was $55,000 for the fiscal year ended July 31, 2013.

The following table provides information about restricted stock grants during the fiscal year ended July 31, 2013, 2012 and 2011:

	Number of Shares			Weighted Average Grant Date Fair Value
Balance as of August 1, 2010		278,841		$	2.03
Granted		43,846		$	4.43
Vested		(11,980	)	$	1.75
Balance as of July 31, 2011		310,707		$	2.38
Granted		202,072		$	6.37
Forfeited		(39,384	)	$	5.88
Vested		(41,617	)	$	3.47
Balance as of July 31, 2012		431,778		$	3.82
Granted		70,307		$	4.52
Forfeited		(10,160	)	$	3.47
Vested		(86,677	)	$	4.57
Balance as of July 31, 2013		405,248		$	3.79

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Compensation expense associated with stock-based compensation plans as of July 31, 2013, 2012 and 2011 was as follows (dollars in thousands):

	July 31, 2013		July 31, 2012		July 31, 2011
Stock Options:
Directors	$	230	$	217	$	100
Employees		233		154		60
Total	$	463	$	371	$	160
Restricted Stock
Employees	$	413	$	357	$	154
Advisors		55		36		44
Total		468		393		198
Total Compensation Expense	$	931	$	764	$	358
Income Tax benefits from Share-based Compensation	$	285	$	225	$	108

Note 14.  Stockholders’ Equity

Upon completion of the reverse merger between Valley Forge and Synergetics on September 22, 2005, the Company reincorporated in Delaware, decreased the par value of common stock from $0.01 2/3 to $0.001, increased the authorized common shares to 50,000,000 and eliminated the outstanding treasury shares.

The holders of common stock have no preemptive rights and the common stock has no redemption, sinking fund or conversion provisions.  Each share of common stock is entitled to one vote on any matter submitted to the holders and to equal rights in the assets of the Company upon liquidation.  All of the outstanding shares of common stock are fully paid and nonassessable.

Note 15. Research and Development Costs

R&D costs related to both future and present products are charged to operations as incurred.  The Company incurred approximately $3,643,000, $3,642,000 and $3,713,000 of R&D costs during the years ended July 31, 2013, 2012 and 2011, respectively.

Note 16. Enterprise-wide Sales Information

Enterprise-wide sales information as of July 31, 2013, 2012 and 2011 consisted of the following (dollars in thousands):

	Fiscal Year Ended July 31,
	2013		2012		2011
Net Sales
Ophthalmic	$	35,446	$	35,240	$	34,547
OEM (1)		26,469		23,973		19,456
Other (2)		881		801		1,654
Total	$	62,796	$	60,014	$	55,657
	Fiscal Year Ended July 31,
		2013		2012		2011
Net Sales
Domestic	$	46,489	$	44,047	$	38,997
International		16,307		15,967		16,660
Total	$	62,796	$	60,014	$	55,657

(1) Net sales from OEM represent sales of electrosurgery generators, disposable bipolar forceps and related accessories and royalties from Codman, multi-channel generators, disposable ultrasonic tips and related accessories to Stryker, sales of certain disposable products to Mobius along with sales of certain laser probes to Iridex in the comparable 2012 period. In addition, recognition of deferred revenues of $1.3 million from Alcon is included in this category for the fiscal year ended July 31, 2013.  Recognition of deferred revenues of $266,000 and $1.2 million from Codman and Alcon, respectively, are included in this category for the fiscal year ended July 31, 2012.

(2) Net sales from Other represent direct neurosurgery revenues and other miscellaneous revenues.

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Note 17. Commitments and Contingencies

The Company has entered into change of control agreements with each of its President and Chief Executive Officer, Chief Financial Officer, Chief Scientific Officer, Vice President of Domestic Sales and Vice President of Marketing and Technology.  The change in control agreements with its executive officers provide that if employment is terminated within one year for cause or disability following a change in control (as each term is defined in the change in control agreements), as a result of the officers’ death, or by the officer other than as an involuntary termination (as defined in the change in control agreements), the Company shall pay the officer all compensation earned or accrued through his or her employment termination date, including (i) base salary; (ii) reimbursement for reasonable and necessary expenses; (iii) vacation pay; (iv) bonuses and incentive compensation; and (v) all other amounts to which they are entitled under any compensation or benefit plan of the Company (“Standard Compensation Due”).

If the officer’s employment is terminated within one year following a change in control without cause and for any reason other than death or disability, including an involuntary termination, and provided the officer enters into a separation agreement within 30 days of his or her employment termination, he or she  shall receive the following: (i) all Standard Compensation Due and any amount payable as of the termination date under the Company’s objectives-based incentive plan, the sum of which shall be paid in a lump sum immediately upon such termination; and (ii) an amount equal to one times his or her annual base salary at the rate in effect immediately prior to the change in control, to be paid in 12 equal monthly installments beginning in the month following his or her employment termination. Furthermore, all of the officer’s awards of shares or options shall immediately vest and be exercisable for one year after the date of his or her employment termination.

Various claims, incidental to the ordinary course of business, are pending against the Company.  In the opinion of management, after consultation with legal counsel, resolution of these matters is not expected to have a material effect on the accompanying financial statements.

The Company is subject to regulatory requirements throughout the world. In the normal course of business, regulatory agencies may require companies in the medical industry to change their products or operating procedures, which could affect the Company.  The Company regularly incurs expenses to comply with these regulations and may be required to incur additional expenses.  Management is not able to estimate any additional expenditures outside the normal course of operations which will be incurred by the Company in future periods in order to comply with these regulations.

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Note 18. Quarterly Financial Data (Unaudited)

The following table provides the Company’s quarterly information as presented in the Form 10-Q (dollars in thousands except earnings per share):

Quarters ended:	July 31,  2013*		April 30, 2013		January 31,  2013			October 31, 2012
Net sales	$	17,857	$	16,264	$	14,055		$	14,620
Gross profit		9,676		9,051		5,171	**		8,473
Operating income		2,193		1,721		(2,153	)		1,941
Net income		1,439		1,150		(1,382	)		1,352
Earnings per share - basic
Net income	$	0.06	$	0.05	$	(0.05	)	$	0.05
Earnings per share - diluted
Net income	$	0.06	$	0.05	$	(0.05	)	$	0.05
Basic weighted average common shares outstanding		25,290,882		25,299,131		25,230,142			25,160,757
Diluted weighted average common shares outstanding		25,367,558		25,362,923		25,230,142			25,286,184

Quarters ended:	July 31, 2012		April 30, 2012			January 31,  2012		October 31, 2011
Net sales	$	16,861	$	14,568		$	15,080	$	13,505
Gross profit		9,809		7,822	***		8,972		7,916
Operating income		2,946		1,405			2,618		1,512
Income from continuing operations		1,942		1,006			1,867		1,153
Loss (income) from discontinued operations, net of tax		--		--			--		382
Net income		1,942		1,006			1,867		771
Earnings per share – basic
Income from continuing operations	$	0.08	$	0.04		$	0.07	$	0.05
Loss from discontinued operations		-		-			-		(0.02	)
Net income	$	0.08	$	0.04		$	0.07	$	0.03
Earnings per share – diluted
Income from continuing operations	$	0.08	$	0.04		$	0.07	$	0.05
Loss from discontinued operations		-		-			-		(0.02	)
Net income	$	0.08	$	0.04		$	0.07	$	0.03
Basic weighted average common shares outstanding		25,165,493		25,184,447			25,085,296		24,971,034
Diluted weighted average common shares outstanding		25,293,168		25,363,620			25,280,449		25,136,727

*      The M.I.S.S. acquisition has been reflected in our results of operations from July 8 through July 31, 2013.

**  In the second quarter of fiscal 2013, the Company recorded an inventory write-down of approximately $2.1 million, or approximately $0.06 per share, net of tax.

*** In the third quarter of fiscal 2012, the Company recorded an inventory write-down of approximately $367,000, or approximately $0.01 earnings per share, net of tax.

Note 19. Recent Accounting Pronouncements

Recently Adopted

In June 2011, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2011-05, “Presentation of Comprehensive Income” (“ASU No. 2011-05”). ASU No. 2011-05 amends current guidance to allow a company the option of presenting the total of comprehensive income, the components of net income, and the components of other comprehensive income either in a single continuous statement of comprehensive income or in two separate but consecutive statements. The provisions do not change the items that must be reported in other comprehensive income or when an item of other comprehensive nature must be reclassified to net income. The amendments do not change the option for a company to present components of other comprehensive income, either net of related tax effects or before related tax effects, with one amount shown for the aggregate income tax expense (benefit) related to the total of other comprehensive income items. The amendments do not affect how earnings per share is calculated or presented.   In December 2011, ASU No. 2011-05 was amended by ASU No. 2011-12, “Comprehensive Income (Topic 220):  Deferral of the Effective Date for Amendments to the Presentation of Reclassification of Items Out of Accumulated Other Comprehensive Income in Accounting Standards Update No. 2011-05,” to defer only those changes in ASU No. 2011-05 that relate to the presentation of reclassification adjustments.  All other requirements in ASU No. 2011-05 are not affected. The provisions of ASU No. 2011-05 have been adopted retrospectively effective August 1, 2012 and had no effect on the Company’s consolidated financial statements.

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In September 2011, the FASB issued ASU No. 2011-08, “Intangibles – Goodwill and Other” (“ASU No. 2011-08”). ASU No. 2011-08 amends current guidance to allow a company to first assess qualitative factors to determine whether it is necessary to perform the two-step quantitative goodwill impairment test. Under this amendment, an entity would not be required to calculate the fair value of a reporting unit unless the entity determines based on a qualitative assessment that it is more likely than not that its fair value is less than its carrying amount. ASU No. 2011-08 applies to all companies that have goodwill reported in their financial statements. The provisions of ASU No. 2011-08 have been adopted effective August 1, 2012 and had no effect on the Company’s consolidated financial statements.

In February 2013, the FASB issued an amendment to the comprehensive income standard to improve the transparency of reporting reclassifications out of accumulated other comprehensive income/loss.  Other comprehensive income/loss includes gains and losses that are initially excluded from net income for an accounting period.  Those gains and losses are later reclassified out of accumulated other comprehensive income/loss into net income.  The amendments do not change the current requirements for reporting net income or other comprehensive income/loss in financial statements.  The new amendments require the Company to present the effects on income statement line items of certain significant amounts reclassified out of accumulated other comprehensive income/loss and cross-reference to other disclosures currently required under U.S. GAAP for certain other reclassification items.  The Company was required to adopt this revised standard in the fourth quarter of fiscal 2013.  This revised standard had no impact on the Company’s results of operations or financial position.

In July 2012, the FASB issued guidance concerning the testing of indefinite-lived intangible assets for impairment. This guidance gives an entity the option first to assess qualitative factors to determine whether the existence of events and circumstances indicates that it is more likely than not that the indefinite-lived intangible asset is impaired. If, after assessing the totality of events and circumstances, an entity concludes that it is not more likely than not that the indefinite-lived intangible asset is impaired, then the entity is not required to take further action. However, if an entity concludes otherwise, then it is required to determine the fair value of the indefinite-lived intangible asset and perform the quantitative impairment test by comparing the fair value with the carrying amount in accordance with ASC Subtopic 350-30, “Intangibles--Goodwill and Other, General Intangibles Other than Goodwill.” Under the guidance, an entity also has the option to bypass the qualitative assessment for any indefinite-lived intangible asset in any period and proceed directly to performing the quantitative impairment test. An entity will be able to resume performing the qualitative assessment in any subsequent period. The revised standard is effective for annual and interim impairment tests performed for fiscal years beginning after September 15, 2012. However, early adoption is permitted.  The revised standard did not have a material impact on the Company’s consolidated financial statements.

The Company has reviewed all other recently issued, but not yet effective, accounting pronouncements and does not believe any such pronouncements will have a material impact on its financial statements.

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Note 20. Valuation Allowances and Qualifying Accounts

Schedule II — Valuation Allowances and Qualifying Accounts

(dollars in thousands)

Classifications	Balance at Beginning of Year		Charges to Cost and Expenses		Charges to Other Accounts		Deduction from Reserves			Balance at End of Year
Year ended July 31, 2011
Allowance for Doubtful Accounts  & Returned Goods	$	282	$	5	$	--	$	(5	)	$	282
Allowance for Excess and Obsolete Inventory	$	38	$	44	$	--	$	--		$	82
Year ended July 31, 2012
Allowance for Doubtful Accounts & Returned Goods	$	282	$	37	$	--	$	--		$	319
Allowance for Excess and Obsolete Inventory	$	82	$	384	$	--	$	--		$	466
Year ended July 31, 2013
Allowance for Doubtful Accounts & Returned Goods	$	319	$	207	$	--	$	31		$	495
Allowance for Excess and Obsolete Inventory	$	466	$	1,368	$	--	$	--		$	1,834

(1) Adjustments represent write-offs of uncollectible accounts receivable or excess and obsolete inventory.

Note 21. Subsequent Events

On September 30, 2013, the Company extended its revolving credit facility and its equipment line of credit through September 30, 2016.

On October 1, 2013, the Company announced that it plans to close its King of Prussia, Pennsylvania facility and consolidate the manufacturing operations into its existing facility in O’Fallon, Missouri.  The Company expects to spend approximately $900,000 over the next fourteen months to complete the closure.  The Company expects the closure to result in a reduction in operating expense of more than $1.0 million on an annualized basis beginning in fiscal 2016.

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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	SYNERGETICS USA, INC.
	(registrant)
October 1, 2013
	/s/ David M. Hable
	David M. Hable, President and Chief
	Executive Officer (Principal Executive Officer)
October 1, 2013	/s/ Pamela G. Boone
	Pamela G. Boone, Executive Vice President, Chief
	Financial Officer, Secretary and Treasurer (Principal
	Financial and Accounting Officer)

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

October 1, 2013
	/s/ David M. Hable
	David M. Hable, President and Chief
	Executive Officer and Director
	(Principal Executive Officer)
October 1, 2013	/s/ Pamela G. Boone
	Pamela G. Boone, Executive Vice President, Chief
	Financial Officer, Secretary and Treasurer (Principal
	Financial and Accounting Officer)
October 1, 2013
	/s/ Robert H. Dick
	Robert Dick, Chairman of the Board of Directors
October 1, 2013	/s/ Lawrence C. Cardinale
	Lawrence C. Cardinale, Director
October 1, 2013	/s/ Guy R. Guarch
	Guy Guarch, Director
October 1, 2013	/s/ Juanita H. Hinshaw
	Juanita H. Hinshaw, Director

October 1, 2013	/s/ D. Graeme Thomas
	D. Graeme Thomas, Director
	*Robert Blankeneyer, Director

* Joined the Board of Directors on September 23, 2013.

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Index to Exhibits

Exhibit Number	Description
2.1	Agreement and Plan of Merger by and among Valley Forge Scientific Corp. (“Valley Forge”), Synergetics Acquisition Corporation and Synergetics, Inc. dated May 2, 2005. (Filed as Exhibit 2.1 to Valley Forge’s Current Report on Form 8-K filed on May 4, 2005 and incorporated herein by reference.)
2.2	Amendment No. 1 to Agreement and Plan of Merger by and among Valley Forge, Synergetics Acquisition Corporation and Synergetics, Inc. dated June 2, 2005. (Filed as Exhibit 2.1 to Valley Forge’s Current Report on Form 8-K filed on June 3, 2005 and incorporated herein by reference.)
2.3	Amendment No. 2 to Agreement and Plan of Merger by and among Valley Forge, Synergetics Acquisition Corporation and Synergetics, Inc. dated July 15, 2005. (Filed as Exhibit 2.1 to Valley Forge’s Current Report on Form 8-K filed on July 15, 2005 and incorporated herein by reference.)
2.4	Agreement and Plan of Reincorporation Merger, dated as of September 22, 2005, between Valley Forge and VFSC Delaware, Inc. (Filed as Exhibit 2.1 to the Registrant’s Current Report on Form 8-K filed on September 27, 2005 and incorporated herein by reference.)
3.1	Amended and Restated Certificate of Incorporation of the Registrant. (Filed as Exhibit 3.1 to the Registrant’s Current Report on Form 8-K filed on September 27, 2005 and incorporated herein by reference.)
3.2	Amended and Restated Bylaws of the Registrant. (Filed as Exhibit 3.2 to the Registrant’s Current Report on Form 8-K filed on September 27, 2005 and incorporated herein by reference.)
4.1	Form of common stock certificate of the Registrant. (Filed as Exhibit 4.1 to the Registrant’s Current Report on Form 8-K filed on September 27, 2005 and incorporated herein by reference.)
10.1**	Amended and Restated Synergetics USA, Inc. 2001 Stock Plan. (Filed as Exhibit 10.1 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended April 30, 2006 and incorporated herein by reference.)
10.2**	Form of Employee Restricted Stock Agreement for the Amended and Restated Synergetics USA, Inc. 2001 Stock Plan. (Filed as Exhibit 10.2 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended April 30, 2006 and incorporated herein by reference.)
10.3**	Valley Forge Scientific Corp. 2000 Non-Employee Directors’ Stock Option Plan. (Filed as Exhibit 4.3 to Valley Forge’s Registration Statement on Form S-8, Registration No. 333-72134 and incorporated herein by reference.)
10.4**	Valley Forge Scientific Corp. 1988 Non-Qualified Employee Stock Option Plan, as amended. (Filed as Exhibit 10.1 to Valley Forge’s Registration Statement on Form S-8, Registration No. 333-63637 and incorporated herein by reference.)
10.5**	Amended and Restated Synergetics USA, Inc. 2005 Non-Employee Directors’ Stock Option Plan. (Filed as Exhibit 10.3 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended April 30, 2006 and incorporated herein by reference.)
10.6**	Amendment No. 1 to Amended and Restated Synergetics USA, Inc. 2005 Non-Employee Directors’ Stock Option Plan. (Filed as Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed on January 29, 2009, and incorporated herein by reference.)
10.7**	Amendment No. 2 to Amended and Restated Synergetics USA, Inc. 2005 Non-Employee Directors’ Stock Option Plan.  (Filed as Appendix A to the Registrant’s Proxy Statement on schedule 14A filed on November 14, 2012, and incorporated herein by reference.)
10.8**	401(k) and Profit-Sharing Plan. (Filed as Exhibit 10(x) to Valley Forge’s Registration Statement on Form S-18, Registration No. 33-35668-NY and incorporated herein by reference.)
10.9**	Change of Control Agreement between Synergetics USA, Inc. and David M. Hable (Filed as Exhibit 10.1 to Registrant’s Current Report on Form 8-K filed on February 3, 2009 and incorporated herein by reference.)
10.10**	Change in Control Agreement effective as of August 1, 2009 by and between Jerry Malis, MD and Synergetics USA, Inc. (Filed as Exhibit 10.2 to the Registrant’s Current Report on Form 8-K filed on December 15, 2009 and incorporated here in by reference.)

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10.11**	Change in Control Agreement effective as of August 1, 2010 by and between Pamela G. Boone and Synergetics USA, Inc. (Filed as Exhibit 10.10 to the Registrant’s Annual Report on Form 10-K filed on October 12, 2010 and incorporated here in by reference.)
10.12**	Change in Control Agreement effective as of August 1, 2010 by and between Michael Fanning and Synergetics USA, Inc. (Filed as Exhibit 10.1 to the Registrant’s Quarterly Report on Form 10-Q filed on March 9, 2011 and incorporated here in by reference.)
10.13**	Change in Control Agreement effective as of August 1, 2010 by and between Jason Stroisch and Synergetics USA, Inc. (Filed as Exhibit 10.2 to the Registrant’s Quarterly Report on Form 10-Q filed on March 9, 2011 and incorporated here in by reference.)
10.14	Assignment of Know-How Agreement, dated June 30, 1989. (Filed as Exhibit 10(I) to Valley Forge’s Registration Statement on Form S-18, Registration No. 33-35668-NY and incorporated herein by reference.)
10.15	Assignment of Patents — Bipolar Electrosurgical Systems, June 30, 1989. (Filed as Exhibit 10(h) to Valley Forge’s Registration Statement on Form S-18, Registration No. 33-31008-NY and incorporated herein by reference.)
10.16	Assignment of Patents — Binocular Magnification System, June 30, 1989. (Filed as Exhibit 10(i) to Valley Forge’s Registration Statement on Form S-18, Registration No. 33-31008-NY and incorporated herein by reference.)
10.17	Assignment of Malis® Trademark, dated June 30, 1989. (Filed as Exhibit 10(j) to Valley Forge’s Registration Statement on Form S-18, Registration No. 33-31008-NY and incorporated herein by reference.)
10.18	Supply and Distribution Agreement with Stryker Corporation dated October 25, 2004. (Filed as Exhibit 10.13 to Valley Forge’s Annual Report on Form 10-K for the year ended September 30, 2004 and incorporated herein by reference.)
10.19	Addendum No. 1 to Supply and Distribution Agreement by and between Synergetics USA, Inc. and Stryker Instruments Division of Stryker Corporation dated November 15, 2006.  (Filed as Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed on November 28, 2012 and incorporated herein by reference.)
10.20	Addendum No. 2 to Supply and Distribution Agreement by and between Synergetics USA, Inc. and Stryker Instruments Division of Stryker Corporation dated August 1, 2007.  (Filed as Exhibit 10.2 to the Registrant’s Current Report on Form 8-K filed on November 28, 2012 and incorporated herein by reference.)
10.21	Acknowledgement of Amendment of Solicitation/Modification of Contract by and between Synergetics USA, Inc. and Stryker Corporation dated January 9, 2012.  (Filed as Exhibit 10.3 to the Registrant’s Current Report on Form 8-K filed on November 28, 2012 and incorporated herein by reference.)
10.22	Acknowledgement of Amendment of Solicitation/Modification of Contract by and between Synergetics USA, Inc. and Stryker Corporation dated March 19, 2012.  (Filed as Exhibit 10.4 to the Registrant’s Current Report on Form 8-K filed on November 28, 2012 and incorporated herein by reference.)
10.23	Acknowledgement of Amendment of Solicitation/Modification of Contract by and between Synergetics USA, Inc. and Stryker Corporation dated as of June 26, 2012.  (Filed as Exhibit 10.5 to the Registrant’s Current Report on Form 8-K filed on November 28, 2012 and incorporated herein by reference.)
10.24	Acknowledgement of Amendment of Solicitation/Modification of Contract by and between Synergetics USA, Inc. and Stryker Instruments Division of Stryker Corporation, dated as of October 25, 2012.  (Filed as Exhibit 10.6 to the Registrant’s Current Report on Form 8-K filed on November 28, 2012, and incorporated herein by reference.)
10.25	Addendum No. 3 to Supply and Distribution Agreement by and between Synergetics USA, Inc. and Stryker Instruments Division of Stryker Corporation dated November 27, 2012.  (Filed as Exhibit 10.7 to the Registrant’s Current Report on Form 8-K filed on November 27, 2012 and incorporated herein by reference.)
10.26* #	Supply Agreement by and between Synergetics, Inc. and Stryker Corporation dated March 31, 2010.

72

10.27* #	Amendment No. 1 to Supply Agreement by and between Synergetics, Inc. and Stryker Corporation dated November 28, 2011.
10.28* #	Amendment No. 2 to Supply Agreement by and between Synergetics, Inc. and Stryker Corporation dated June 30, 2012.
10.29* #	Product Development and Marketing Agreement by and between Synergetics USA, Inc. and Codman & Shurtleff, Inc. dated January 1, 2009.
10.30* #	Amendment No. 1 to Product Development and Marketing Agreement by and between Synergetics USA, Inc. and Codman & Shurtleff, Inc. dated October 21, 2009.
10.31* #	Trademark License Agreement by and between Synergetics IP, Inc. and Codman & Shurtleff, Inc. dated January 1, 2009.
10.32	Agreement of Lease between Liberty Property Limited Partnership and Valley Forge. (Filed as Exhibit 10.16 to Valley Forge’s to Registration Statement on Form S-4, Registration No. 333-125521 and incorporated herein by reference.)
10.33	Amendment to Agreement of Lease between Liberty Property Limited Partnership and Synergetics USA, Inc. dated March 26, 2009. (Filed as Exhibit 10.23 to the Registrant’s Annual Report on Form 10-K for the year ended July 31, 2009 and incorporated herein by reference.)
10.34	Amendment to Agreement of Lease between Liberty Property Limited Partnership and Synergetics USA, Inc. dated July 19, 2012.  (Filed as Exhibit 10.20 to the Registrant’s Annual Report on Form 10-K for the year ended July 31, 2012 and incorporated herein by reference.)
10.35	Letter Agreement between Synergetics, Inc. and Regions Bank, dated February 22, 2006 (Filed as Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed on March 2, 2006 and incorporated herein by reference.)
10.36	Credit and Security Agreement among Synergetics USA, Inc., Synergetics, Inc. and Regions Bank, dated March 13, 2006.  (Filed as Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed on March 15, 2006 and incorporated herein by reference.)
10.37	First Amendment to Credit and Security Agreement by and among Synergetics, Inc., Synergetics USA, Inc., Regions Bank, as Agent and Lender, and Wachovia Bank, National Association, as Lender, dated September 26, 2006.  (Filed as Exhibit 10.52 to the Registrant’s Annual Report on Form 10-K for the fiscal year ended July 31, 2006 and incorporated herein by reference.)
10.38	Second Amendment to Credit and Security Agreement by and among Synergetics, Inc., Synergetics USA, Inc., Regions Bank, as Agent and Lender, and Wachovia Bank, National Association, as Lender, dated December 8, 2006. (Filed as Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed on December 8, 2006 and incorporated herein by reference.)
10.39	Third Amendment to Credit and Security Agreement by and among Synergetics, Inc., Synergetics USA, Inc. and Regions Bank, as Lender, dated June 7, 2007.  (Filed as Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed on June 8, 2007 and incorporated herein by reference.)
10.40	Letter Agreement between Synergetics, Inc. and Regions Bank, dated September 28, 2006.  (Filed as Exhibit 10.55 to the Registrant’s Annual Report on Form 10-K for the fiscal year ended July 31, 2006 and incorporated herein by reference.)
10.41	Fourth Amendment to Credit and Security Agreement by and among Synergetics, Inc. and Synergetics USA, Inc. as Borrowers and Regions Bank as Lender, dated as of January 31, 2008. (Filed as Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed on March 11, 2008 and incorporated herein by reference.)
10.42	Fifth Amendment to Credit and Security Agreement by and among Synergetics, Inc. and Synergetics USA, Inc. as Borrowers and Regions Bank as Lender, dated December 1, 2008 (Filed as Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed on December 3, 2008 and incorporated herein by reference.)

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10.43***	Seventh Amendment to Credit and Security Agreement by and among Synergetics, Inc. and Synergetics USA, Inc. as Borrowers and Regions Bank as Lender, dated November 30, 2009 (Filed as Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed on December 3, 2009 and incorporated herein by reference.)
10.44	Eighth Amendment to Credit and Security Agreement by and among Synergetics, Inc. and Synergetics USA, Inc. as Borrowers and Regions Bank as Lender, dated November 30, 2010 (Filed as Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed on December 6, 2010 and incorporated herein by reference.)
10.45	Ninth Amendment to Credit and Security Agreement by and among Synergetics, Inc. and Synergetics USA, Inc. as Borrowers and Regions Bank as Lender, dated November 30, 2011 (Filed as Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed on December 2, 2011 and incorporated herein by reference.)
10.46*	Tenth Amendment to Credit and Security Agreement by and among Synergetics, Inc. and Synergetics USA, Inc. as Borrowers and Regions Bank as Lender, dated September 30, 2013.
10.47*	Third Amended and Restated Revolving Note from Synergetics, Inc. and Synergetics USA, Inc. in favor of Regions Bank, dated September 30, 2013.
10.48*	Second Amended and Restated 2008 Equipment Purchase Note from Synergetics, Inc. and Synergetics USA, Inc. in favor of Regions Bank dated September 30, 2013.
10.49	Confidential Settlement and License Agreement between Synergetics USA, Inc. and Alcon, Inc., Alcon Laboratories, Inc. and Alcon Research Ltd. (Filed as Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q for the quarter ended April 30, 2010 and incorporated herein by reference.)
10.50	Supply Agreement between Synergetics, Inc. and Alcon Research Ltd. (filed as Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q for the quarter ended April 30, 2010 and incorporated herein by reference.)
21*	Subsidiaries of Registrant.
23.1*	Consent of UHY LLP.
31.1*	Certification of the Registrant’s Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2*	Certification of the Registrant’s Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act. Of 2002.
32.1*	Certification of the Registrant’s Principal Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2*	Certification of the Registrant’s Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

*Filed herewith.

**    Management contract or compensatory plan or arrangement.

***The Company did not enter into a sixth amendment to credit agreement.

#  Portions of these exhibits have been omitted pursuant to a request for confidential treatment filed with the Commission. Omitted material for which confidential treatment has been requested has been filed seperately with the Commission.

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EX-10.26

Exhibit 10.26

** Information marked as "[redacted**]" has been omitted pursuant to a request for confidential treatment and has been filed separately with the Securities and Exchange Commission.

EXECUTION VERSION

SUPPLY AGREEMENT

by and between

STRYKER CORPORATION,

ACTING THROUGH ITS INSTRUMENTS DIVISION

and

SYNERGETICS, INC.

TABLE OF CONTENTS

Article 1		Definitions	1
Article 2		Supply, Delivery and Inventory	4
	2.1	In General	4
	2.2	Purchase Orders	4
	2.3	Delivery, Title and Risk of Loss	5
	2.4	Packaging and Shipment	5
	2.5	Location	5
	2.6	Forecasting	5
	2.7	Engineering Change Orders	6
Article 3		Acceptance and Rejection of Products	6
	3.1	Acceptance and Rejection Procedure	6
	3.2	Consequences of Rejection	6
	3.3	Latent Defects	7
Article 4		Pricing	7
	4.1	Pricing	7
	4.2	Price Changes	7
	4.3	Taxes	7
	4.4	Invoices for Products	7
	4.5	Acceptance	8
Article 5		Electronic Commerce	8
	5.1	Availability	8

	5.2	Proper Receipt	8
	5.3	Garbled Transmissions	8
	5.4	Signatures	8
	5.5	Verification	8
	5.6	System Operations	8
	5.7	Security Procedures	9
	5.8	Binding Commercial Transactions	9
Article 6		Term and Termination	9
	6.1	Term	9
	6.2	Termination	9
	6.3	Transition Assistance	10
Article 7		Representations, Warranties and Related Covenants	11
	7.1	Compliance	11
	7.2	Shelf Life Expiration	11
	7.3	Product Warranty	11
	7.4	Intellectual Property	11
	7.5	Notification	12
	7.6	Environmental, Health and Safety	12
	7.7	MSDS	12
	7.8	Authority, Conflicts and Validity	12
	7.9	Absence of Claims	13
	7.10	Obligations	13
	7.11	Related Parties	13
	7.12	Work Authorization	13
	7.13	Cumulative Effect	13

	7.14	Obligation to Notify	13
Article 8		Complaints; Adverse Events Reporting and Recalls	14
	8.1	Obligations of Supplier	14
Article 9		Confidential Information	14
	9.1	Confidential Information	14
	9.2	Non-Disclosure and Non-Use	14
	9.3	Exceptions	14
	9.4	Return or Destruction of Materials	15
	9.5	Irreparable Harm	15
	9.6	Stryker	15
	9.7	Compelled Disclosure	15
Article 10		Inventions, Copyrights; Tooling and Equipment	15
	10.1	Effect of Agreement	15
	10.2	Title	16
	10.3	Disclosure	16
	10.4	Tools	16
	10.5	Copyrights	16
	10.6	Third Parties	17
	10.7	Stryker Technology	17
	10.8	License to Stryker Technology	17
	10.9	Post-Term License	17
	10.1	Retained Intellectual Property Rights	18
	10.11	License to Retained Intellectual Property Rights	18
	10.12	Goodwill	18

Article 11		Release of Information	18
	11.1	Approval Required	18
Article 12		Indemnification	18
	12.1	Indemnification by Supplier	18
	12.2	Third Party Claims	19
	12.3	Other Claims	20
Article 13		Insurance	20
	13.1	Obligation to Maintain	20
Article 14		Regulatory Approvals, Audits and Records, Quality Assurance and Process Controls
	14.1	510(k); CE Marking	21
	14.2	Audit Rights	22
	14.3	Change of Location	22
	14.4	Record-Keeping	22
	14.5	Inspection and Testing	23
	14.6	Quality Management System & Procedures	23
	14.7	Access for CGMP Audit	23
	14.8	Quality Agreement/Plan	23
	14.9	Operations Processes	23
Article 15		Independent Contractor	23
	15.1	Relationship of the Parties	23
	15.2	Right to Direct Services	24
	15.3	No Right to Participate in Stryker Plans	24
Article 16		Assignment	24

	16.1	Assignment Restrictions	24
Article 17		Subcontractors	24
	17.1	Stryker Consent	24
	17.2	Independent Subcontractors	25
	17.3	Subcontractor Agreement Terms	25
Article 18		Permits	25
	18.1	Obligations of Supplier	25
Article 19		Work on Stryker's Premises, Security and Health Services	25
	19.1	Contractor Safety Manual	25
	19.2	Searches, etc.	25
	19.3	Impropriety, Theft or Loss	26
	19.4	Right of Approval; Replacements	26
	19.5	Accidents, Injury, Damage and Discharges	26
	19.6	Response and Indemnification	26
	19.7	Right to Bar; Compliance	26
Article 20		Disaster Recovery Plan and Business Continuity	27
	20.1	Supplier’s Obligations	27
Article 21		Force Majeure	27
	21.1	Force Majeure Event	27
	21.2	Exclusions.	27
Article 22		Governing Law; Dispute Resolution	27
	22.1	Governing Law	27
	22.2	Dispute Resolution	27

Article 23		Compliance with Laws	27
	23.1	Compliance with Laws	27
Article 24		Notices	27
Article 25		Miscellaneous	27
	25.1	Remedies	27
	25.2	Counterparts.	28
	25.3	Waiver; Modification of Agreement	28
	25.4	Survival	28
	25.5	Severability	28
	25.6	Exhibits	28
	25.7	Entire Agreement	28
	25.8	Interpretation.	28
	25.9	Non-Compete	29

Exhibit 10.26

SUPPLY AGREEMENT

THIS SUPPLY Agreement is effective as of March 31, 2010 ("Effective Date") by and between SYNERGETICS, INC., a Missouri corporation ("Supplier"), and STRYKER CORPORATION, a Michigan corporation, acting through its Instruments Division ("Stryker").

Background

A.Supplier is a wholly-owned subsidiary of Synergetics USA, Inc. and distributes the Omni control module, handpieces, ultrasonic accessory tips and disposable tubing sets throughout the world.  Mutoh Co., Ltd. manufacturers the control module and handpieces, while Supplier manufactures the ultrasonic accessory tips and disposable tubing sets.

B.Stryker, Supplier and an affiliate of Supplier have entered into an Asset Purchase Agreement dated November 10, 2009, as amended by an Amendment to Asset Purchase Agreement dated effective as of March 29, 2010 (the "Purchase Agreement"), which contemplates the execution of this Agreement as a condition to the closing thereof.  Pursuant to the Purchase Agreement, concurrent with the execution of this Agreement, Stryker will purchase certain assets associated with Supplier's product line of control modules, handpieces, ultrasonic accessory tips, disposable tubing sets and related items intended for use with the Sonopet device, including all product designs, design specifications, and Intellectual Property Rights used by Supplier in manufacturing, producing, or constructing the Products, except as specifically excluded under the Purchase Agreement.

C.Stryker desires to retain Supplier to manufacture and supply for Stryker the ultrasonic accessory tips and other certain related Products and desires to oversee, direct and control the quality of all such products through audits, testing, and establishing quality standards in order to promote compliance with applicable regulatory standards, subject to and in accordance with the terms and conditions of this Agreement.

ACCORDINGLY, in consideration of the mutual promises and benefits made and contained in this Agreement, the receipt and sufficiency of which are hereby acknowledged, the Parties hereby agree as follows:

Article 1.    Definitions

When used in this Agreement with initial capitalization, whether in the singular or in the plural, the following terms shall have the following meanings:

"Action" means any arbitration, charge, complaint, audit, hearing, investigation, litigation or suit (whether civil, criminal, administrative, investigative or informal) commenced, brought, conducted or heard by or before, or otherwise involving, any governmental body or arbitrator.

"Affiliate" means any person or entity that directly, or indirectly through one or more intermediaries, controls or is controlled by or is under common control with the Party specified.

"Agreement" means this Supply Agreement, Exhibits referenced in Section 25.6, and any additional documents specifically incorporated by reference in this Agreement.

"A.M. Best Rating" means a rating provided by A.M. Best Company, Inc. a company headquartered in Oldwick, New Jersey that is designated as a nationally recognized statistical rating organization (NRSRO) by the United States Securities and Exchange Commission.

"CGMP" means the current good manufacturing practices of the Quality System Regulation, 21 C.F.R. 820 (Medical Devices) promulgated by the Food and Drug Administration.

"Confidential Information" is defined in Section 9.1.

"Copyright Act"means the federal Copyright Act of 1976.

"ECO" means an engineering change order.

"Damages" is defined in Section 12.1.

"Force Majeure Event" is defined in Section 21.1.

"Forecast Report" is defined in Section 2.6.

"Goodwill" is defined in Section 10.12.

"Indemnity Notice" is defined in Section 12.3.

"Initial Term" is defined in Section 6.1.

"Intellectual Property Rights" means: (i) patents, design patents, industrial design registrations, copyrights and copyrightable works, trademarks, trademark registrations, licensed trade-mark rights, service marks, servicemark registrations, trade names, service names, brand names, logos, trade dress, Internet domain names, registrations, and all applications for any of the foregoing, including all priority applications, divisionals, continuations, continuations-in-part, substitutions, reissues, re-examinations, extensions, and all foreign counterparts thereof, and all goodwill symbolized thereby and appurtenant thereto and any licenses or sublicenses with respect to any of the foregoing; (ii) trade secrets, concepts, ideas, discoveries, products, procedures, methods, materials, inventions, technology, formulae, know-how, show-how, proprietary information, research material, specifications, surveys, designs, drawings, processes, improvements, developments and other similar rights (including other unpatented or unpatentable proprietary or confidential information, systems or procedures); (iii) computer software and related documentation, including operating software, source and object code, network software, firmware, middleware, design software, design tools, schematics, compilers, design and functional specifications, management information systems, systems documentation and instructions, algorithms, databases and the tangible objects in which the foregoing rights are embodied; (iv) World Wide Web sites, World Wide Web pages, components, scripts (including cgi scripts), classes, interfaces, forms, databases, Java applets, Web-related code (including HTML, XML DHTML, Java, Active Server Pages and any similar code) and browser plug-ins; (v) artwork, photographs, drawings, graphics, animation, editorial copy and materials, formats, color schemes, look-and-feel, functions, features and designs, including all content currently or previously displayed through Internet sites; (vi) customer, partner, prospect and marketing lists, market research data, sales data and traffic Internet log files and related reports, data mining reports, third-party Internet reports (including traffic and referral reports) and user data; and (vii) registrations, applications, recordings, common law rights, works of authorship, "moral" rights of authors, licenses and other agreements relating to any of the foregoing.

2

"Latent Defect" means a flaw or other imperfection in any article which is discovered after delivery, including defects which normally are not detected by examination or routine tests, but which are present at time of manufacture and are aggravated by use.

"Non-Conforming" is defined in Section 3.1.

"Option" means the option under Section 4.20 of the Purchase Agreement to purchase certain Intellectual Property Rights of Supplier and its Affiliates.

"Option Assets" means the assets subject to the Option.

"Packaging" means bags, cases, cylinders, drums, pallets and other containers.

"Party" or "Parties" means in the singular, a company referred to in the preamble of this Agreement, or in the plural, all such companies, as context may so dictate.

"Patent Rights" is defined in Section 10.7.

"PPI" means the United States Producer Price Index for Surgical & Medical Instrument Manufacturing, as published by the United States Department of Labor, Bureau of Labor Statistics for the 12-month period ending six months prior to the effective date of the applicable price adjustment.

"Pricing Schedule" means the list of prices that Supplier may charge Stryker for the Products, as more fully described in Exhibit A.

"Products" means the products supplied by Supplier during the Term and as more fully described in Exhibit A.

"Purchase Order" means a purchase order in the form prescribed by Stryker from time to time and issued subject to the terms and conditions set forth in Exhibit C, as may be modified from time to time by Stryker.

"Quality Plan" means the Stryker terms relating to the quality, regulatory and related aspects of the supply of the Products, as modified by Stryker from time to time in its sole discretion (subject to Section 2.7) and identified by a sequential reference number, the current version of which is attached as part of Exhibit D.

3

"Renewal Term" is defined in Section 6.1.

"Representatives" is defined in Section 12.1.

"Retained Intellectual Property Rights" is defined in Section 10.10.

"Signature" is defined in Section 5.4

"Specifications" means the documents describing the functionality, performance and other technical attributes of the Products attached as part of Exhibit D and as the same may be amended or supplemented by Stryker from time to time (subject to Section 2.7).

"Stryker Indemnified Person" is defined in Section 12.1.

"Stryker Technology" is defined in Section 10.7.

"Tools" is defined in Section 10.4.

"Term" is defined in Section 6.1.

Article 2.  Supply, Delivery and Inventory

2.1In General.   Supplier shall make available to Stryker those Products that are described in Exhibit A, and shall supply those Products at such time and place specified by Stryker.  Subject to the terms and conditions set forth in this Agreement, Stryker hereby appoints Supplier a preferred vendor.  Stryker will purchase the disposable tips set forth on Exhibit A from Supplier on an exclusive basis and Stryker will purchase the tubing, canisters and sterilization trays set forth on Exhibit A from Supplier on a non-exclusive basis. Notwithstanding the foregoing provision, if, for any reason, after being provided with reasonable notice of supply requirements either through ISupply or Forecast Reports, Supplier is unable to fulfill Stryker’s needs for disposable tips, then Stryker may purchase such products from a third party or manufacture the products for itself.

While Supplier may provide products similar to the Products to other companies, Supplier agrees that during the Term, Supplier will not directly or indirectly provide Products for any company that manufactures, distributes, markets or sells products that are competitive with those manufactured, distributed, marketed or sold by Stryker or its Affiliates.  Notwithstanding the foregoing provision or any other provision of this Agreement to the contrary, Supplier shall not be restricted by this Agreement from selling products similar to the Products to third parties for non-medical uses.

2.2Purchase Orders.   Any and all Purchase Orders must state that they are placed subject to this Agreement.  Stryker may cancel a Purchase Order issued to Supplier upon 30 days prior written notice to Supplier, provided, however, Stryker shall not cancel orders for Products manufactured exclusively for Stryker that Supplier would be unable to sell to any other customer.

4

2.3Delivery, Title and Risk of Loss.

(a)Delivery.  Supplier shall deliver the Products ordered by Stryker in accordance with the Purchase Order issued and the Specifications, including Stryker's requirements of delivery dates, shipping, specifications, quantity, quality, Packaging and maintenance of inventory. Supplier shall provide a numbered packing slip for Products delivered to Stryker. At a minimum, Supplier's packing slip will contain the following information: (i) purchase order number, (ii) part number, (iii) description of the Product(s) shipped, (iv) lot number and (v) the quantity of Product(s) shipped. Delivery of the Products is not complete until all of the Products comprising Purchase Order have been actually received, inspected, and accepted by Stryker.  Acceptance is subject to Section 3.1, and such further terms as may be described in Exhibit D. 

(b)Title and Risk of Loss.   Products shall be delivered FOB (Stryker Instruments, Freight Collect), and title, risk of loss or damage to the Products remains with Supplier until the Products are actually received by Stryker, not including inspection and acceptance.

2.4Packaging and Shipment.   Products shall be packed and shipped at no cost to Stryker in accordance with the Purchase Order, the Specifications, Stryker's instructions, and good commercial practice to ensure that no damage shall result during transportation. Further, where applicable, Supplier guarantees that the articles comprising each shipment or other delivery hereunder made by Supplier to Stryker is, as of the date of such shipment or delivery, in compliance with all applicable laws.  Supplier shall protect any item or part thereof that may deteriorate during shipment or storage.  Supplier shall provide additional information as specified in Exhibit D.

Supplier shall indicate any back-ordered items on packing slip and invoices.  Signed proof of delivery does not constitute or imply that the contents of the boxes used for delivery contain all items ordered by Stryker.  Signed proof of delivery or receipt acknowledges receipt of the number of specified boxes but does not constitute or imply acceptance of the contents.  Any subsequent order placed by Stryker as a result of items missing from a delivered shipment must be first credited then re-billed.  Acceptance is subject to Section 3.1, and such further terms as may be described in Exhibit D.

2.5Location.   Orders placed by Stryker shall be delivered to the Stryker facility location identified in the Purchase Order.

2.6Forecasting.   Exhibit B sets forth Stryker's initial forecast for its supply requirements for Products.  Stryker will provide Supplier with a six-months rolling forecast of Stryker's supply requirements for Products, such forecast to be available for review either (a) online through Stryker ISupply or (b) upon request by Supplier, by written report provided by Stryker ("Forecast Report").  Supplier will review supply requirements and maintain stocking levels indicated in Exhibit B, ISupply or the Forecast Report.  Supplier will review the forecasted supply requirements on a weekly basis.  Supplier will ship to meet Stryker's Product needs in accordance with the min/max levels indicated in Exhibit B, ISupply or any Purchase Order release form provided to Supplier by Stryker.  Supplier agrees to maintain the safety stock set forth in Exhibit B or ISupply.  Such stock will be rotated by Supplier on a first-in, first-out basis.  Stryker and Supplier may review and adjust safety stock levels as necessary.

5

2.7Engineering Change Orders.  In the event Stryker issues an ECO (including in connection with changes in the Quality Plan or Specifications) that results in a significant change in Product material costs then Stryker and Supplier will work together to establish new pricing for the Products.  In the event Stryker elects to issue an ECO, Stryker's total obligation and maximum liability for any such ECO shall be limited to payment to Supplier of an amount equal to two times the applicable Exhibit A prices of the existing safety stock maintained by Supplier as required under Section 2.6.

Article 3. Acceptance and Rejection of Products

3.1Acceptance and Rejection Procedure.

(a)Stryker shall have [redacted**] days from receipt of the Products to either (i) accept the Products; or (ii) notify Supplier that it has delivered Non-Conforming Products.  Products are "Non-Conforming" when the particular Products do not meet the requirements set forth in the Specifications, this Agreement, any applicable Purchase Order, the warranties set forth herein, or other applicable expressed warranties or implied warranties.  In the event that Stryker does not notify Supplier of non-conformity or non-compliance within such 45-day period, then the Products shall be deemed accepted.

(b)If Stryker rejects the Products, Supplier shall, unless otherwise agreed by the Parties, immediately replace Non-Conforming Products.  Upon delivery of the replacement Products, Stryker may then inspect the Products to determine whether Supplier has cured the non-conformity or non-compliance. In the event that Stryker determines that Supplier has failed to correct the non-conformity or non-compliance, Stryker may, in its sole discretion (i) terminate all or a portion of the Purchase Order related thereto, and receive a refund of the applicable charge already paid, if any; (ii) deliver to Supplier additional notices of non-conformity or non-compliance; and (iii) cover the Non-Conforming Products as set forth in Section 3.2.

3.2Consequences of Rejection.   In the event that following notice and opportunity to cure, Supplier has attempted and failed to correct Non-Conforming Products, Stryker may, in its sole discretion, engage a third party to supply such Products as may be appropriate to replace the Non-Conforming Products and either invoice Supplier for the incremental cost of replacing the Non-Conforming Products or set-off the cost of such replacement Products against any invoice then due and owing to Supplier, which cost of replacement shall in either case be deemed equal to twice the quoted price reflected on Exhibit A.

** Information marked as "[redacted**]" has been omitted pursuant to a request for confidential treatment and has been filed separately with the Securities and Exchange Commission.

6

3.3Latent Defects.   Notwithstanding the provisions of Section 3.1, Stryker shall have the right to revoke its acceptance of any Products, or portion thereof, if Stryker later discovers Latent Defects not reasonably discoverable at time of Supplier's delivery of such Products.  Stryker's revocation must occur within a reasonable time after Stryker discovers or should have discovered the Latent Defect and before any substantial change in condition of the Products that is not caused by their own defects, but in no event after the shelf life has expired for the applicable Product.

Article 4. Pricing

4.1Pricing.   In full satisfaction for all Products provided by Supplier hereunder, Stryker agrees to compensate Supplier according to the Pricing Schedule as set forth in Exhibit A.

4.2Price Changes.   Supplier shall hold firm its prices and discounts, as set forth in the Pricing Schedule in Exhibit A, for 18 months from the Effective Date.  After (a) the initial 18-month time period; (b) the end of the Initial Term; and (c) each year of any Renewal Term, prices may be adjusted annually to reflect increases or decreases in Supplier's production costs; provided, however, unless otherwise mutually agreed to in writing, price increases shall not exceed the lesser of (a) [redacted**], per Product or (b) the corresponding percentage change, if any, in [redacted**] per Product.  Supplier shall present Stryker with a detailed list of proposed changes in the prices of Products (with supporting documentation) at least 45 days before the annual review.  Any pricing revisions agreed to by the Parties and the effective date for any such revision, shall be documented in writing as an amendment to Exhibit A.  If the Parties are unable to negotiate a mutually acceptable price increase, then Stryker may, in its sole discretion, elect not to renew this Agreement pursuant to Section 6.1.

4.3Taxes.   Except for those taxes noted herein, no extra charges of any kind, including transportation charges, shall be allowed unless agreed to in writing by Stryker prior to performance.  [Redacted**] Invoices shall separately identify any tax (including value added taxes as exclusively net extra) and shall include either Supplier's sales tax or use tax permit number.  Supplier shall pay any other taxes and charges, including assessments or fines arising from Supplier's performance of the transactions under the Agreement, including taxes based upon Supplier's net income and penalties or fees imposed due to failure to file or pay collected sales or use taxes.

4.4Invoices for Products.   Supplier shall invoice Stryker with Supplier's shipment of Products with a complete, correct and audit worthy invoice within 30 days of delivery.  The invoice shall include, at a minimum, the following information: (i) purchase order number, (ii) part number, (iii) description of the Product(s) shipped, (iv) quantity of the Product(s) shipped, (v) unit and extended price applicable, (vi) date that the Product(s) shipped, (vii) Supplier's packing slip number, (viii) any applicable taxes chargeable under Section 4.3; and (ix) any extraordinary charges that have been approved by Stryker.  Stryker shall pay all such invoices net within [redacted**] days of receipt of the invoice; provided, however, Stryker shall have no obligation to pay any Supplier invoice submitted more than [redacted**] days after delivery of Products hereunder.  Stryker shall receive a [redacted**] discount for any Supplier invoice paid within [redacted**] day of receipt of invoice.  To facilitate prompt payment, all invoices must be directed to, and received by Stryker at the invoice address shown on the applicable Purchase Order.  Payment hereunder shall represent full and complete compensation for all obligations assumed by Supplier under this Agreement and for all inventions, improvements, copyrights, patent rights and other Intellectual Property Rights assigned to Stryker as more fully set forth in Article 10.

** Information marked as "[redacted**]" has been omitted pursuant to a request for confidential treatment and has been filed separately with the Securities and Exchange Commission.

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4.5Acceptance.   No payment made by Stryker shall be considered an acceptance of satisfactory performance of Supplier's obligations under this Agreement, nor shall any payment limit Stryker's rights to reject Non-Conforming Products or relieve Supplier from its full responsibility under this Agreement.

Article 5.  Electronic Commerce

5.1Availability.   When the capability to utilize electronic commerce services are implemented from time-to-time by Stryker then, as required by Stryker, Supplier will, within a commercially reasonable amount of time, provide in the United States, the applicable electronic commerce services for electronic ordering and invoicing processes. Stryker shall communicate with Supplier to develop appropriate electronic commerce services in other countries as may be appropriate.

5.2Proper Receipt.   Transmissions shall not be deemed to have been properly received, and no transmission shall give rise to any obligation, until accessible, during regular business hours of the receiving Party, to the receiving Party at such Party's receipt device.

5.3Garbled Transmissions.   If any properly initiated transmission is received in an unintelligible or garbled form, the receiving Party shall promptly notify the originating Party in a reasonable manner.  In the absence of such notice, the originating Party's records of the contents of such transmission shall control.

5.4Signatures.   Each Party shall adopt and notify the other Party of its electronic identification consisting of symbols or codes which will be affixed to or contained in each transmission by such Party and which shall act as its signature ("Signature").  Each Party agrees that any Signature of such Party affixed to or contained in any transmission shall be sufficient to verify that such Party originated such document.  No Party shall disclose to any unauthorized person the Signatures of another Party.

5.5Verification.   Upon proper receipt of any transmission (except a confirmation), the receiving Party shall promptly and properly transmit a confirmation in return.  A confirmation shall constitute conclusive evidence a transmission has been properly received.

5.6System Operations.   Each Party, at its own expense, shall provide and maintain the equipment, software services and testing necessary to effectively and reliably initiate and receive transmissions.

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5.7Security Procedures.   Each Party shall properly use such security procedures that are reasonably sufficient to ensure that all transmissions are authorized and to protect its business records and data from improper access.

5.8Binding Commercial Transactions.   Any commercial transaction properly transmitted pursuant to this Agreement shall be considered to be a "writing" or "document in writing"; and any such transmission when containing, or to which there is affixed, a Signature shall be deemed for all purposes (i) to have been "signed" and (ii) to constitute an "original" when printed from electronic files or records established and maintained in the normal course of business.

Article 6.  Term and Termination

6.1Term.   Unless earlier terminated in accordance with the provisions of this Agreement, the initial term of this Agreement shall commence on the Effective Date and shall expire four years after the Effective Date ("Initial Term"); provided however, that this Agreement shall remain in effect with respect to any Purchase Order then in effect at the time of such termination until performance thereunder is completed to the satisfaction of Stryker, unless or until such Purchase Order is itself terminated as herein provided.  This Agreement will automatically renew for successive two-year terms (each a "Renewal Term") unless either Stryker or Supplier gives to the other at least 180 days advance written notice prior to the expiration of the Initial Term or then-current Renewal Term of such Party's election not to renew this Agreement.  Stryker may give less than 180 days advance written notice in the event Stryker desires not to renew because the Parties could not agree on a price change pursuant to Section 4.2.  All references in this Agreement to "Term" shall include both the Initial Term and all Renewal Terms.  Without limitation of Section 6.3, if Supplier notifies Stryker of its election not to renew this Agreement by giving 180 days advance written notice thereof prior to the expiration of the Initial Term or then-current Renewal Term, then, beginning on the effective date of the expiration of this Agreement, Supplier will assist Stryker in finding a new supplier for the Products as reasonably requested by Stryker, and Supplier will supply the Products to Stryker on a purchase order basis until Stryker finds an acceptable supplier for the Products.

6.2Termination.

(a)Termination for Breach.   Stryker or Supplier may terminate this Agreement upon written notice to the other in the event the other materially breaches this Agreement and fails to cure the breach within 30 days after receipt of written notice thereof.  Material breaches shall include, but are not limited to: (i) the filing of bankruptcy, receivership or similar proceeding due to insolvency (voluntarily or involuntarily); (ii) dissolution, liquidation or other discontinuation of all or a significant part of the other Party's business operations or the threat to cease to carry on all or a significant part of it business operations; (iii) failure or admission of inability to pay any debt when due, or the making of an assignment for the benefit of creditors; (iv) any unapproved assignment of or repeated non-performance of Supplier's obligations under this Agreement; (v) any material breach of a Party's representations and warranties; or (vi) the termination or lapse of any insurance coverage or policies required of Supplier if such termination or lapse is due to any act or omission of Contractor in breach of law, this Agreement or the provisions of such coverage or policies, or if such termination or lapse results in any gap in coverage or other circumstance that Stryker reasonably deems materially adverse to its interests. Any termination effected pursuant to this Section 6.2(a) shall be deemed effective as of the date specified in the notice of termination.

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(b)Consequences of Termination.   Upon termination of this Agreement, Supplier shall immediately cease all work (except as otherwise required by Stryker under this Agreement), cease to represent itself as providing Products to Stryker and shall deliver to Stryker:  (i) a report describing Purchase Orders outstanding as of the date of termination; (ii) all Confidential Information in its possession; (iii) all Tools (as defined below) owned by Stryker; and (iv) all of Stryker’s work product, including programs, reports, data, flow diagrams, materials and all work in process, in whatever state of production they may exist on the date of termination. Upon delivery and receipt of the above, Stryker shall pay Supplier, as expeditiously as is practicable, for the Products delivered to and accepted by Stryker, as of the date of termination, at the applicable prices under the terms of this Agreement, and with respect to items in production, the Parties shall negotiate applicable prices in good faith.

(c)Additional Requirements.   Supplier shall promptly provide Stryker any final reports and copies of all records required; provided, however, to the extent that Stryker knowingly receives any proprietary confidential information, trade secrets or know-how of Supplier contained in such reports or records and not vesting in or required to be assigned to Stryker under Article 10, then Stryker will receive, maintain and hold the same in confidence for the benefit of Supplier to the extent that Supplier would be required to do so with respect to “Confidential Information” of Stryker under Article 9.

(d)Purchase Option.   Upon expiration of the Term or the termination of this Agreement by Stryker as a result of a breach of this Agreement by Supplier, Stryker shall have the option to purchase the Option Assets under the Option terms provided in the Purchase Agreement and incorporated herein by reference.

6.3Transition Assistance.   Upon the expiration or earlier termination of this Agreement for any reason, Supplier shall promptly provide all assistance reasonably required by Stryker and its Affiliates to transfer to Stryker or its designee the manufacture of the Products and all ancillary procedures necessary for Supplier’s performance of its obligations hereunder.  Such assistance shall include the following: (i) the transfer of any and all transferable permits, approvals, licenses and certifications relating to the subject matter hereof as may be reasonably required by Stryker for the purpose of continuing the manufacture of the Products, (ii) training and other knowledge transfers used in the performance of Supplier’s obligations under this Agreement, and (iii) notwithstanding the expiration or earlier termination of the Term, at Stryker’s election, continuing to supply the Products for an interim period not to exceed 6 months as requested by Stryker until such transition is complete, for which limited period the Term shall also be deemed extended.  The foregoing is in addition to and not in limitation of any other obligations of Supplier under this Agreement, and the performance thereof shall be a condition to Stryker's obligation to enter into the license agreement referenced in Section 10.9.  Upon completion of the foregoing, Stryker or its designee shall promptly pay to Supplier the amount of [redacted**].

** Information marked as "[redacted**]" has been omitted pursuant to a request for confidential treatment and has been filed separately with the Securities and Exchange Commission.

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Article 7.  Representations, Warranties and Related Covenants

7.1Compliance.   Supplier represents and warrants that Products manufactured and supplied by it to Stryker and the components and materials used therein (i) shall conform to the Specifications and applicable samples and models, and (ii) shall be manufactured, inspected and verified in accordance with Stryker's standard supplier quality requirements and any mutually agreed quality plan, current copies of which are attached to Exhibit D.  Supplier further agrees that it will be responsible for the foregoing warranties with respect to sales made by Stryker to its customers and that it will replace at no charge any Product that is found to be defective.

7.2Shelf Life Expiration.  Supplier represents and warrants to Stryker that the shelf life expiration date for the Products (and the Packaging shall be validated as such) shall not be less than: (a) six months for Products shipped on or prior to the  Effective Date through April 14, 2010; (b) 12 months for Products shipped on April 15, 2010 through July 14, 2010; and (c) 36 months for Products shipped on and after July 15, 2010.

7.3Product Warranty.   Supplier represents and warrants to Stryker that for the greater of 36 months (or the applicable shorter time period in Section 7.2 solely with respect to "sterilization") from the date of shipment or the period set out in the applicable Specifications, all Products provided under this Agreement shall be of merchantable quality, free from any defects in design, workmanship or sterilization, shall be safe for their intended use, and fit for their intended purpose; provided, however, the foregoing "design," "safe for intended use" and "fit for intended purpose" warranties will not apply to the extent the Product designs are based on Stryker technology that is not Stryker Technology as of the "Closing" under the Purchase Agreement and listed in Schedule 1.1(d) of the Purchase Agreement, Retained Intellectual Property Rights, or any other technology of Supplier or its Affiliates.  Supplier represents and warrants that the Products and all rights thereto shall be delivered, transferred and conveyed by Supplier to Stryker free and clear of all liens and encumbrances.

7.4Intellectual Property.   Supplier represents and warrants that, except where any alleged infringement, misappropriation, or violation is a result of a modification made by Stryker or any of its Affiliates, the Products do not and will not violate, infringe, or misappropriate any Intellectual Property Right or proprietary right of any third party in the jurisdictions where the Products are made, used, sold, offered for sale, or imported, nor has any claim of such violation, infringement, or misappropriation been threatened or asserted.  Supplier further represents and warrants that, except where any alleged infringement, misappropriation, or violation is a result of a modification made by Stryker or any of its Affiliates, the using, selling, offering for sale, or importing of Products or any deliverable provided hereunder does not and will not (i) conflict with, or result in a material breach of any material agreement, judgment or court decree by which Supplier is bound, or (ii) violate, infringe, or misappropriate any Intellectual Property Right or proprietary right of any third party in the jurisdictions where such using, selling, offering for sale, or importing take place, nor has any claim of violation, infringement, or misappropriation been threatened or asserted.

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7.5Notification.  If either Supplier or Stryker is notified or otherwise learns that any service, Product or any deliverable provided hereunder violates, infringes, or misappropriates any Intellectual Property, proprietary or other rights or interests of any third party anywhere in the world, Supplier, except where any alleged infringement, misappropriation, or violation is a result of a modification made by Stryker or any of its Affiliates, shall upon written notice from Stryker, and at Supplier’s option and expense, use its commercially reasonable efforts to, at its sole option, either: (i) procure for Stryker the right to continue to exercise Stryker’s rights under this Agreement; (ii) develop and adopt modifications so that Stryker can continue to exercise its rights under this Agreement in a non-infringing and functionally equivalent manner, such non-infringement and functional equivalence to be determined by Stryker in its sole and reasonable discretion; or (iii) with Stryker’s prior written consent, not to be unreasonably withheld, terminate the Agreement and refund all payments paid to Supplier by Stryker hereunder.  Alternatively, Supplier may propose (subject to Stryker's consent, which would not be unreasonably withheld) that the allegedly infringing, violating or misappropriating Product would be discontinued in the jurisdiction where such infringement, violation, or misappropriation is alleged, and Sellers would pay to Stryker [redacted**] worth of gross profits lost by Stryker in such jurisdiction as a result of the discontinued Product either in a lump sum amount or on a monthly basis over 24 months, as mutually-agreed upon by the parties.  Lost gross profits in the foregoing sentence will be calculated based on the 12-month trailing gross profits measured from the date the Product is discontinued.

7.6Environmental, Health and Safety.   Supplier represents and warrants that all Products sold to Stryker hereunder shall be manufactured or provided in full compliance with all applicable national, provincial, state and local environmental, health and safety statutes, acts, ordinances, rules, codes, standards, and regulations, in effect at the time and place of manufacture of any Products, including the standards required by the Occupational Safety and Health Act of 1970.  Further, Supplier represents and warrants that all waste, including all hazardous waste, generated at the time of manufacture of any Products shall be disposed of in accordance with all applicable national, provincial, state and local laws and regulations.

7.7MSDS.   Supplier represents and warrants that it has provided Stryker with current and accurate Material Safety Data Sheets, as applicable, for the Products sold to Stryker.

7.8Authority, Conflicts and Validity.   Supplier and Stryker each represent and warrant to the other that the execution, delivery and performance of this Agreement by such Party:  (a) has been duly authorized by all necessary corporate action; (b) does not conflict with, or result in a material breach of, the articles of incorporation or by-laws of such Party, and any material agreement by which such Party is bound, or any law, regulation, rule, judgment or decree of any governmental instrumentality or court having jurisdiction over such Party; and (c) this Agreement has been duly executed by such Party and constitutes a valid and legally binding obligation of such Party enforceable in accordance with its terms.

** Information marked as "[redacted**]" has been omitted pursuant to a request for confidential treatment and has been filed separately with the Securities and Exchange Commission.

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7.9Absence of Claims.   Supplier represents and warrants to Stryker that there is no action, suit, claim, investigation or proceeding pending or, to the best of its knowledge, threatened against it that, if adversely decided, might adversely affect Supplier's: (i) ability to enter into this Agreement; or (ii) the performance of its obligations under this Agreement.

7.10Obligations.   Supplier represents and warrants to Stryker that it is not a Party to any agreement which would prevent it from fulfilling its obligations under this Agreement and that during the Term, Supplier shall not enter into an agreement to provide Products which would in any way restrict its ability to perform under this Agreement.

7.11Related Parties.   Supplier represents and warrants that to the best of its knowledge no Stryker employees are compensated by or act on Supplier or its Affiliates' behalf, nor are related by blood or marriage to any of Supplier and/or its Affiliates' employees which have contractual influence or authority over Supplier and/or its Affiliates.  Supplier further represents and warrants that it has not provided any form of compensation or remuneration to any Stryker employee regarding the issuance of this Agreement. No item or material used by Supplier in its performance hereunder which would result in a separate charge to Stryker may be obtained from an Affiliate of Supplier without prior written notice to Stryker of such affiliation.

7.12Work Authorization.   Supplier represents and warrants that Supplier's performance under this Agreement will be in full compliance with all applicable federal, state, and local laws, statutes, acts, ordinances, rules, codes, standards, and regulations. Supplier further represents and warrants that as required by the United States' immigration laws, Supplier and any individual retained by Supplier as an employee, agent, and subcontractor is entitled to work in the United States, and upon reasonable request, Supplier shall provide Stryker documented proof of eligibility to work in the United States for itself and its employees, agents, and subcontractors.

7.13Cumulative Effect.   The representations and warranties provided in this Agreement are cumulative of and in addition to any other representations and warranties agreed to by Supplier or provided by law.  The representations and warranties in Sections 7.1 – 7.6 and 7.8 shall survive the expiration or termination of this Agreement indefinitely and all others shall survive until the third anniversary of such expiration or termination.

7.14Obligation to Notify.   During the Term, if Supplier's representations in this Article become untrue for any reason, then Supplier shall promptly notify Stryker of the circumstances that have made such representation(s) untrue.

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Article 8.  Complaints; Adverse Events Reporting and Recalls

8.1Obligations of Supplier.   Supplier shall at all times comply with the Quality Plan provisions regarding complaint notifications, adverse event reporting, recalls and communications with the Food and Drug Administration.

Article 9.  Confidential Information

9.1Confidential Information.   Any and all data, reports, specifications, computer programs or models and related documentation, business or research plans of Stryker or its Affiliates or third parties and any other documents or information furnished to Supplier, or to which Supplier is given access, by Stryker in connection with the performance of this Agreement and all business terms of this Agreement, shall be deemed to be the confidential property of Stryker ("Confidential Information").

9.2Non-Disclosure and Non-Use.   During the Term, Stryker is willing to disclose Confidential Information to Supplier on the following terms:

(a)Supplier shall receive, maintain, and hold the Confidential Information in strict confidence; and

(b)Supplier shall not utilize Confidential Information, other than for performance hereunder; and

(c)All obligations under this Article 9 shall expire 10 years after the expiration or termination of this Agreement, except for Supplier's confidentiality obligations with regard to the know-how and trade secrets included in the Stryker Technology that are associated with the manufacturing and design of instrument tips, which shall continue forever.

9.3Exceptions. The obligations in Section 9.2 shall not extend to any portion of Confidential Information:

(a)which is known to Supplier prior to disclosure or is information generally available to the public;

(b)becomes generally known or readily available to the public through no act or omission of Supplier; or

(c)was furnished to Supplier on a non-secretive and non-confidential basis by any third party having a legal right to do so; or

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(d)which Supplier can establish was in its possession prior to disclosure or was subsequently and independently developed by employees of or on behalf of Supplier without use, direct or indirect, of Confidential Information,  and who had no knowledge of the Confidential Information disclosed.

9.4Return or Destruction of Materials.   At any time upon the request of Stryker, (i) the Confidential Information, including any copies, shall be returned to Stryker, and (ii) all other embodiments of the Confidential Information in the possession of Supplier, including all copies and/or any other form or reproduction and/or description thereof made by Supplier, shall, at Stryker's option, be returned to Stryker or destroyed.

9.5Irreparable Harm.   Supplier acknowledges and agrees that a violation of the provisions of this Article may cause Stryker irreparable harm and that money damages are likely not sufficient to compensate Stryker adequately for any such breach.  Accordingly, Supplier agrees that Stryker will be entitled to, in addition to any monetary damages, equitable relief, including a preliminary injunction, and Supplier hereby waives any right to require the posting of a bond in connection therewith.  Such relief will not be exclusive of any other rights Stryker may have at law, in equity or otherwise.  All of the rights and remedies of Stryker hereunder will be cumulative and not alternative.

9.6“Stryker”.   When used in this Article, the term "Stryker" will be deemed to include Stryker, its subsidiaries, parent and Affiliates.

9.7Compelled Disclosure.   Notwithstanding any provision herein to the contrary, in the event that Supplier hereafter becomes obligated by mandatory applicable law, regulation or judicial or administrative order to disclose any Confidential Information to any third party, government authority or court, Supplier shall immediately notify Stryker of each such requirement and identify the Confidential Information so required thereby, so that Stryker may seek an appropriate protective order or other remedy with respect to narrowing the scope of the requirement and/or waive Supplier’s compliance with the terms hereof.  If, failing the entry of an appropriate remedy or receipt of a waiver, Supplier, in the written opinion of its counsel, is compelled to disclose Confidential Information, Supplier may disclose that portion of the Confidential Information that its counsel advises it, after consultation with counsel for Stryker, that it is compelled to disclose. In any event, Supplier agrees that it will cooperate in any action by Stryker to obtain an appropriate protective order or other reliable assurance that the information will be treated as confidential.

Article 10.  Inventions, Copyrights; Tooling and Equipment

10.1Effect of Agreement.   Each Party acknowledges and agrees that no Party shall obtain any rights to any Intellectual Property Rights of another Party existing on the Effective Date of this Agreement solely by reason of entering into this Agreement.

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10.2Title.   Title to any and all Intellectual Property Rights that result from Supplier's performance under this Agreement or pertain or relate to Stryker's Confidential Information, shall reside with Stryker.  Supplier agrees to and hereby does assign to Stryker (i) all of Supplier’s right, title and interest in and to all Intellectual Property Rights that result from Supplier’s performance under this Agreement or pertain or relate to Stryker’s Confidential Information, including any Intellectual Property Rights disclosed pursuant to Section 10.3, and, (ii) to the extent that any Intellectual Property Rights do not qualify as a “work made for hire”, all common law and statutory copyrights therein to the fullest extent of Supplier’s rights therein and including those rights as set forth above, and irrevocably waives any and all rights thereto. At Stryker's reasonable request, Supplier agrees to execute written assignments and any other documents required by Stryker for Intellectual Property Rights described in this Section.  Supplier also agrees, upon reasonable request by Stryker, to take any further steps necessary to assign and to cause its employees, subcontractors, agents, or other representatives to assign to Stryker the entire right, title, and interest in and to any and all such Intellectual Property Rights and to cause its employees, subcontractors, agents, or other representatives to execute and deliver written assignments and any other documents required by Stryker for Intellectual Property Rights described in this Section.

10.3Disclosure.   Supplier, warranting that it has the right to do so, agrees to disclose promptly in writing, and to cause its employees, subcontractors, agents, or other representatives performing under this Agreement to disclose promptly in writing, to Stryker all Intellectual Property Rights, if such are discovered, prepared, developed, created, reduced to practice, made, and/or conceived by Supplier and/or by any such employees, subcontractors, agents or other representatives, either alone or jointly with others, both:  (a) during the Term and for 12 months thereafter and (b) in the course of or as a result of Supplier's performance under this Agreement or as a result of the information revealed directly or indirectly by Stryker or its Affiliates, including Stryker Confidential Information.

10.4Tools.   Equipment, design, tools, jigs, dies, fixtures, templates, patterns, drawings, and other information and things (herein collectively, the "Tools") paid for or furnished by Stryker shall be Stryker's property and Supplier shall not encumber or dispose of them in any way. Supplier shall maintain such Tools in good working condition. The Tools shall be used exclusively for Supplier's performance of its obligations hereunder. To the extent any equipment owned by Stryker is placed at Supplier's facility to be used in connection with Supplier's performance of its obligations hereunder, in addition to the foregoing terms and conditions, such equipment and Supplier's use thereof shall also be subject to the terms and conditions set forth in Exhibit E.

10.5Copyrights.   To the extent permissible by law and without implying an employee-employer relationship, Supplier agrees that all original works of authorship prepared by or for Supplier in the performance under this Agreement encompassed by the categories identified in Section 101 of the federal Copyright Act shall be "works made for hire" as defined in Section 101 of the Federal Copyright Act, with all ownership automatically vesting in Stryker.  Stryker will own all right, title and interest in and to such works and all copyrights therein, including the right to register and renew the copyright, publish, create derivative works, display, reproduce, perform, distribute, modify, revise, license, sell, use, and commercialize, throughout the world and in any form or medium now or hereafter known, and all other rights provided in the Copyright Act in each "work made for hire", and Supplier agrees that it retains none of such rights, nor any reversionary rights.  For any original works of authorship prepared by or for Supplier in the performance of this Agreement that, under the copyright laws of the United States, may not be considered "works made for hire", Supplier agrees to do everything reasonably requested by Stryker or its nominee to protect its rights in such works.

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10.6Third Parties.   Supplier represents that neither it nor any employee, subcontractor, agent, or other representative is under any obligation to assign Intellectual Property Rights, which obligation would conflict with those contained in this Article or any other provision of this Agreement, and Supplier agrees that neither it nor any employee, subcontractor, agent, or other representative will enter into any such conflicting agreements or arrangements during the Term.  Supplier has valid and enforceable agreements that require an assignment to Supplier of all right, title, and interest in and to Intellectual Property Rights with all persons or entities presently employed or engaged as consultants or employees or otherwise involved in the development, testing and manufacture of the products and methods of Supplier.  No third party has any right or claim in and/or to the Intellectual Property Rights as a result of that third party having been previously employed or engaged as a consultant or otherwise involved in the development, testing and manufacture of the products and methods of Supplier.  No employee of Supplier has entered into any agreement that restricts or limits in any way the scope or type of work in which the employee may be engaged or requires the employee to transfer, assign, or disclose information concerning his or her work to anyone other than Supplier.

10.7Stryker Technology.   The term "Stryker Technology" means all Intellectual Property Rights of Stryker relating to the Products, including those listed on Exhibit F (the "Patent Rights"), to the extent that Stryker now or hereafter owns or otherwise maintains the right to license the same.

10.8License to Stryker Technology.   Subject to the terms and conditions of this Agreement, and in partial consideration for the promises made by Supplier in this Agreement, Stryker hereby grants to Supplier an exclusive, non-transferable, royalty-free license under the Stryker Technology during the Term and only to the extent necessary for Supplier to perform its obligations under this Agreement.  Supplier shall not have any right to grant sublicenses of the Patent Rights or subcontract the use thereof. If, for any reason, Supplier is unable to fulfill Stryker’s needs for Products, then the foregoing license shall automatically become non-exclusive.

10.9Post-Term License.   Upon the expiration or earlier termination of this Agreement, and provided that as of such expiration or earlier termination Supplier is not in material breach of any of its obligations under this Agreement or any other contracts with Stryker or any of its Affiliates, Stryker will enter into a license agreement with Supplier, pursuant to which Stryker will grant to Supplier a worldwide, non-exclusive, non-transferrable, royalty-free license to the know-how and trade secrets included in the Stryker Technology as of the “Closing” under the Purchase Agreement and listed in Schedule 1.1(d) of the Purchase Agreement that are associated with the manufacture and design of ultrasonic accessory tips.  Such license agreement will contain other customary terms and obligations.

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10.10Retained Intellectual Property Rights.  The term "Retained Intellectual Property Rights" means all Intellectual Property Rights relating to the Products that Supplier now owns or has the right to license, including those listed on Exhibit G.  The Retained Intellectual Property Rights include all United States and pending patent applications relating to the Products that Supplier now owns or has the right to license, together with all corresponding patent applications filed in any foreign countries on the invention(s) disclosed in such United States patents or patent applications and, thereafter, shall mean the patents that issue thereon.  The rights granted or which may be granted in respect to any patents or applications shall extend to any reissues, divisions, continuations, or continuations-in-part of any of these patent applications for the term set forth in this Agreement.

10.11License to Retained Intellectual Property Rights.  Subject to the terms and conditions herein, and in partial consideration for the promises made by Stryker herein, Supplier hereby grants to Stryker and its Affiliates an exclusive, worldwide, non-transferable, royalty-free license under the Retained Intellectual Property Rights to use, sell, have sold, offer for sale, have offered for sale, distribute, have distributed, and/or import or have imported Products purchased under this Agreement.  Neither Stryker nor any of its Affiliates shall have any right to grant sublicenses to the Retained Intellectual Property Rights.  Supplier represents and warrants that it has the full right, interest, and authority to enter into and license the Retained Intellectual Property Rights under this Agreement.

10.12Goodwill. Subject to Section 10.11, any goodwill associated with any trademark rights included in the Retained Intellectual Property Rights ("Goodwill") should be protected and enhanced, and therefore: (a) Stryker will not take any action that would destroy or diminish the Goodwill; (b) all use by Stryker of any trademark rights included in the Retained Intellectual Property Rights shall inure to the benefit of Supplier; and (c) Stryker shall cooperate fully with all reasonable requests of Supplier in securing and maintaining the Goodwill.

Article 11.  Release of Information

11.1Approval Required.   Supplier shall not permit the release of any statement, advertisement, information, or publicity referring to Stryker, any Stryker Affiliate, or use of the word Stryker without Stryker's prior written approval, as determined in Stryker's sole discretion; provided, however, that Stryker shall not unreasonably withhold approval of a written request received from Supplier with respect to any release or use if such request if delivered to Stryker together with a written opinion of Supplier’s legal counsel in a form and substance reasonably acceptable to Stryker stating that the release or use is required for Supplier to comply with obligations under the Securities and Exchange Act of 1934, as amended.

Article 12.  Indemnification

12.1Indemnification by Supplier.   Supplier shall defend, indemnify and hold harmless Stryker and its Affiliates, subsidiaries, shareholders, officers, directors, employees, agents, successors, and assigns (a "Stryker Indemnified Person") from and against any and all liabilities, claims, suits, actions, losses, costs, reasonable attorneys' fees and expenses, judgments or damages, whether ordinary, special or consequential (collectively, “Damages”), arising out of or in any way connected with: (a) Supplier, and/or its officers, employees, agents, representatives, contractors, subcontractors or invitees (collectively, "Representatives")violating, infringing, or misappropriating any patent, copyright, trademark, trade secret and any other intellectual property or proprietary right anywhere in the world, except where any alleged infringement, misappropriation, or violation is a result of a modification made by Stryker or any of its Affiliates; (b) the commission of any acts, omissions, negligence, misconduct, or dishonesty by Supplier or Supplier's Representatives in connection with the performance hereunder or any defect in Products; (c) any breach of a representation, warranty and/or covenant of Supplier, or failure of Supplier to perform its obligations hereunder; (d) Supplier's or Supplier's Representatives violating any federal or state law, regulation, statute or ordinance including the transportation, handling, disposal or processing of regulated materials; (e) any failure of Supplier or Supplier's Representatives to comply with the confidentiality obligations set forth herein; (f) any loss or damage to persons (including death) or property, to the extent caused by any act or omission of Supplier or, where applicable, by Supplier's Representatives; (g) [redacted**]; (h) any claim made or suit brought by Supplier's employees or subcontractors or their respective representatives for personal injury or death arising out of, during, or from performance of this Agreement, caused by any act, omission, negligence or willful misconduct of Supplier or Supplier's Representatives; or (i) [redacted**].  Supplier’s obligation to pay Damages to Stryker under the foregoing obligation with respect to any claim shall not exceed the greater of the sum of all amounts paid to Supplier by Stryker under this Agreement or [redacted**]; provided, however, that the foregoing limitation shall not apply to any Damages arising from any claims by third parties.  Supplier's indemnity obligation pursuant to this Article shall not be diminished or limited in any way by Supplier's maintenance of Worker's Compensation insurance.

** Information marked as "[redacted**]" has been omitted pursuant to a request for confidential treatment and has been filed separately with the Securities and Exchange Commission.

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12.2Third Party Claims.

(a)Notice.  Promptly after Stryker having knowledge of any written threat of the commencement of any Action against it, or receiving notice of the commencement of any Action against a Stryker Indemnified Person, Stryker will, if a claim is to be made against an indemnifying Party under this Agreement, give notice to Supplier of the commencement of such claim, but the failure to notify Supplier will not relieve Supplier of any liability that it may have to any Stryker Indemnified Person, except to the extent that Supplier demonstrates that the defense of such action is materially prejudiced by Stryker's failure to give such notice.

(b)Participation.  If any Action is brought against a Stryker Indemnified Person and Stryker gives notice to Supplier of the commencement of such Action, Supplier will be entitled to participate in such Action and, to the extent that it wishes to assume the defense of such Action, may do so with counsel satisfactory to Stryker.  After notice from Supplier to Stryker of its election to assume, and its continued defense, of such Action, Supplier will not, as long as it diligently conducts such defense, be liable to Stryker under this Article for any fees of other counsel or any other expenses with respect to the defense of such Action subsequently incurred by Stryker in connection with the defense of such Action, other than reasonable costs of investigation.  If Supplier assumes the defense of an Action:

It will be conclusively established for purposes of this Agreement that the claims made in that Action are within the scope of and subject to indemnification; it being understood that Supplier may choose not to assume the defense in connection with any new or amended Action that arises in connection with the original Action, and in such instance, it will not be established that such new or amended Action is within the scope of and subject to indemnification until Supplier assumes the defense of such new or amended Action;

No compromise or settlement of such claims may be effected by Supplier without Stryker's consent unless: (A) there is no finding or admission of any violation of legal requirements or any violation of the rights of any entity or individual and no effect on any other claims that may be made against the Stryker Indemnified Person, and (B) the sole relief provided is monetary damages that are paid in full by Supplier; and

The Stryker Indemnified Person will have no liability with respect to any compromise or settlement of such claims effected without its consent.  If notice is given to Supplier of the commencement of any Action and Supplier does not, within ten days after notice is given, give notice to Stryker of its election to assume the defense of such Action, Supplier will be bound by any determination made in such Action or any compromise or settlement effected by the Stryker Indemnified Person.

(b)Special Claims.  Notwithstanding the above, Supplier will not be entitled to assume or continue the defense of an Action if: (i) Supplier is also a party to such Action and Stryker determines in good faith that joint representation would be inappropriate; (ii) Supplier fails to provide reasonable assurance to the Stryker Indemnified Person of its financial capacity to defend such Action and provide indemnification with respect to such Action; or (iii) a Stryker Indemnified Person determines in good faith that there is a reasonable probability that an Action may adversely affect it or its Affiliates other than as a result of monetary damages for which it would be entitled to indemnification under this Agreement.  In any such case, Stryker may, by notice to Supplier, assume the exclusive right to defend, compromise, or settle such Action, but Supplier will not be bound by any compromise or settlement effected without its consent, which consent may not be unreasonably withheld, conditioned, or delayed.

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12.3Other Claims.  If any Stryker Indemnified Person should have a claim against Supplier hereunder that does not involve a third party claim, Stryker will transmit to Supplier a written notice (the "Indemnity Notice") describing in reasonable detail the nature of the claim, and the basis of the Stryker Indemnified Person's request for indemnification under this Agreement.  If Supplier does not notify Stryker within 15 business days from its receipt of the Indemnity Notice that Supplier disputes such claim, the claim specified by the Stryker Indemnified Person in the Indemnity Notice will be deemed a liability of Supplier hereunder, with respect to which the Stryker Indemnified Person is entitled to prompt indemnification hereunder.

Article 13. Insurance

13.1Obligation to Maintain.   Unless otherwise agreed to in writing, Supplier shall, at its own expense, carry and maintain during the entire Term, including any subsequent extensions thereof, the following types of insurance coverage in amounts not less than those specified below for each type:

(a)Worker's Compensation insurance in accordance with all applicable federal and state laws subject to statutory limits and Employer's Liability insurance in an amount of not less than [redacted**] per accident for bodily injury and [redacted**] per employee and policy limit for disease.

(b)Commercial General Liability insurance, including coverage for Contractual Liability, in an amount of not less than [redacted**] per occurrence and [redacted**] annual aggregate.  Such insurance shall name Stryker as an additional insured with respect to Supplier's performance under this Agreement, including any liabilities assumed under this Agreement.

(c)Automobile Liability insurance, including coverage for owned, hired and non-owned vehicles, in an amount of not less than [redacted**] combined single limit per accident.  Such insurance shall name Stryker as an additional insured with respect to Supplier's performance under this agreement.

(d)Products Liability Insurance in an amount not less than [redacted**] per occurrence and annual aggregate.  Such insurance shall name Stryker as an additional insured with respect to Supplier's performance under this Agreement, including any liabilities assumed under this Agreement.  Such insurance may be provided under the Commercial General Liability insurance policy required in subsection (b) above provided that the Umbrella or Excess Liability insurance required in subsection (e) below provides additional limits of such insurance.

** Information marked as "[redacted**]" has been omitted pursuant to a request for confidential treatment and has been filed separately with the Securities and Exchange Commission.

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(e)Umbrella or Excess Liability insurance, in an amount of not less than [redacted**] per occurrence and annual aggregate.  Such insurance shall include the Employer's Liability, Commercial General Liability and Automobile Liability insurance policies required in (a) through (c) above as scheduled underlyers and shall name Stryker as an additional insured with respect to Supplier's performance under this Agreement, including any liabilities assumed under this Agreement.

Supplier agrees to waive, and will require its insurers to waive, all rights of subrogation against Stryker, its directors, officers and employees related to this Agreement with respect any insurance coverages maintained by Supplier.  If any of the insurance coverages required under this Agreement are written on a claims made or other basis rather than an occurrence basis, such insurance coverages must be subject to a retroactive date that precedes the effective date of this Agreement and Supplier must maintain such insurance coverages subject to such retroactive date for a period of not less than three years following the expiration or other termination of this Agreement, including any subsequent extensions thereof.  All of the insurance coverages required under this Agreement shall be provided by insurers with an A.M. Best Rating of not less than A- / VIII.  Supplier shall have its insurance carrier, agent or broker furnish Stryker with certificates evidencing that all of the insurance coverages required under this Agreement are in force, identifying any deductible and/or self-insured retention amounts, and stipulating that Stryker shall be provided with 30 days' prior written notice of cancellation or material change in such insurance coverages while this Agreement is in effect.  If, at any time, Supplier neglects or refuses to provide or cause to be provided the insurance coverages required herein, or if such insurance coverages are canceled or exhausted, Stryker shall have the right to procure the same and the cost thereof shall be deducted from monies then due or that thereafter become due Supplier.  The insurance provisions above set forth the minimum types, amounts and scopes of coverage to be maintained by Supplier and are not to be construed in any way as a limitation on Supplier's liability under this Agreement.  Supplier shall not commence work until all of the insurance coverages required herein shall have been obtained and approved by Stryker.

Article 14. Regulatory Approvals, Audits and Records, Quality Assurance and Process Controls

14.1510(k); CE Marking.   Supplier will maintain all 510(k)s with respect to the Products and shall be primarily responsible for maintaining 510(k) clearances that are required for the marketing of the Products, notwithstanding any 510(k)s and clearances hereafter maintained by Stryker.  Stryker and its Affiliates will have the right to use Supplier's 510(k)s with respect to the Products in connection with Stryker's or its Affiliates' marketing or sale of the Products or performance under this Agreement. Unless otherwise notified in writing by Stryker, Supplier will maintain its CE marking for the Products and will comply with the applicable clauses of the European Medical Device Directives required to retain CE marking for the Products. The Parties shall cooperate fully to obtain and maintain such clearances, acceptances and approvals and shall furnish such information regarding the Products, their design and manufacture, and marketing as any Party may reasonably request in connection therewith, including any information requested by Stryker to build a product technical file for the Products.  Upon request, Supplier shall use its best efforts to prepare and deliver to appropriate regulatory agencies any part of the technical file necessary for approval or clearance by such agencies for marketing and sale whether on behalf of Supplier or Stryker.  

** Information marked as "[redacted**]" has been omitted pursuant to a request for confidential treatment and has been filed separately with the Securities and Exchange Commission.

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14.2Audit Rights.   Stryker, competent authorities, and Stryker’s notified body(ies) shall have the right, upon reasonable notice to Supplier and during regular business hours, to inspect and audit the facilities being used by Supplier for production and storage of the Products to assure compliance by Supplier with GMP (21 CFR Part 820), ISO 13485:2003 under United States Quality Management System, ISO 13485:2003 CAN/CSA, European Medical Device Directives, and other rules and regulations, and with other provisions of this Agreement.  The parties shall notify each other immediately of FDA or any government regulatory inspections or actions relative to the Products.

Supplier shall within ten (10) business days remedy or cause the remedy of any deficiencies which may be noted in any such audit or, if any such deficiencies cannot reasonably be remedied within such ten-day period, present to Stryker a written plan to remedy such deficiencies as soon as possible; and the failure by Supplier to remedy or cause the remedy of any such deficiencies within such ten-day period or to present such a plan within such ten day period and then use commercially reasonable efforts to remedy or cause the remedy of such deficiencies in accordance with such written plan, as the case may be, shall be deemed a material breach of this Agreement. Supplier acknowledges that the provisions of this Section granting Stryker certain audit rights shall not relieve Supplier of any of its obligations under this Agreement, nor shall such provisions require Stryker to conduct any such audits.

14.3Change of Location.   Subject to Section 9 of the Quality Plan attached to Exhibit D, if Supplier intends to manufacture Products at a location other than its current facility in O'Fallon, Missouri, or modify its production procedure in any material manner, it will give Stryker at least 120 days' advance written notice and an opportunity to inspect, audit and approve the new manufacturing facility or production process prior to shipping Products manufactured at such facility or under such process to Stryker.

14.4Record-Keeping.   Supplier shall keep complete and systematic written records of all Products purchased by Stryker.  Such records shall include records relevant to any costs or expenses incurred by Supplier on behalf of Stryker and any and all manufacturing and inspection records, financial records, procedures (including records for compliance with federal, state and local law) and such other documentation pertaining to Supplier's performance under this Agreement, and Supplier shall preserve all such records until seven years after the termination or expiration of this Agreement. Without limitation of other inspection and audit rights provided to Stryker under this Agreement, during the Term and for seven years thereafter, Stryker shall have the right to inspect copy and audit such records during Supplier’s regular working hours.  Supplier shall fully cooperate in any such inspection or audit of its records. Supplier shall use commercially reasonable efforts to ensure that all files will be made available to the Stryker within (i) a 24-hour period in connection with any patient adverse events or governmental and other regulatory audits, provided, that in no event will such availability exceed a 48-hour period, and (ii) five working days in connection with any normal business operational matters.

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Additionally, during the Term and for seven years after termination or expiration of this Agreement, Supplier will keep and store all information relating to end-customers of the Products (whether within or outside the United States), including details regarding the identity, location, type, quantity, quality, and serial numbers of subject products, warranty and service matters, complaints and other tracking information.  At Stryker's request, Supplier will provide Stryker with such information.

14.5Inspection and Testing.   Supplier shall not unreasonably refuse any request by Stryker to inspect and test Products during manufacturing, processing, or storage, at the premises of Supplier or any third party, prior to dispatch, and Supplier shall provide Stryker with all facilities reasonably required for inspection and testing.  Stryker has the right to inspect the manufacturing process or the facilities at any time it sees fit, subject to a reasonable request.  If, as a result of inspection or testing, Stryker is not satisfied that Products comply in all respects with this Agreement and informs Supplier within thirty (30) days thereafter, then, Supplier shall promptly take such steps as are necessary to ensure compliance.  The foregoing shall apply without prejudice to any other testing provisions of this Agreement, including any acceptance testing in connection with Article 3.

14.6Quality Management System & Procedures.   Supplier will maintain a Quality Management System, and undertake such quality control and inspection procedures as required by Stryker, the FDA or any other applicable regulatory agency.

14.7Access for CGMP Audit.  Supplier will provide Stryker with access to its manufacturing facilities in order to enable Stryker to make CGMP audits at such times as Stryker shall deem necessary, upon not less than 48 hours notice.

14.8Quality Plan.   Supplier shall abide by all aspects of the Quality Plan so as to provide assurance to Stryker that Product will meet all applicable regulatory requirements.

14.9Operations Processes.   Stryker will approve initial product line setup and manufacturing and assembly processes and subprocesses for Stryker related products. Supplier will provide Stryker with access to its manufacturing facilities in order that Stryker may review operations processes related to the Products, to confirm process conformance and identify process design or operating improvements, at any such times as Stryker shall deem necessary.

Article 15. Independent Contractor

15.1Relationship of the Parties.   Supplier will perform this Agreement as an independent contractor, and this Agreement will not be construed to create between the Parties the relationship of principal and agent, joint-venturers, co-partners, employer and employee, franchiser and franchisee or any other similar relationship, the existence of which is expressly denied by each Party. Supplier will conduct its business under its own name as an independent contractor, and is hereby expressly prohibited from holding itself out as an employee, agent, partner or representative of Stryker.  Any person employed by Supplier to perform hereunder will not be deemed to be an employee of Stryker, and Supplier and its suppliers, subcontractors, agents or representatives will not be, or represent themselves to be, officers, employees, agents or representatives of Stryker and will not bind, or attempt to bind, Stryker to any agreement, liability or obligation of any nature.

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15.2Right to Direct Services.   Stryker will have no right to control the manner, means, or method by which Supplier performs this Agreement.  Rather, Stryker will be entitled only to direct Supplier with respect to the elements of obligations to be performed by Supplier and the results to be derived by Stryker, to inform Supplier as to where and when such obligations will be performed, and to review and assess the performance of such obligations by Supplier for the limited purposes of assuring that such obligations have been performed and confirming that such results were satisfactory.

15.3No Right to Participate in Stryker Plans.   No amounts payable by Stryker under this Agreement will be considered salary for pension and incentive compensation purposes. Individuals engaged by Supplier in the performance of this Agreement are not eligible for and will not participate in Stryker's retirement plans, insurance plans and any other benefits normally afforded to employees of Stryker. Supplier will bear all responsibility and liability for the payment of all federal, state and local income taxes due on money received from Stryker under this Agreement and filing all appropriate tax returns and other forms with respect thereto.  Moreover, Supplier will be solely responsible for any worker's compensation, FICA, withholding tax, unemployment compensation, and any other federal or state payment in connection with the performance of this Agreement. Supplier will indemnify and hold Stryker and its affiliates harmless from and against any and all such liabilities or claims including interest assessed or penalty and reasonable attorneys fees incurred, arising from Supplier’s failure to pay such tax.

Article 16. Assignment

16.1Assignment Restrictions.   No Party may assign this Agreement, in whole or in part, without the prior written consent of the others; provided, however, Stryker and Supplier, respectively, may assign this Agreement, in whole or in part, to any of its Affiliates without the prior consent of the others provided that the assigning Party shall be deemed jointly and severally responsible for Affiliate’s continued performance of the obligations of this Agreement and the assigning Party shall provide 30 days prior notice of assignment to the other Parties.  This Agreement shall inure to the benefit of and be binding upon each Party, their respective successors and permitted assigns. No assignment shall relieve a Party of the performance of any accrued obligation that such Party may then have under this Agreement.  Any attempted assignment of this Agreement not in compliance with this Section shall be of no force or effect.

Article 17. Subcontractors

17.1Stryker Consent.   Supplier shall not subcontract, in whole or part, any of its rights or obligations under this Agreement without Stryker's prior written consent, which consent shall not unreasonably be withheld, nor shall Supplier allow any work to be performed other than on its own premises.

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17.2Independent Subcontractors.   In the case of any subcontract for which Stryker issues its written consent, each subcontract entered into by Supplier shall be in such form and substance as will not create any relationship, contractual or otherwise, between the subcontractor and Stryker, and will not permit subcontractor to pass through to Stryker, as agent for subcontractor or otherwise, any claims of subcontractor.  Supplier shall be solely responsible for the job performance, actions, and/or omissions of the subcontractor's employees through completion of the subcontractor's performance under this Agreement.

17.3Subcontractor Agreement Terms.   Supplier agrees and warrants that any such employees and subcontractors who shall perform hereunder shall abide by the provisions of this Agreement regarding confidentiality, inventions and work on Stryker's premises.  Supplier shall include in each subcontract agreement terms and conditions consistent with the intent of the Agreement, including all special performance requirements hereunder.  Additionally, Supplier shall include in each such subcontract agreement, a provision giving Stryker the right to audit and inspect the subcontractor's facilities and procedures in accordance with Article 14 and as otherwise provided in this Agreement.  Each subcontractor agreement shall include consent to any assignment thereof, in whole or in part, by Supplier to Stryker, its Affiliates and designees, without requirement of further consent from such subcontractor.

Article 18. Permits

18.1Obligations of Supplier.   Supplier shall obtain, maintain and pay for all permits, governmental fees, and licenses necessary for the performance of this Agreement and shall obtain all required inspections, authorizations and approvals prior to commencement of performance.  Supplier shall assist Stryker in obtaining additional permits and licenses that may be required by law to be issued in Stryker's name.

Article 19. Work on Stryker's Premises, Security and Health Services

19.1To the extent that Supplier's performance of this Agreement requires work on Stryker's premises, Supplier shall do so in a manner that (a) does not interfere with the operation of Stryker's business and (b) complies with the following:

19.2Contractor Safety Manual.   Supplier shall confine all equipment, apparatus, materials and operations to limits indicated by the proper representative of Stryker, and Supplier shall not unnecessarily encumber the premises with materials.  Supplier shall strictly comply with all of Stryker's work and safety rules set forth in Stryker's Contractor Safety Manual, as the same may be updated and amended by Stryker from time to time.  Supplier shall also ensure that any subcontractors retained by Supplier to perform under this Agreement on Stryker's premises shall strictly comply with all of Stryker's work and safety rules set forth in Stryker's Contractor Safety Manual, as the same may be updated and amended by Stryker from time to time.  By requiring compliance therewith, Stryker does not assume, abrogate or undertake to discharge any duty or responsibility of Supplier to its employees and its subcontractor's employees or other persons.

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19.3Searches, etc.   For security purposes, all vehicles, persons and materials of or from Supplier and its subcontractors, employees, agents, representatives or invitees entering or exiting the premises of Stryker are subject to search upon request of any representative of the Corporate Security Department of Stryker.

19.4Impropriety, Theft or Loss.   Any instances of impropriety, theft or loss involving Supplier or any of its personnel, employees, agents, representatives, subcontractors or invitees shall be immediately reported to Stryker Corporate Security as well as to the appropriate law enforcement agency.

19.5Right of Approval; Replacements.   To the extent that Supplier's performance of this Agreement requires work on Stryker's premises by Supplier's personnel or a subcontractor's personnel, such personnel shall be approved by Stryker.  In the event that any of Supplier's or a subcontractor's personnel approved by Stryker hereunder becomes unwilling or unable to perform, fails to perform, or fails to cooperate with Stryker in performing, Supplier shall find a replacement acceptable to both Parties at no additional cost to Stryker.

19.6Accidents, Injury, Damage and Discharges.   Supplier shall report to Stryker as soon as practicable all accidents resulting in personal injury or property damage arising out of or during its or its subcontractors performance on Stryker's premises, and shall furnish Stryker with a copy of all reports made by Supplier of such accidents.  To the extent required by law, Supplier shall report to the appropriate federal, state or local agencies all spills and discharges of a hazardous, or toxic substance or other pollutant within the time provided by applicable laws, rules, codes or regulations of all such agencies.  Supplier shall also notify Stryker as soon as reasonably possible of any such spill or discharge and provide copies of any written reports filed with said agencies.

19.7Response and Indemnification.   Supplier acknowledges that Stryker may provide first aid and emergency medical response services to Supplier's employees, agents, representatives or subcontractors as may be appropriate under the circumstances.  In addition to the indemnification provisions set forth elsewhere in this Agreement, Supplier shall indemnify and hold Stryker, its Affiliates, and their respective shareholders, officers, directors, employees, agents, successors, and assigns harmless from and against any and all claims, suits, actions, liabilities, losses, costs, reasonable attorney fees, expenses, judgments and damages, arising out of Stryker's provision of such first aid and emergency medical services to Supplier's employees, agents, representatives or subcontractors.

19.8Right to Bar; Compliance.   Stryker shall have the right to immediately bar from Stryker's premises any Supplier or subcontractor personnel who fail to strictly comply with the provisions of this Article.  Supplier's or a subcontractor's failure to strictly comply with the provisions of this Article shall be deemed a material breach of this Agreement.

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Article 20. Disaster Recovery Plan and Business Continuity

20.1Supplier’s Obligations.   Supplier shall provide disaster recovery and back up capabilities and facilities through which Supplier will be able to render the services to Stryker with minimal disruptions or delays.  Supplier shall furnish Stryker copies of the written plan or plans for disaster recovery and back up arrangement prior to or upon execution of this Agreement.

Article 21. Force Majeure

21.1Force Majeure Event.   In the event that any Party is unable to perform any of its obligations under the Agreement, or to enjoy any of its benefits because of fire, natural disaster, action or decrees of governmental bodies (a "Force Majeure Event"), the Party who has been so affected shall immediately give written notice to the other Parties and shall do everything possible to resume performance.  Upon receipt of such notice, all obligations under the Agreement shall be immediately suspended.  If the period of nonperformance exceeds 30 days from the receipt of notice of the Force Majeure Event, a Party whose ability to perform has not been so affected may by giving written notice terminate the Agreement.  Delays in delivery due to Force Majeure Events shall automatically extend the delivery date for a period equal to the duration of such Force Majeure Events.  Any acceptance or warranty period affected by a Force Majeure Event shall likewise be extended for a period equal to the duration of such Force Majeure Event.  As applied to this Article and to determine whether an event is wholly beyond control of a Party, strikes, slowdowns or other labor related delays are not Force Majeure Events.

21.2Exclusions.   Notwithstanding the provisions set forth in Section 21.1, a Force Majeure Event shall not include any governmental action of an enforcement nature that arises from or relates to Supplier’s failure to comply with any federal, national, state, provincial, or local law, statute, regulation or ordinance applicable to Supplier's performance hereunder or Supplier's manufacture, storage or handling of materials associated with such performance.

Article 22. Governing Law; Dispute Resolution

22.1Governing Law.   The validity and interpretation of this Agreement and the legal relations of the Parties shall be governed by the internal laws of the state of Michigan, without regard to its rules governing conflicts of law.  The U.N. Convention on Contracts for the Sale of International Goods is hereby excluded from application to this Agreement.

22.2Dispute Resolution.   Any suit, action or proceeding seeking to enforce any provision of, or based on any matter arising out of or in connection with, this Agreement or the transactions contemplated hereby will be brought in the United States District Court for the Western District of Michigan or any Michigan State Court sitting in Kalamazoo County, Michigan, so long as one of such courts will have subject matter jurisdiction over such suit, action or proceeding, and that any cause of action arising out of this Agreement will be deemed to have arisen from a transaction of business in the state of Michigan, and each of the Parties hereby irrevocably consents to the jurisdiction of such courts (and of the appropriate appellate courts therefrom) in any such suit, action or proceeding and irrevocably waives, to the fullest extent permitted by law, any objection that it may now or hereafter have to the laying of the venue of any such suit, action or proceeding in any such court or that any such suit, action or proceeding brought in any such court has been brought in an inconvenient forum.  Process in any such suit, action or proceeding may be served on any party anywhere in the world, whether within or without the jurisdiction of any such court.

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Article 23. Compliance with Laws

23.1Compliance with Laws.   Supplier warrants that all Products shall be produced in compliance with all applicable federal, state and local laws, rules and regulations, including :

(a)the nondiscrimination provisions of (i) the Equal Opportunity clause set forth in 41 CFR 60‑1.4 (a) pursuant to the requirements of Executive Order 11246; (ii) the Rehabilitation Act of 1973 as set forth in 41 CFR 60-741.1; (iii) the Vietnam Era Veteran Readjustment Assistance Act of 1974 as set forth in 41 CFR 60-250.4; and (iv) any law, order, or regulatory provision issued in addition, supplement or replacement of the foregoing; and

(b)the requirements of Sections 6, 7, and 12 of the Fair Labor Standards Act, as amended, and all regulations and orders issued under Section 14 thereof.

Article 24. Notices.

All notices hereunder shall be delivered (i) personally, (ii) by registered or certified mail, postage prepaid or (iii) by overnight courier service to the following addresses of the respective Parties:

If to Supplier: Synergetics, Inc.

3845 Corporate Centre Drive

O'Fallon, Missouri 63368

Attn: Peter Rasche

If to Stryker: Stryker Instruments

4100 East Milham Avenue

Kalamazoo, MI  49001

Attn: Vice President, Finance

Copy To: Stryker Corporation

2825 Airview Boulevard

Kalamazoo, MI  49002

Attn: General Counsel

Notices shall be effective upon receipt.  A Party may change its address listed above by notice to the other Party.

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Article 25.  Miscellaneous.

25.1Remedies.   No remedy herein conferred is intended to be exclusive of any other remedy, and each and every such remedy shall be cumulative and shall be in addition to every other remedy given hereunder or now or hereafter existing at law or in equity or by statute or otherwise.

25.2Counterparts.   This Agreement may be executed in one or more counterparts, each of which shall for all purposes be deemed to be an original and all of which shall constitute the same instrument.  This Agreement may be executed and delivered by facsimile or electronic transmission with the same effect as if a manually signed original were personally delivered.

25.3Waiver; Modification of Agreement.   Waiver of any breach under this Agreement shall not constitute waiver of any other breach of the same or any other provision.  Acceptance of any items or payment therefor shall not waive any breach.  No waiver or modification of any of the terms of this Agreement shall be valid unless in writing and signed by authorized representatives of both Parties.

25.4Survival.   Sections 6, 7, 8, 9, 10, 12, 13, 14, 15, 24, and 25 shall survive expiration or termination of this Agreement and shall be binding to the respective successors, assigns, subsidiaries or Affiliates.

25.5Severability.   In case any one or more of the provisions of this Agreement should be invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained herein shall not in any way be affected or impaired thereby.

25.6Exhibits.   Exhibits described below and attached hereto are incorporated into this Agreement wherever referenced.

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Exhibit AList of Products and Pricing Schedule

Exhibit BInitial Forecast

Exhibit CPurchase Order Form

Exhibit DSpecifications

Exhibit EEquipment Placement Terms

Exhibit FPatent Rights

Exhibit GRetained Intellectual Property Rights

25.7Entire Agreement.   This Agreement, including any documents referred to herein and attached hereto, constitutes the entire agreement between the Parties with respect to its subject matter and supersedes all prior representations, understandings or agreements between the Parties with respect to such subject matter, and the signing and delivery by the Parties shall cause this Agreement to be valid on the Effective Date.  No course of dealing or usage of trade shall be used to modify the terms hereof.

25.8Interpretation.   The headings in this Agreement are for convenience of reference only and in no way define or limit any of the provisions hereof or otherwise affect their construction or effect. This Agreement is the product of negotiations between the Parties, and shall be construed as if jointly prepared and drafted by them, and no provision hereof shall be construed for or against any Party due to its actual role in the preparation or drafting hereof by reason of ambiguity in language and/or rules of construction against the drafting Party or similar doctrine.  The documents referred to herein and attached hereto shall be read together with this Agreement to determine the Parties' intent.  In the event of a conflict between or among such documents, the documents shall govern in this order:  (1) this Agreement; (2) the Specifications; and (3) a Purchase Order. Unless otherwise provided in this Agreement or the context requires otherwise, (i) references to Articles, Sections, Subsections, refer to those of this Agreement; (ii) Exhibits or Schedules are deemed to refer to those referred to in Section 25.6; (iii) references to the word “including” mean “including without limitation”; (iv) reference to any document, means any permitted variation, amendment or supplement to such document and shall include such document herein by reference; and (v) references to “supply” in the context of the Products mean the sale, delivery, provision and supply of Products and related terms shall have the equivalent meaning.

25.9Non-Compete.   Supplier acknowledges it has agreed to a certain covenants as set forth in Section 4.12 of the Purchase Agreement.  Any breach of Supplier's obligations under Section 4.12 of the Purchase Agreement will be a breach of this Agreement.

* * *

30

Exhibit 10.26

The Parties have caused this Agreement to be executed by their duly authorized officers as of the day and year first above written.

STRYKER CORPORATION, ACTING THROUGH ITS INSTRUMENTS DIVISION
By	/s/ Pamela G. Boone
Its	President
SYNERGETICS, INC.
By	/s/ James N. Heath
Its	EVP & CFO

[SUPPLY AGREEMENT]

EXHIBIT A

[Redacted** (2 pages)]

** Information marked as "[redacted**]" has been omitted pursuant to a request for confidential treatment and has been filed separately with the Securities and Exchange Commission.

A-1

Exhibit 10.26

EXHIBIT B

Initial Forecast

[Redacted** (1 page)]

** Information marked as "[redacted**]" has been omitted pursuant to a request for confidential treatment and has been filed separately with the Securities and Exchange Commission.

B-1

EXHIBIT C

PURCHASE ORDER TERMS AND CONDITIONS

1. Definitions.  The term "Stryker" shall refer to Stryker Corporation, and/or any division or subsidiary of Stryker Corporation identified on the front of this Purchase Order.  The term "Supplier" shall refer to the vendor designated on the face hereof and shall also include all persons performing any type of work under this Purchase Order ("PO").  The term "Product(s)" shall refer to the materials, supplies, items and equipment covered by this PO and the Supply Agreement between Stryker and Supplier.

2. Acceptance.  This PO must be accepted in writing by Supplier by returning a signed acknowledgment copy of this PO.  If Supplier fails to accept in writing, any conduct by Supplier that is in accordance with the existence of this PO shall constitute an acceptance by Supplier of this PO.  Any terms proposed in Supplier's acceptance of Stryker's offer that add to, vary from, or conflict with these Terms and Conditions are hereby objected to and shall not apply.  If this PO has been issued by Stryker in response to an offer, and if any of these Terms and Conditions are additional to or different from any terms of such offer, then the issuance of this PO by Stryker shall constitute an acceptance of such offer subject to the express condition that Supplier assents to these Terms and Conditions, and Supplier shall be deemed to have so assented unless Supplier notifies Stryker to the contrary in writing within ten (10) days of receipt of this PO.  Any preprinted terms and conditions provided by Supplier shall be void and of no effect.

3. Entire Agreement. This PO consists of the terms contained herein and on the face as well as the Supply Agreement between Stryker and Supplier, the Stryker quality requirements (a copy of which is available to Supplier upon request) and any exhibits referred to or attached hereto.  This PO sets forth the complete agreement between the parties with respect to the subject matter hereof, and supersedes any and all prior or contemporaneous oral or written communications relating thereto. The Terms and Conditions of this PO shall supplement the provisions of Supply Agreement between Stryker and Supplier to the extent they are not inconsistent.  In the event of any inconsistency between the terms of the Supply Agreement, the terms on the face of this PO or these pre-printed Terms and Conditions, the following shall be the order of precedence: (i) the terms of the Supply Agreement, (ii) the terms on the face of the PO, and (iii) these pre-printed Terms and Conditions. Any reference to a proposal, quotation or other communication by Supplier shall, unless indicated to the contrary, be limited to the description of the Products and by the terms set forth or incorporated by reference herein.  The failure of Stryker to insist on performance of any provision hereof shall not be construed to be a waiver of such provision or any part thereof.

4. Prices.   Except as otherwise provided in any exhibit attached to this PO or the Supply Agreement, the price(s) set forth on the face of this PO are firm, and are not subject to increase.

5. Taxes.  The prices for the Products provided hereunder include all Federal, state and local taxes imposed upon or on account of such sale, unless otherwise indicated on the face of this PO.

6. Invoices.  All invoices shall be submitted in duplicate and be accompanied by a copy of the bill of lading if on collect freight shipments or if otherwise required by law, and by a prepaid freight bill if all or any part of the freight is included on the face of the invoice. Stryker shall have no obligation to pay any Supplier invoice submitted more than ninety (90) days after delivery of Products hereunder. In addition to any other information specified elsewhere herein, invoices and packing slips shall contain the following information:  PO number, item number, description of Products, sizes, quantities, weight, unit prices and extended totals.

7. Payment.  Stryker shall make payment for Products within [redacted**] days after receipt of invoice and delivery and acceptance of the Products, unless different terms have been stated on the face of this PO.  Stryker shall receive a [redacted**] discount for any Supplier invoice paid within [redacted**] days of receipt of invoice.  Payment of an invoice shall not constitute acceptance of Products and shall be subject to adjustment for errors, shortages, defects in the Products, damage to Stryker for which Supplier is partially or wholly responsible or other failure of Supplier to meet the requirements of the PO.

** Information marked as "[redacted**]" has been omitted pursuant to a request for confidential treatment and has been filed separately with the Securities and Exchange Commission.

EXHIBIT C

PURCHASE ORDER TERMS AND CONDITIONS

8. Delivery.  Time is of the essence and the Products must be received on the dates and at the destination(s) set forth on the face hereof.  If Supplier fails to meet any such delivery date, Stryker may, without limiting its other rights and remedies, direct expedited routing, charge excess costs incurred thereby to Supplier, or cancel all or part of this PO.  All rejected or over-run Products and material with Stryker's printing or identification must be destroyed by Supplier at Supplier's expense and not sold as surplus.

9. Freight; Title and Risk of Loss.  Unless otherwise specifically provided for on the face page hereof, (a) Supplier shall be responsible for freight and delivery to the Stryker destination specified on the face of this PO and (b) all freight and delivery charges will be paid by Supplier.  Notwithstanding anything else herein, Supplier shall bear all risks of loss and damage to the Products until final acceptance by Stryker at Stryker's "ship to" destination specified on the face of this PO.  Further, Supplier shall bear the same risks with respect to any Products rejected by Stryker or as to which Stryker has revoked its acceptance, from the time of such rejection or revocation.

10. Inspection.

(a) Notwithstanding any prior inspections or payments hereunder, all Products shall be subject to final inspection, which may include measurement, testing or examination, and acceptance at Stryker's facility within a reasonable time (but not less than 45 days) after receipt at destination.  Any inspection by Stryker does not relieve Supplier of any obligations or liabilities under this PO.

(b) If any Products delivered do not meet all of the requirements of this PO, Stryker shall have the right to reject such Products and return such Products at Supplier's expense.  Stryker may elect to reject the entire Products tendered even if only a portion thereof is nonconforming.  If Stryker elects to accept nonconforming Products, Stryker, in addition to its other remedies, shall be entitled to an appropriate reduction in price.  Payment for any Products shall not be deemed an acceptance thereof.

(c) Supplier agrees to undertake such quality control and inspection procedures as required by the FDA or any other appropriate regulatory agency.  Supplier will provide Stryker with access to its manufacturing facilities in order that Strykermay make CGMP audits at such times as Strykershall deem necessary, upon not less than 48 hours notice.

11. Warranty.

(a) Supplier warrants that all Products furnished hereunder shall:  (i) be free from latent and patent defects in workmanship, material, manufacture, design (where design is Supplier's responsibility), and sterilization; (ii) comply with the requirements of this PO, including all drawings, specifications and or quality plans incorporated herein and samples and warranties furnished by Supplier; (iii) be merchantable and safe for consumer use, and fit and sufficient for the use intended by Stryker; (iv) be free and clear of any lien, security interest or other adverse claim against title; (v) comply with the laws of the states and of the United States governing weights, measures and sizes; (vi) not be adulterated or misbranded within the meaning of any State food and drug laws or the Federal Food, Drug and Cosmetic Act, or not be an article which may not under the provisions of sections 510, 513, 515 or 801 of the Act or any other applicable Federal, state or local laws, be sold, legally transported or introduced into interstate commerce; and (vii) not infringe, including without limitation their sale or use alone or in combination, any United States or foreign patents, trademarks, trade secrets, copyrights or proprietary rights of any third party.

(b) The foregoing warranties are in addition to all other warranties, expressed or implied, and shall survive any delivery, inspection, acceptance, and payment by Stryker.

(c) Supplier's warranties shall be effective for the greater of (i) 36 months from the date of shipment; or (ii) the period of time set forth in the applicable specifications provided by Stryker.

EXHIBIT C

PURCHASE ORDER TERMS AND CONDITIONS

(d) These warranties shall run to Stryker's customers and users of its products.

(e) If any Products furnished hereunder do not meet the warranties specified in this PO, Stryker may, at its option: (i) require Supplier to correct, at no cost to Stryker, any defective or nonconforming Products by repair or replacement within seven (7) days of notice to Supplier; (ii) return such defective or nonconforming Products at Supplier's expense to Supplier and recover from Supplier the price thereof; (iii) correct the defective or nonconforming Products itself and charge Supplier with the cost of such correction; or (iv) accept the defective or nonconforming Products at a reduced price.

12. Changes.  Stryker reserves the right at any time to change this PO in writing, and if such change causes an increase or decrease in price or delivery of Products, an equitable written adjustment shall be made.

13. Confidentiality.  In its performance of this PO, Stryker may disclose to Supplier or Supplier may have access to certain Confidential Information of Stryker.  "Confidential Information" means trade secrets (as defined by applicable laws), any data, reports, computer programs or models and related documentation, business or research plans, specifications, drawings, designs or information transmitted by Stryker to Supplier in connection with this PO, and any other information that is of value to its owner and is treated as confidential, including without limitation, the fact that Supplier has furnished or contracted to furnish to Stryker the Products covered by this PO.  All Confidential Information of Stryker shall remain the property of Stryker.  Supplier shall keep all Proprietary Information of Stryker confidential and use such information only as necessary to fulfill Supplier's obligations pursuant to this PO. All originals, copies, summaries and derivations of Confidential Information in whatever form shall be returned to Stryker or destroyed upon Stryker's request.

14. Intellectual Property.  The provisions set forth in Sections 7.4, 7.5, and 10 of the Supply Agreement between Supplier and Stryker shall apply to this PO.

15. Tooling and Equipment.  Design, tools, jigs, dies, fixtures, templates, patterns, drawings, and other information and things (herein collectively, the "Tools") paid for or furnished by Stryker shall be Stryker's property and Supplier shall not encumber or dispose of them in any way. Supplier shall maintain such Tools in Product working condition.  The Tools shall be used exclusively for Supplier's performance of its obligations hereunder.  To the extent any equipment owned by Stryker is placed at Supplier's facility to be used in connection with Supplier's performance of its obligations hereunder, in addition to the foregoing terms and conditions, such equipment and Supplier's use thereof shall be subject to the terms and conditions set forth in Stryker's Equipment Placement Terms.

16. Work on Stryker's Premises; Occupational Health Services.  If services are to be performed on Stryker's premises, Supplier shall comply with all applicable safety laws and Stryker's then current safety and other applicable regulations.  Supplier shall provide Stryker with a complete list of all chemicals, hazardous materials, and ingredients in the composition of Products or used in the performance of the services hereunder and a copy of the Material Safety Data Sheet for such chemicals and hazardous materials.  The submission of such list by Supplier shall not relieve Supplier of exclusive responsibility for the safe transportation, use, storage, and disposal of such materials prior to acceptance by Stryker.  All chemicals and hazardous materials brought by Supplier to Stryker's premises shall bear a label stating the identity of the chemical or material and the hazards associated therewith.

17. Indemnity; Insurance.

(a) Supplier shall defend, indemnify and hold Stryker, its affiliated companies, and their respective shareholders, officers, directors, employees, agents, successors, and assigns harmless from and against any and all claims, suits, actions, liabilities, losses, costs, reasonable attorneys' fees, expenses, judgments or damages, whether ordinary, special or consequential arising directly or indirectly from or in connection with (i) the acts, negligence, omissions or willful misconduct of Supplier; (ii) Products supplied hereunder; (iii) a breach of any of Supplier's warranties or any other term and condition of this PO; (iv) Supplier's negligent, unauthorized or wrongful acts or omissions with regard to the transportation, use, handling, disposal, processing or installation of hazardous materials;  (v) a claim that any Products furnished hereunder infringe upon or misappropriate any patent, copyright, trademark, trade secret or other intellectual property interest of another;  (vi) a claim of any lien, security interest or other encumbrance made by a third party; (vii) a violation of federal or state law, regulation, statute or ordinance; or (viii) failure to comply with the Confidentiality obligations set forth herein. Notwithstanding the foregoing, Supplier shall not hold Stryker harmless from claims arising out of the negligence, reckless actions or willful misconduct or malfeasance of Stryker, its officers, agents, or employees or any person or entity not subject to Supplier's supervision or control.

EXHIBIT C

PURCHASE ORDER TERMS AND CONDITIONS

(b) Without limiting Stryker's rights and remedies hereunder, if Stryker believes that the Products supplied hereunder are likely to be determined to be an infringement or misappropriation of a patent, copyright, trademark, trade secret, or other proprietary right, Stryker may require Supplier to (i) replace such Products with equivalent functionality or (ii) modify such Products with equivalent functionality to make them non-infringing.

(c) Supplier shall carry and maintain insurance coverage satisfactory to Stryker to cover its obligations in this PO, including without limitation, the following insurance with the respective minimum limits per occurrence:  Commercial General Liability - $1,000,000, Workers' Compensation - statutory, Business Automobile Liability - $1,000,000 and Product Liability Coverages - $1,000,000. Upon request, Supplier shall submit to Stryker certificates of insurance showing proof of such coverages.  All such policies shall name Stryker as an additional insured.

18. Termination.

(a) Stryker may, at any time, terminate this PO, in whole or in part, without cause, upon written notice to Supplier.  Upon any such termination Supplier shall, to the extent specified by Stryker, stop all work on this PO, and cause its suppliers and subcontractors to stop work.  Charges for any such termination of this PO shall be limited to actual non-recoverable costs incurred by Supplier that Supplier can demonstrate were properly incurred for the Products hereunder prior to the date of termination.  In no event will Stryker reimburse Supplier for anticipated profits or revenue or other economic loss for undelivered Products.  Any Products for which Supplier is reimbursed shall become Stryker's property.

(b) Stryker may terminate this PO, in whole or in part, if Supplier: (i) fails to make delivery of the Products within the time specified herein; or (ii) fails to replace or correct defective Products in accordance with the provisions of this PO; or (iii) becomes insolvent, files or has filed against it a petition in bankruptcy, or makes an assignment for the benefit of creditors.

(c) Any such termination shall not relieve Supplier from any liability hereunder.

19. Remedies.  Stryker's remedies shall be cumulative and remedies herein specified do not exclude any remedies allowed by law or in equity.  Waiver of any breach shall not constitute waiver of any other breach of the same or any other provision.

20. Stryker Property.All drawings, artwork, data, material, supplies, equipment, tooling, dies, molds, fixtures, and patterns furnished or paid for by Stryker shall be Stryker's exclusive property, and shall be used by Supplier only in performance of this PO.  Such property, while in Supplier's custody and control, shall be held at Supplier's sole risk and, upon Stryker's request, shall be returned to Stryker in Product condition, normal wear and tear excepted.

21. Assignability and Subcontracting.  This PO shall be binding upon and inure to the benefit of the parties hereto and their respective successors and permitted assigns.  Notwithstanding the foregoing, neither this PO nor any interest therein shall be assigned, delegated subcontracted for, or otherwise transferred by Supplier, except upon the prior written consent of Stryker. Any assignment or transfer without such consent shall be void and of no effect. Regardless of Stryker's consent to any of the foregoing, Supplier shall remain liable for the performance of all such obligations and shall ensure that any permitted subcontractor or non-employee reads and understands the terms of this PO.  Stryker may assign its rights or obligations under this PO to any Stryker affiliate or successor without Supplier's consent.

EXHIBIT C

PURCHASE ORDER TERMS AND CONDITIONS

22. Survivorship.  All provisions, representations and warranties contained herein which by their nature are required or intended to be observed or performed after termination of this PO will survive its termination.

23. Release of Information. Supplier shall not release any statement, advertisement, information, or publicity referring to Stryker, or any Stryker affiliate without Stryker's prior written approval.

24. Compliance with Laws.  Supplier warrants that all Products will be produced or performed in compliance with all applicable federal, state and local laws, rules and regulations, including without limitation: (a) the nondiscrimination provisions of (i) the Equal Opportunity clause set forth in 41 CFR 60‑1.4 (a) pursuant to the requirements of Executive Order 11246; (ii) the Rehabilitation Act of 1973 as set forth in 41 CFR 60-741.1; (iii) the Vietnam Era Veteran Readjustment Assistance Act of 1974 as set forth in 41 CFR 60‑250.4; and (iv) any law, order, or regulatory provision issued in addition, supplement or replacement of the foregoing; and (b) the requirements of sections 6, 7, and 12 of the Fair Labor Standards Act, as amended, and all regulations and orders issued under section14 thereof.

25. Applicable Law. This PO shall be governed by and construed according to the laws of the State of Michigan as applicable to contracts made and to be performed in that state, without regard to conflicts of laws principles of such state.  The U.N. Convention on Contracts for the Sale of International Goods is hereby excluded from application to this PO.

26. Independent Contractor.  Supplier will perform this PO as an independent contractor, and this PO will not be construed to create between the parties the relationship of principal and agent, joint-venturers, co-partners, employer and employee, franchiser and franchisee or any other similar relationship, the existence of which is expressly denied by each party.  Supplier represents that Supplier is engaged in similar business for other clients. Supplier will conduct its business under its own name as an independent contractor, and is hereby expressly prohibited from holding itself out as an employee, agent, partner or representative of Stryker.  It is agreed that any person employed by Supplier to perform hereunder will not be deemed to be an employee of Stryker, and Supplier and its suppliers, subcontractors, agents or representatives will not be, or represent themselves to be, officers, employees, agents or representatives of Stryker and will not bind, or attempt to bind, Stryker to any agreement, liability or obligation of any nature.

27. Force Majeure. Supplier and Stryker shall have the right to suspend their respective performance hereunder, without penalty or liability, in the event of war, riot, flood, acts of God, fire, court order, strike, work stoppage, act of governmental authority, or other causes beyond their control (a "Force Majeure Event.").  Delays in delivery due to a Force Majeure Event shall automatically extend the delivery date for a period equal to the duration of such event. Any acceptance or warranty period affected by a Force Majeure Event shall likewise be extended for a period equal to the duration of such event.

28. Severability.  These Terms and Conditions shall be deemed severable.  In the event that any provision is determined to be unenforceable or invalid, such provision shall nonetheless be enforced to the fullest extent permitted by applicable law, and such determination shall not affect the validity and enforceability of any other remaining provisions.

29. Change Control Statement.  Supplier will not make any change to the product, process, materials, formulation, packaging, labeling, software, environment conditions, quality assurance processes, equipment, production location or subcontractor that could in anyway affect the quality of the finished device, without prior written notification and where appropriate, approval from Stryker.

EXHIBIT D

SPECIFICATIONS; QUALITY PLAN

[Redacted** (24 pages)]

** Information marked as "[redacted**]" has been omitted pursuant to a request for confidential treatment and has been filed separately with the Securities and Exchange Commission.

Quality Plan

Product: Sonopet Products

Scope:    Development & Manufacturing Responsibilities

Supplier: Synergetics

Initiated By:
		Name		Signature			Date
Revision:	1
Status:	o  in Process        o  Released
Distribution: STRYKER INSTRUMENTS	R&D		AME		Materials	SQE             QA/RA
Distribution: SUPPLIER	QA/RA		Manufacturing		Other __________	Other _______________

The following signatures denote consensus and a released agreement:

SUPPLIER:
QA/RA Reviewed & Approved:
	Name:	Signature:	Date:
Manufacturing Reviewed & Approved:
	Name:	Signature:	Date:
Other __________: Reviewed & Approved:
	Name:	Signature:	Date:
Other __________: Reviewed & Approved:
	Name:	Signature:	Date:
STRYKER INSTRUMENTS:
R&D Reviewed & Approved:
	Name:	Signature:	Date:
QA/RA Reviewed & Approved:
	Name:	Signature:	Date:
Manufacturing Reviewed & Approved:
	Name:	Signature:	Date:
Supplier Quality
Reviewed & Approved	Name:	Signature:	Date:
Materials/Purchasing Reviewed & Approved:
	Name:	Signature:	Date:

Change history

Rev. Nr. Comments Date Author

Contents

1	Goals/Objectives	2
2	Scope of Responsibility	2
3	Manufacturing Requirements	3
4	Packaging Requirements	11
5	Purchase Orders	11
6	Order Acknowledgement	11
7	Delivery Documentation	11
8	Delivery Rejection	12
9	Product/Process Changes	12
10	Financial Responsiblities	13
11	Record Retention	13
12	Formal Problem-Solving	14
13	Quality Performance Expectations	15
14	Contact Information	15

1Goals/Objectives

We, Stryker Instruments, desire to engage in a quality plan with SYNERGETICS, “SUPPLIER”, for the sole purpose of developing and manufacturing the Device A to be sold and marketed by Stryker Instruments.  It is the mutual intent of Stryker Instruments and SUPPLIER, to facilitate the realization of this product.

2Scope of Responsibility

The Scope of Responsibilities for each party shall be defined in accordance with the following:

Stryker Instruments:  Product development and design control of said product, including, but not limited to all necessary product specifications and drawings.  Stryker Instruments R&D shall authorize the release of new components for production.  If applicable, Stryker Instruments shall assume all responsibility for design verification testing for new products designed to be manufactured by SUPPLIER, and/or any Design and/or Engineering changes of an existing product manufactured by SUPPLIER as necessary.

SUPPLIER:  SUPPLIER is responsible for a Manufacturing and/or assembly process that delivers said product packaged and sterilized (when applicable) within specified tolerances and meeting defined quality requirements.  Responsibility to include, but not limited to, appropriate equipment qualification(s), the development of process validation plans and test reports; process validation documentation; monitor and maintenance of manufacturing equipment (including measuring and monitoring devices); monitor and maintenance of manufacturing areas; raw materials and component incoming inspections; audits for raw material and sub components suppliers and management of these suppliers and any outsourced processes; secure and accessible storage of all the applicable device history files (DHF) and Quality records; Quality Control and final release of product; and appropriate storage, packaging, preservation, and delivery of the finished products.  These responsibilities shall be incorporated into the normal manufacturing flow of the products.

2

3Manufacturing Requirements

3.1 Quality System

· Stryker Instruments shall have the ability to conduct on-site audits of SUPPLIER.  In the event that corrective actions are required, Stryker Instruments shall coordinate and review corrective action response adequacy.  If deemed appropriate, corrective action verification may be conducted on-site at SUPPLIER’s facility.

· When deemed necessary, SUPPLIER will facilitate Stryker Instruments access to SUPPLIER’s sub-tier supplier’s facility for an on-site audit and to review quality system and/or process documentation.

· If a contract manufacturer, SUPPLIER shall be an FDA registered facility.  Notices and/or warning from the FDA shall be reported to Stryker Instruments.

· SUPPLIER shall document, implement, and maintain a quality system third-party certified to ISO 13485:2003. Updated ISO 13485:2003 certificates shall be sent to Stryker Instruments upon receipt.  (If SUPPLIER is not certified, SUPPLIER shall develop an implementation plan and it should be made a part of this Quality Plan as an attachment.)

· SUPPLIER shall ensure its subcontractors comply with all QSR/cGMP requirements.

· SUPPLIER shall be obliged to produce and test all relevant materials, critical processes, sub-components and product in compliance with the requirements of this contract, applicable standards and any other pertinent governmental regulations.

3

3.2 Compliance.

3.2.1Products manufactured and supplied to Stryker: (i) shall conform to the Specifications and applicable samples and models, (ii) shall not be adulterated or misbranded within the meaning of the Food, Drug and Cosmetic Act, as amended from time to time (the "Act"), and (iii) shall be manufactured and inspected in accordance with and with the current good manufacturing practice ("CGMP") and other requirements of the Quality System Regulation, 21 C.F.R. 820 (Medical Devices) promulgated by the Food and Drug Administration ("FDA") and in compliance with the Quality Management System requirements of ISO 13485:2003 and ISO 13485:2003 CAN/CSA (and any amendments thereto) and all other applicable legal and regulatory requirements, including all requirements of the Canadian Medical Device Regulation, the Therapeutic Goods Administration, Medsafe (New Zealand regulatory authority), and European Directives (including CE marking requirements). Supplier will be responsible for the foregoing with respect to sales made by Stryker to its customers and that it will replace at no charge any Product that is found to be defective.

3.3 Design Control

3.3.1 Design Control Activities

· Stryker Instruments R&D shall be responsible for managing and executing the design process, including the Planning, Execution, and Design Transfer phases for any products intended to be manufactured by SUPPLIER under this Agreement.  The activities covered in the design process are defined by Stryker Instruments procedures and instructions.  Stryker Instruments shall involve SUPPLIER in design activities as necessary.

· SUPPLIER shall be responsible for developing, executing, validating and maintaining the manufacturing processes for Stryker Instruments designed product applicable to this Agreement, this includes any necessary equipment qualifications.  SUPPLIER shall also be responsible for participation on design process activities as defined and required by Stryker Instruments procedures and instructions.

3.3.2 Design Control Documentation

Stryker Instruments shall be responsible for providing the following documentation:

· Product Development:

· Product Specification Documentation (per section 2 above) to consist of CAD drawings, specification documents, etc., that specify the design intent and required tolerances. Final production release design documentation to be reviewed and authorized by both parties, Stryker Instruments and SUPPLIER.

· Design Validation Documentation consisting of design validation test plan, test protocols and test reports.

· Pre-release product design changes initiated by Stryker Instruments shall be jointly reviewed and approved by both Stryker Instruments and SUPPLIER prior to implementation of the changes.

· Design Transfer of relevant documentation to ensure proper transfer of components and finished device specifications and bill of materials from pre-release status to production release status.  Upon design status change of pre-release to production release, Stryker Instruments shall verify that components and devices previously built under pre-release status meet the requirements of the production release specifications.  Any products not meeting the production release status shall be reviewed for acceptability for commercial release and acceptance rationale documented by Stryker Instruments.  Design transfer willbe considered complete when all the activities associated with the master validation plan have been successfully completed and approved.

4

SUPPLIER shall be responsible for generating the following production documentation per local quality system procedures.  All documentation listed below shall be reviewed and approved by both parties, Stryker Instruments and SUPPLIER.  These documents shall be auditable by Stryker Instruments at any time during the life of the contract with 72 hours notice to SUPPLIER.  In addition, hard copies shall be furnished to Stryker Instruments for our Device History Files and/or PPQA files.  SUPPLIER local quality system procedures apply, but documentation at a minimum shall include the details noted below.

Manufacturing:

· Production Process Map or Process Flow Chart identifying the planned manufacturing, assembly and testing steps and their respective sequence.  Planned critical control points shall also be identified.

· Process Failure Modes and Effects Analysis (PFMEA) for the planned manufacturing, assembly and testing steps.  PFMEA process steps shall correlate with the production process map.  Risk reduction measures, such as additional test or inspection points, shall require updating the process map with the additional identified control points or measures.  The PFMEA is a living document and shall reflect the latest design level, as well as the latest relevant actions, including those occurring after the start of production.

· Manufacturing Process Control Plan shall identify each control point in manufacturing, relevant equipment, fixtures, measurement instruments, etc.  The plan shall also define the process parameters and attributes that shall be monitored to demonstrate process control over time.  Process Control Plans shall be maintained by SUPPLIER and be readily accessible to floor personnel.

· Master Process Validation Plan documenting all the necessary Installation Qualifications (IQ), Operational Qualifications (OQ) and Process Qualifications (PQ) activities.  The master validation plan (MVP) shall identify all systems, processes, and methods that are considered “special” and therefore require validation.  In addition, the MVP shall identify those processes, operations and inspections that require verification and/or qualification only, (e.g. gage reliability and reproducibility studies, operator qualification, etc.).  The MVP shall also identify the relative sequence for conducting such validation and verification efforts.  Documentation to be maintained by SUPPLIER shall be in a readily accessible location.  A process validation summary shall be required for Stryker Instruments Design History Files with references to the hard copies of all process validation documents.  Hard copies of all Process Validation documentation to be furnished to Stryker Instruments as necessary upon request.  It is also recommended that the SUPPLIER maintains a validation registry.

· Equipment Qualifications, e.g. Installation Qualification (IQ) and an Operational Qualification-Equipment (OQ-E) with approved protocols and test reports.

· Process Validations, e.g. Operational Qualification-Process (OQ-P) and Performance Qualification (PQ) with approved protocols and test reports which include test data.

· Manufacturing Assembly Procedures

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· Quality Inspection Procedures.

· Certificates of Conformance (CofC).  If Stryker specifications require SUPPLIER to provide certificates of conformance, the SUPPLIER shall provide supporting process documentation defining the review and approval process for the specified certificate of conformance.

· Traceability Documentation and Procedures.SUPPLIER may manufacture and package the devices for design validation for which traceability of components and processes shall be maintained by SUPPLIER.  Documentation to be traceable back to a design specification or Product Development Plan.

· Pre-release Product Design Changes initiated by SUPPLIER that could potentially impact form, fit, or function of components or product or regulatory clearances, shall be jointly reviewed and approved by Stryker Instruments and SUPPLIER prior to implementation of the changes.  This includes any changes to materials, sub-tier suppliers, production or assembly processes, packaging, or labeling.  Refer to Stryker Instruments Supplier Change Management Guidelines and Supplier Change Request Form (SCRF).

· Product Costing.  SUPPLIER is responsible for maintaining product cost records per local SUPPLIER procedures.  Responsibility to include, but not limited to, annual cost roll, assessing impacts of design and/or manufacturing changes on product cost, loading of BOM changes, and new components information.

· Device Master Record (DMR).  SUPPLIER is responsible for generation of the released Device Master Record for said product.  This shall include released manufacturing procedures, all released drawings and/or product specification documents for each component, the released Bill of Materials, released quality inspection procedures, released instructions for use, and released labels.  A copy of this record is to be provided to Stryker Instruments on either an electronic or hard copy.

· Device History Records (DHR).  SUPPLIER is responsible for the maintenance and storage of the Device History Records resulting from the realization for said product.  SUPPLIER is responsible for ensuring that such records are properly preserved.  These records are to be accessible to Stryker Instruments preferably immediately or within 48 hours.  SUPPLIER shall furnish to Instruments either electronic or hard copies.

· Design Transfer of relevant documentation to ensure proper transferring of components and finished device specifications and bill of materials from pre-release to production release status.

· Supplier Production Part Approval Process (PPAP).  The design development process will culminate in the submission of PPAP documentation.  SUPPLIER PPAP documentation will confirm SUPPLIER clearly understands all Stryker engineering design requirements and specifications and that the SUPPLIER”S manufacturing process has the potential to produce parts meeting requirements during production.

3.4 Subcontractors Selection and Management

· SUPPLIER in conjunction with Stryker Instruments shall be responsible for selecting and qualifying subassembly and component suppliers.  Critical outsourced process shall be noted in the master validation plan (MVP).  SUPPLIER is responsible for monitoring the supplier’s performance, notifying them of changes, providing incoming inspection and storage of purchased components, and resolving nonconforming material issues.  Suppliers shall be qualified prior to production release and be placed on SUPPLIER’S Approved Supplier List.

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· Once subcontractors are approved and qualified SUPPLIER shall be responsible for the monitoring of on-going performance of these subcontractors and ensure subcontractor compliance with any applicable terms of the Agreement and compliance with QSR/cGMP requirements.

· Subcontractor changes for reason of delivery, quality, cost, etc., are the responsibility of SUPPLIER.  Qualification and approval of supplier is to follow SUPPLIER’S supplier qualifications procedure(s).  Per Stryker Instruments Supplier Change Management Guidelines, Stryker Instruments shall be notified prior to implementing Supplier changes.

· Supplier shall include a clause in purchasing documents that requires sub-contractors to notify SUPPLIER of proposed changes prior to implementation.

· Supplier further agrees to provide and to cause its suppliers to provide Stryker with any manufacturing data that Stryker may at any time be required to submit to the FDA, Health Canada, Therapeutic Goods Administration, Medsafe, all European Competent Authorities or any other applicable regulatory body.

3.5 Repair Plan

· Repair for this product will be covered by Stryker.

3.6 Manufacturing and Sterilization Processes

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Stryker Instruments shall be responsible for:

· Reviewing and approving any revisions to product test requirements prior to implementation.

· Defining instructions and authorizations for rework of returned product as well as any testing to be performed.

· Stryker Instruments shall review and approve SUPPLIER’S LAL requirements, sterilization validation plan and test reports.

· Reviewing manufacturing variances that potentially could affect form, fit, and function and cannot be reworked to a conforming status.

SUPPLIER shall be responsible for:

· All verifications, validations, equipment qualifications, equipment calibrations, and servicing related to the manufacturing, assembly and sterilization processes.

· SUPPLIER shall determine the sterilization validation requirements, which shall include, without limitation, that the shelf life expiration date specified on the packaging shall not be less than 36 months from the date of shipment.

· Maintaining all relevant and applicable manufacturing documentation (manufacturing process map, PFMEA, production control plan, assembly procedures, inspection procedures, etc.) up-to-date.  Manufacturing process control documentation shall be accessible to the production floor.  Copies are to be provided to Stryker Instruments.

· Informing Stryker Instruments of any suspect product, known potential defects, or nonconformities that may have occurred during production of said product prior to delivery.

· Guaranteeing the production of said product by SUPPLIER conforms to all approved assembly procedures and manufacturing process control documentation.

· Releasing Sterile lots by verifying whether sterilization requirements were met.

· Managing Sterilization Validation and any re-validations thereafter.  SUPPLIER shall also execute LAL-testing if required.

· Executing the master validation plan.  Notifying Stryker Instruments when there is a proposed change to a previously validated process.  And if the proposed change is approved by Stryker Instruments, developing and executing the agreed to revalidation plan.

3.7 Regulatory Matters: Complaints, Adverse Event Reporting, Recalls and Remedial Action

3.7.1 Regulatory Matters

· SUPPLIER will maintain all 510(k)s with respect to the products and shall be primarily responsible for maintaining 510(k) clearances that are required for the marketing of the products, notwithstanding any 510(k)s and clearances hereafter maintained by Stryker.  Stryker will have the right to use Supplier's 510(k)s with respect to the products in connection with Stryker's marketing or sale of the products or performance under any agreement with Supplier. Unless otherwise notified in writing by Stryker, SUPPLIER will maintain its CE marking for the products and will comply with the applicable clauses of the European Medical Device Directives required to retain CE marking for the products. Stryker and Supplier shall cooperate fully to obtain and maintain such clearances, acceptances and approvals and shall furnish such information regarding the products, their design and manufacture, and marketing as either Stryker or Supplier may reasonably request in connection therewith, including any information requested by Stryker to build a product technical file for the products.  Upon request, SUPPLIER shall use its best efforts to prepare and deliver to appropriate regulatory agencies any part of the technical file necessary for approval or clearance by such agencies for marketing and sale whether on behalf of Supplier or Stryker.

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3.7.2 Compliant Handling

Stryker Instruments shall be responsible for:

· Receiving, logging, and tracking complaints.

· Assigning complaint a investigator and determining investigation method.

· Assisting in the identification and implementation of any necessary measures required that result from repeated complaints deemed related to the product design.

SUPPLIER shall be responsible for:

· Notifying Stryker Instruments whenever supplier acquires any information that may suggest product failures.

· Supporting Stryker Instruments by completing complaint investigations for manufacturing-related complaints, as requested.

· Supporting Stryker Instruments by completing failure analysis, failure cause investigation, and corrective/preventative actions with regard to field performance.

· Closing manufacturing-related complaints within 30 days unless otherwise agreed upon by both parties.

3.7.3 Medical Device Reporting

Stryker Instruments shall be responsible for:

· Reviewing all complaints received in order to recognize any complaints which may necessitate filing a Medical Device Report.

· Informing SUPPLIER of any case in which a Medical Device Reports is necessary.

· Filing the applicable Medical Device Report and furnish a copy to SUPPLIER within the require time frame outlined in 21 CFR 803.20.

SUPPLIER shall be responsible for:

· Evaluating Stryker Instruments decisions regarding Medical Device Report filing.

· Supporting the investigation as needed.

· Notifying Stryker Instruments whenever Supplier acquires information that may require a Medical Device Report (MDR) filing.

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3.7.4 Regulatory Product Actions

Stryker Instruments shall be responsible for:

· Communicating any fact, condition, circumstance or event (whether actual or potential) concerning or related to the product mentioned in this Agreement which may reasonably require recall or market withdrawal of the product to SUPPLIER within 24 hours.

· Bearing all expenses related to the product mentioned in this Agreement subject to recall or remedial action to the extent that the recall was necessitated by Stryker Instruments’ design, storage or distribution of the product mentioned in this Agreement.

· Providing such cooperation as SUPPLIER may reasonably request is connection with the product mentioned in this Agreement subject to recall or remedial action.

· Maintaining a system for the traceability of the product mentioned in this Agreement shipped from Stryker Instruments’ stock to end users.  The system will, at a minimum, comprise dates and catalog numbers, and such information shall be available to SUPPLIER at any time upon their request.  Such data shall be maintained by Stryker Instruments and made available to SUPPLIER upon request for 10 years, whether or not this Agreement remains in effect.

· Acting as the primary contact entity for any communications to any government entity, regulatory body, the media and customers concerning any recall or remedial action.

· Supplier, at its cost and expense, shall promptly issue credit to Stryker for any recalled Product and shall pay all reasonable out-of-pocket expenses incurred in effecting such Recall, including any shipping costs related to the return and/or replacement of the defective Products.

SUPPLIER shall be responsible for:

· Communicating any fact, condition, circumstance or event (whether actual or potential) concerning or related to the product mentioned in this Agreement which may reasonably require recall or market withdrawal of the product to Stryker Instruments within 24 hours.

· Bearing all expenses, including but not limited to, preparing customer lists and letters; mailing expenses; media notices or other public announcements and any other necessary notices; legal and/or regulatory counsel; destruction, return, repair and/or replacement of the recalled or withdrawn product, including the cost of shipping and freight, with it being understood that SUPPLIER shall be responsible for such recall expenses to the extent that the recall or remedial action was necessitated by Supplier's manufacture, design or sterilization of the products mentioned in this Agreement or in the procedures established by SUPPLIER for the packaging, labeling, handling, storage or distribution of the product mentioned in this Agreement.

· Providing such cooperation as Stryker Instruments may reasonably request in connection with the product mentioned in this Agreement subject to recall or remedial action.

· Numbering products in order that they may be traced back to the manufacturing lot in the case of a recall or remedial action.

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3.7.5 FDA Communications.

· Notwithstanding anything to the contrary in this Agreement, Supplier shall not initiate or participate in any communications with the FDA concerning the subject matter hereof without the express prior written consent of Stryker.  Notwithstanding the foregoing, Supplier may communicate with the FDA without Stryker's prior written consent in the event such communication is expressly required by applicable federal law. When practicable, Supplier shall use reasonable efforts to consult with Stryker prior to any such communications.

4Packaging Requirements

The necessary product specifications shall be identified within the CAD drawings and/or product specification documents.  Instruments R&D shall be responsible for developing said specifications and establishing critical tolerance parameters.  SUPPLIER shall be responsible for complying with the defined packaging specifications.

5Purchase Orders

Stryker Instruments shall be responsible for:

· Coordinating with SUPPLIER on supplier selection process.

SUPPLIER shall be responsible for:

· Purchasing and performing supplier selection in coordination with Stryker Instruments.

· Maintaining and accepting testing of all required components and new materials.  Acceptance criteria shall be based on Stryker Instruments design specifications.

· Maintaining Approved Supplier List.

· Maintaining Supplier Performance Management.

6Order Acknowledgement

The following documentation shall be provided from SUPPLIER to Stryker Instruments to acknowledge receipt of a purchase order:

1. Stryker Instruments Purchase Order Number

2. Quantity

3. Promised Delivery Date

4. Current Revision Number

5. Part Number

6. Product Name

7Delivery Documentation

The following documents shall accompany each order from SUPPLIER to Stryker Instruments:

1. Part Number

2. P.O. Number

3. Release Number

4. Quantity

5. Inspection results

6. Lot Number

7. Certificate of Conformance

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8Delivery Rejection

Stryker Instruments retains the right to reject said product delivery upon occurrence of one and/or more of the following:

· Received product does not comply with said delivery specifications per this Agreement.

· Received product does not comply with the Purchase Order.

· Product and/or packaging defects occurring during shipment.

· Product rejection at Incoming Quality Assurance at Stryker Instruments following an unsatisfactory inspection in accordance with a set sampling plan.

Stryker Instruments shall notify SUPPLIER immediately upon receiving notice of a potential delivery rejection.

9Product/Process Changes

Supplier will not make any change to the product, process, materials, formulation, packaging, labeling, software, environment conditions, quality assurance processes, equipment, production location or subcontractor that could in anyway affect the quality of the finished device, without prior written notification and where appropriate, approval from Stryker.  MATL-fm-50015 Supplier Change Request Form (SCRF) shall be used to notify Stryker Instruments of changes as described above.  (Also reference MATL-gd-40345, Stryker’s Supplier Change Management Guidelines).

All potential post-release product, materialand/or process (manufacturing or assembly) changes shall be processed in accordance with MATL-gd-40345 Supplier Change Management Guidelines – to obtain copies of the guidelines or Stryker Supplier Change Request Form (SCRF) see Stryker Instruments supplier websiteto download a copyhttp://www.stryker.com/en-us/support/029672.  Any change potentially having an impact on the product shall be approved prior to implementation.  In addition to local SUPPLIER approvals, Stryker Instruments R&D, Stryker Instruments Manufacturing, Stryker Instruments Supplier Quality, and Stryker Instruments QA/RA shall also approve SUPPLIER changes prior to implementation.  Any change that has an impact on product appearance, in addition to local approvals, shall be approved by StrykerInstruments R&D, Instruments QA/RA, and Instruments Marketing.

Note, in the event that it is even mildly questionable whether or not a potential change could have an impact on the product performance or appearance, Instruments R&D and/or Instruments QA/RA shall be consulted prior to implementing the change.

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10 Financial Responsibility

SUPPLIER shall assume all financial responsibility related to capital investment and equipment costs related to the manufacture of said product.  This shall include, but not limited to, new equipment and necessary tooling that shall be used in production.

In the event product changes and/or modifications are being submitted by Stryker Instruments, Instruments R&D shall assume all responsibility for development costs of said product changes, including, but not limited to, prototype tooling, sterility validation costs, and biocompatibility costs.  In addition, Instruments shall assume responsibility for costs related to process validation activities (sterility, materials, etc.).  If the product changes and/or modifications are being submitted by SUPPLIER, SUPPLIER shall be responsible for the aforementioned costs.

In the unlikely event that the product changes and/or modifications are not implemented, the party initiating the changes, Stryker Instruments or SUPPLIER, shall assume financial responsibility for those costs incurred to advance and implement the changes.

11 Record Retention

SUPPLIER shall maintain quality records for parts and materials affecting Stryker Instruments product for a minimum of seven (7) years after shipment unless otherwise specified.  These retention requirements do not supersede any statutory or regulatory requirements.  All specified retention periods shall be considered “minimums”.

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12 Formal Problem-Solving

SUPPLIER shall have a defined process for problem-solving leading to root cause identification.  Corrective action plans shall be submitted to Stryker Instruments Supplier Quality Engineering as required per the due date indicated.  In general, non-conformance reports (NCRs) issued for incoming or in-process non-conformances are due in 30 days.  Supplier Corrective Action (SCA) Requests are typically due within 30-60 days depending on the type of non-conformance reported, e.g. audit finding, systemic issue, or other.

In the event that on-going quality problems are experienced with SUPPLIER, Stryker Instruments may escalate the issue through several phases depending on the supplier’s responsiveness and corrective action effectiveness.  The typical escalation path is as follows:

At minimum, Phase I Output shall include a Formal Supplier Executive Management signed response plan which defines responsible resources and timing.  Regular follow-up conference calls and/or meetings will continue until the issue is addressed and satisfactorily closed.

For Phase II, the supplier will be placed on New Business Hold (NAFNB) and Probation (level 0).  The additional activities will be dependent upon the supplier’s responsiveness and corrective action plan.  Regular follow-up conference calls and/or meetings will continue until the issue is addressed and satisfactorily closed.

Failure to respond long term will result in desourcing.

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13 Quality Performance Expectations

SUPPLIER shall strive to achieve Stryker Instruments supplier quality performance targets which include the following:

· Supplier First Pass Yield (FPY) score of 100%

· Zero Defects per Million (DPM)

· 100% Part Availability (PA)

· Pricing per terms of the Agreement

· Initial Corrective Action Response(s) within 30 days

· 100% Total Quality Index (TQI)

To facilitate achievement of some of these quality performance targets, Stryker Instruments will provide SUPPLIER access to the Stryker Instruments Supplier Portal.  The portal provides real time visibility into SUPPLIER’S performance for defects per million (DPM), part availability (PA), cost and total quality.  There is no charge for portal access.  If performance targets are not achieved, SUPPLIER shall develop action plans and corrective/preventive actions to improve performance to acceptable levels.

14 Contact Information

SUPPLIER

Address 1

Address 2

City, State XXXXX

Ph:

Fax:

e-mail:

STRYKER INSTRUMENTS

Address 1

Address 2

City, State XXXXX

Ph:

Fax:

e-mail:

NOTE:  The contents of this document are not strictly limited to the requirements identified here.  The contents of this document may be modified, removed, and/or added to as deemed applicable by the responsible parties denoted to review and approve the document.

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EXHIBIT E

EQUIPMENT PLACEMENT TERMS

1.Use and Location of Equipment.

(a)Stryker agrees to place, or has already placed, the Equipment listed on Schedule A attached hereto (the "Equipment") on temporary loan to Supplier at Supplier's manufacturing facility located at 3845 Corporate Centre Drive, O'Fallon, Missouri ("Facility") for the limited use by Supplier within the terms set forth herein.  The parties acknowledge and agree that the Equipment may only be used by Supplier in the manufacture of the Products for Stryker.   Supplier shall hold the Equipment as bailee described in this Exhibit.  Supplier does and shall continue to have full ownership of the Equipment as bailor.

(b)Supplier shall not move or transfer the Equipment from its Facility, or make any alterations, additions or improvements to the Equipment not approved or recommended by Stryker. Supplier shall keep the Equipment in a safe and secure location and use the Equipment in accordance with the Equipment operating manuals and instructions. Stryker shall have the right, at reasonable times and after reasonable notice to Supplier, to enter Supplier's Facility to inspect or otherwise protect Stryker's interest in the Equipment and its rights hereunder.

(c)   During the Term, Supplier shall be responsible for making all repairs and replacements required to be made in order to maintain the Equipment in good condition, ordinary wear and tear excepted, and perform preventative maintenance on all Equipment per manufacturer (or Stryker) suggested maintenance schedules.  Copies of documentation of calibration and/or preventative maintenance procedures will be forwarded to Stryker within five business days of Stryker's request.   Supplier shall be responsible for any loss of or damage to, the Equipment resulting from its use, handling or storage of the Equipment.  Upon expiration or termination of Supplier's obligation hereunder, the Equipment shall be removed from the Facility and returned to Stryker at Stryker's expense. Notwithstanding the foregoing provision, Stryker may, at any time and for any reason, pick up or claim the Equipment from Supplier.

(d)The parties agree that additional items of equipment purchased by Stryker and installed at the Facility from time to time for use for such purpose may be added to the "Equipment" as that term is defined herein by supplements to Schedule A.  Such additional Equipment shall be subject to the terms and conditions of this Agreement.

2.Ownership of Equipment.  Supplier agrees as follows: (i) Supplier shall not sell, transfer, pledge, hypothecate or allow any lien or other encumbrance of the Equipment, and shall defend Stryker's right, title, and interest in and to the Equipment; (ii) Supplier will allow the Equipment to be used only by competent employees, or subcontractors in a careful manner solely in the manner for which such Equipment was intended to be used; (iii) Supplier shall have possession of the Equipment only and title to such Equipment shall be and remain in Stryker at all times; (iv) Supplier will promptly pay all taxes, assessments and other governmental charges levied or assessed upon the use or operation of the Equipment by Supplier, and (v) Supplier shall, at all times, comply with all applicable laws, ordinances, regulations and standards applicable to the Equipment or the installation, use or operation thereof.  Unless Stryker has already done so, Supplier will firmly affix to the Equipment, in a conspicuous place, decals or other markings showing Stryker as owner of the Equipment. Supplier will replace any such markings or decals that become defaced, illegible or are removed without Stryker authorization.

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3.Security Interest.   Supplier grants Stryker a security interest in the Equipment and in all proceeds of the Equipment.  The security interest secures all indebtedness and obligations that Supplier now or in the future owes to Stryker, including, without limitation, all of Supplier's obligations under the Agreement.  Supplier is granting this security interest to Stryker solely to assure that Stryker's rights in and ownership of the Equipment are superior to any claims of any present or future creditors of Supplier, including any trustee in bankruptcy, and the granting of this security interest shall not detract from or impair Stryker's ownership of the Equipment.

4.Disclaimer of Warranties.  The Equipment is being provided for the use of Supplier as an accommodation to Supplier.  Stryker makes no representations or warranties as to the condition or operation of the Equipment.  THE EQUIPMENT IS PROVIDED AND SUPPLIER ACCEPTS THE EQUIPMENT ON AN "AS IS" "WHERE IS" BASIS AND WITH ALL FAULTS AND DEFECTS.  STRYKER HEREBY DISCLAIMS ANY AND ALL WARRANTIES, EITHER EXPRESS OR IMPLIED, AS TO THE FITNESS, QUALITY, DESIGN, CONDITION, SUITABILITY, MERCHANTABILITY OR PERFORMANCE OF THE EQUIPMENT AND SHALL HAVE NO OBLIGATION TO INSTALL ERECT, TEST, ADJUST OR SERVICE THE EQUIPMENT.

5.Survival. The foregoing terms shall continue for so long as the Equipment has not been returned to Stryker hereunder.

SCHEDULE A to EXHIBIT E

EQUIPMENT LIST

Printer:

Zebra 170 Xilll

SN: 70c08510071

Computer:

Ins002423

SN: 2ua90701t6

PN: aj411av

Monitor:

SN: 3cq91304jp

PN: gps36a

EXHIBIT F

PATENT RIGHTS

[Redacted** (1 page)]

** Information marked as "[redacted**]" has been omitted pursuant to a request for confidential treatment and has been filed separately with the Securities and Exchange Commission.

EXHIBIT G

RETAINED INTELLECTUAL PROPERTY RIGHTS

[Redacted** (1 page)]

** Information marked as "[redacted**]" has been omitted pursuant to a request for confidential treatment and has been filed separately with the Securities and Exchange Commission.

EX-10.27

Exhibit 10.27

** Information marked as "[redacted**]" has been omitted pursuant to a request for confidential treatment and has been filed separately with the Securities and Exchange Commission.

AMENDMENT No. 1

TO SUPPLY AGREEMENT

THIS AMENDMENT No. 1 TO SUPPLY AGREEMENT (“Amendment No. 1”), dated as of November 28, 2011, is entered into by and between Stryker Corporation, a Michigan corporation, acting through its Instruments Division (“Stryker”) and Synergetics, Inc., a Missouri corporation (“Supplier”).

WHEREAS, Stryker and Supplier entered into that certain Supply Agreement (“Agreement”) dated March 31, 2010; and

WHEREAS, Stryker and Supplier now desire to amend the terms and conditions of the Agreement as set forth herein;

NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, Stryker and Supplier hereby agree as follows.

1. Term.  Section 6.1 of the Agreement, which sets forth the Term, is modified only so that the Initial Term shall expire six (6) years after the Effective Date of the Agreement (i.e., the Initial Term shall expire on March 31, 2016), a two year extension of the Initial Term.

2. Pricing.  Exhibit A to the Agreement is deleted in its entirety and replaced with Exhibit A as attached hereto, which presents disposable tip pricing that has been reduced by [redacted**] and disposable tubing set pricing that has been reduced by [redacted**] and disposable tubing set pricing that has been reduced by [redacted**], each as compared with the original pricing in the Agreement.  The Parties acknowledge that the Manufacturing Change (as defined in Exhibit A) did not occur prior to entry into this Amendment No. 1, so that actual pricing to be charged for Universal Tips is augmented as compared to the pricing in the Exhibit A chart by [redacted**] in accord with the Exhibit A pricing footnote (as marked with an asterisk).  Should the Manufacturing Change occur subsequent to entry into this Amendment No. 1, pricing will be further adjusted (decreased) according to the Exhibit A pricing footnote.

Section 4.2 of the Agreement is deleted in its entirety and is replaced with the following Section 4.2.

4.2 Price Changes.  Supplier shall hold firm its prices and discounts, as set forth in the Pricing Schedule in Exhibit A, for a period of 12 months from December 1, 2011.  Prices may be adjusted after such 12 month period and at the start of any Renewal Term and annually thereafter to reflect increases or decreases in Supplier's production costs; provided, however, unless otherwise mutually agreed to in writing, price increases shall not exceed the lesser of (a) [redacted**], per Product or (b) the corresponding percentage change, if any, in [redacted**] per Product.  Supplier shall present Stryker with a detailed list of proposed changes in the prices of Products (with supporting documentation) at least 45 days before the annual review.  Any pricing revisions agreed to by the Parties and the effective date for any such revision, shall be documented in writing as an amendment to Exhibit A.  If the Parties are unable to negotiate a mutually acceptable price, then Stryker may, in its sole discretion, elect not to renew this Agreement pursuant to Section 6.1.

** Information marked as "[redacted**]" has been omitted pursuant to a request for confidential treatment and has been filed separately with the Securities and Exchange Commission.

Page 1 of 3

Amendment No. 1

Stryker and Synergetics

November 28, 2011

3. Volume Rebate.  Beginning August 1, 2011, for the remainder of the 2011 calendar year and for each calendar year thereafter, Supplier shall pay to Stryker a rebate (“Rebate”) of [redacted**] of the total price paid to Supplier during a calendar year for each disposable tip part number for which the number of boxes sold to Stryker during such calendar year exceeds a first volume threshold ("First Threshold") of [redacted**] boxes.  That is, once [redacted**] boxes of a certain disposable tip part number are sold to Stryker in any calendar year, a Rebate equivalent to [redacted**] of the price paid to Supplier shall be earned by Stryker on all boxes (from the first to the last) of that part number sold to Stryker during that calendar year.

Further, beginning on January 1, 2012, and for each calendar year thereafter, Supplier shall pay to Stryker an additional rebate (“Additional Rebate”) of [redacted**] of the total price paid to Supplier during a calendar year on a disposable tip part number basis for those boxes sold to Stryker during such calendar year that exceed a second volume threshold ("Second Threshold") of [redacted**] boxes.  That is, once [redacted**] boxes of a certain disposable tip part number are sold to Stryker in any calendar year, a Rebate equivalent to [redacted**] of the price paid to Supplier shall be earned by Stryker on that [redacted**] box and all subsequent boxes of that part number sold to Stryker during the remainder of that calendar year. 

Any Rebate or Additional Rebate earned during a calendar year shall be due and paid to Stryker within forty-five (45) days after the end of such calendar year or such later date that Supplier receives payment for all boxes for which the Rebate or Additional Rebate is due.

At the time of expiration of the Agreement, on March 31, 2016, if expiration occurs after the Initial Term, or on March 31 of such later year as the Agreement may expire, the Rebate and Additional Rebate for such expiration year shall be earned by Stryker based on a First Threshold and Second Threshold prorated for the number of days during such expiration year that the Agreement is effective (i.e., for the calendar year of expiration the prorated First Threshold will be [redacted**], as there are 90 days between and including January 1 and March 31), and the prorated Second Threshold will be [redacted**]).

The Rebate and Additional Rebate shall not otherwise be earned.

4. Cost Reduction Projects.  Supplier agrees to work with Stryker to develop and recommend to Stryker projects related to the Agreement aimed at reducing Stryker’s operating costs, increasing Stryker’s productivity, and improving Product quality.  Each project recommended by Supplier shall be submitted through Stryker’s SCRF process, shall be subject to approval by Stryker, and shall be based on reasonable, verifiable assumptions regarding the cost savings or productivity or quality increases to be realized by implementing the project.  If a cost savings is achieved upon implementation of a Stryker approved project, such savings will be allocated to benefit each of Supplier and Stryker equally (i.e., a 50/50 split of cost savings).  The cost savings realized shall be calculated based on data obtained as part of any validation performed in advance of making the project’s results (e.g., production process change, raw materials change, packaging change) effective for production of Products to be supplied under the Agreement.  Stryker will capture its allocated cost savings as an appropriate Product price adjustment agreed to by the Parties, evidenced as an amendment to Exhibit A, and effective with the implementation of the project results.

5. Test Equipment Pricing.  Stryker will provide, at Stryker’s cost, Supplier’s requirements for consoles and handpieces (“Test Equipment”) to be used in the disposable tip production process, such as for in-process and finished goods testing.  Stryker will maintain ownership of the Test Equipment so provided, and will replace, repair and provide routine maintenance for such Test Equipment as necessary to keep such Test Equipment in good operating condition.  The Parties acknowledge that Synergetics currently owns consoles and handpieces used in disposable tip production, which are listed in Exhibit B as attached hereto.

** Information marked as "[redacted**]" has been omitted pursuant to a request for confidential treatment and has been filed separately with the Securities and Exchange Commission.

Page 2 of 3

Amendment No. 1

Stryker and Synergetics

November 28, 2011

6. Ratification.  Except as set forth herein, all remaining terms and conditions of the Agreement shall remain in full force and effect.  To the extent any terms or conditions in this Amendment No. 1 conflict with the Agreement, the terms and conditions of this Amendment No. 1 shall control.

7. Miscellaneous.  This Amendment may be executed in multiple counterparts, each of which shall be deemed an original and all of which shall constitute but one and the same instrument.  No agreement hereafter made shall be effected to change, modify, or discharge this Amendment, in whole or in part, unless such agreement is in writing and signed by or on behalf of the Party against whom the enforcement of the change, modification, or discharge is sought.  This Amendment shall be binding on the Parties hereto and their respective personal and legal representatives, successors, and permitted assigns.  Each person whose signature appears below represents and warrants that he or she has the authority to bind the entity on whose behalf he or she has executed this Amendment.

IN WITNESS WHEREOF, the Parties have signed this Amendment intending to be legally bound by its terms as of the date first stated above.

Stryker Corporation		Synergetics, Inc.
By:	/s/ Kevin Lewis	By:	/s/ Kurt W. Gampp
Name:	Kevin Lewis	Name:	Kurt W. Gampp
Date:	12/20/11	Date:	12/14/11

Page 3 of 3

Amendment No. 1

Stryker and Synergetics

November 28, 2011

Exhibit A

[Redacted** (2 pages)]

** Information marked as "[redacted**]" has been omitted pursuant to a request for confidential treatment and has been filed separately with the Securities and Exchange Commission.

Page 1 of 1

Amendment No. 1

Stryker and Synergetics

November 28, 2011

Exhibit B

[Redacted** (1 page)]

** Information marked as "[redacted**]" has been omitted pursuant to a request for confidential treatment and has been filed separately with the Securities and Exchange Commission.

Page 1 of 1

EX-10.28

Exhibit 10.28

** Information marked as "[redacted**]" has been omitted pursuant to a request for confidential treatment and has been filed separately with the Securities and Exchange Commission.

AMENDMENT No. 2

TO SUPPLY AGREEMENT

THIS AMENDMENT No. 2 TO SUPPLY AGREEMENT (“Amendment No. 2”), dated as of June 30, 2012, is entered into by and between Stryker Corporation, a Michigan corporation, acting through its Instruments Division (“Stryker”) and Synergetics, Inc., a Missouri corporation (“Supplier”).

WHEREAS, Stryker and Supplier entered into that certain Supply Agreement (“Agreement”) dated March 31, 2010, and amended by that Amendment No. 1 dated November 28, 2011; and

WHEREAS, Stryker and Supplier now desire to further amend the terms and conditions of the Agreement as set forth herein;

NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, Stryker and Supplier hereby agree as follows.

1. Freight Terms.  Article 2, Section 2.3.b of the Agreement is deleted in its entirety and replaced with the following:

“All Products shall be delivered F.O.B. Supplier’s finished goods warehouse.  Supplier shall, at Stryker’s cost, ship the Products to any location chosen by Stryker, utilizing carriers chosen by Stryker.  Title and risk of loss or damage to the Products shall pass to Stryker at the time Products are loaded on to the carrier specified by Stryker.”

2. Payment Terms. Article 4, Section 4.4 of the Agreement is amended and modified to provide payment shall be due and paid net [redacted**] days following the receipt of invoice from Supplier.  All other elements of this section remain unchanged.

3. Pricing.  Exhibit A to the Agreement (as set forth in Amendment No. 1) is deleted in its entirety and replaced with Exhibit A as attached hereto.

4. Ratification.  Except as set forth herein, all remaining terms and conditions of the Agreement shall remain in full force and effect.  To the extent any terms or conditions in this Amendment No. 2 conflict with the Agreement, the terms and conditions of this Amendment No. 2 shall control.

5. Miscellaneous.  This Amendment No. 2 may be executed in multiple counterparts, each of which shall be deemed an original and all of which shall constitute but one and the same instrument.  No agreement hereafter made shall be effected to change, modify, or discharge this Amendment No. 2, in whole or in part, unless such agreement is in writing and signed by or on behalf of the Party against whom the enforcement of the change, modification, or discharge is sought.  This Amendment No. 2 shall be binding on the Parties hereto and their respective personal and legal representatives, successors, and permitted assigns.  Each person whose signature appears below represents and warrants that he or she has the authority to bind the entity on whose behalf he or she has executed this Amendment No. 2.

** Information marked as "[redacted**]" has been omitted pursuant to a request for confidential treatment and has been filed separately with the Securities and Exchange Commission.

Amendment No. 2 to Supply Agmt

Stryker and Synergetics

June 30, 2012

IN WITNESS WHEREOF, the Parties have signed this Amendment No. 2 intending to be legally bound by its terms as of the date first stated above.

Stryker Corporation		Synergetics, Inc.
By:	/s/ Chad A. McVey	By:	/s/ Pamela G. Boone
Name:	Chad A. McVey	Name:	Pamela G. Boone
Date:	7/13/12	Date:	7/11/12

Page 2 of 2

Amendment No. 2 to Supply Agmt

Stryker and Synergetics

June 30, 2012

Exhibit A

[Redacted** (2 pages)]

** Information marked as "[redacted**]" has been omitted pursuant to a request for confidential treatment and has been filed separately with the Securities and Exchange Commission.

EX-10.29

EXECUTION COPY

Exhibit 10.29

** Information marked as "[redacted**]" has been omitted pursuant to a request for confidential treatment and has been filed separately with the Securities and Exchange Commission.

PRODUCT DEVELOPMENT AND MARKETING AGREEMENT

This AGREEMENT ("Agreement") is made effective as of January 1, 2009 (“Effective Date”) by and between Synergetics USA, Inc. (“Synergetics”), a Delaware corporation with a business address of 3845 Corporate Centre Drive, O’Fallon, Missouri 63368, and Codman & Shurtleff, Inc. ("CODMAN"), a corporation existing under the laws of New Jersey with a business address of 325 Paramount Drive, Raynham, MA 02767.  Synergetics and CODMAN are referred to herein separately as a “Party” and collectively as the “Parties”.

WHEREAS, CODMAN develops, manufactures, and markets medical instruments, implants and accessories for the diagnosis and treatment of conditions affecting the central nervous system;

WHEREAS, Synergetics, among other things, develops, manufactures and supplies medical devices and related instrumentation and accessories used for neurocranial and neurospinal surgery;

WHEREAS, Synergetics and CODMAN have in place an interim agreement covering the time period from January 1, 2009 through March 31, 2009 and desire this Agreement to supercede such interim agreement;

WHEREAS, the parties desire that CODMAN market Synergetics’ Existing Products (as defined below) through December 31, 2011, under the terms of this Agreement;

WHEREAS, simultaneously with the execution of this Agreement, Synergetics IP, Inc., a wholly-owned subsidiary of Synergetics (“Subsidiary”), and CODMAN are entering into that certain Trademark License Agreement, dated even date herewith, providing for the licensing of the Malis trademark by Subsidiary to CODMAN (the “License Agreement”); and

WHEREAS, the parties desire to agree upon other matters as set forth herein.

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NOW, THEREFORE, in consideration of the mutual promises, covenants and agreements hereinafter set forth, the parties hereto agree as follows:

ARTICLE ONE

DEFINITIONS

As used throughout this Agreement, each of the following terms shall have the respective meaning set forth below:

"Accessory Products" shall have the meaning set forth in Schedule A attached hereto.

"Affiliate" of a party shall mean any entity or person that directly or indirectly controls, is controlled by or is under common control with such party.  For purposes of this definition, "control" shall mean the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of an entity, whether through the ownership of voting securities, by contract or otherwise.

“Co-Exclusive Products” shall mean those products identified as such in Schedule A with the corresponding rights defined in Section 2.01(b) below.

"Disposable Products" shall have the meaning set forth in Schedule A attached hereto.

“Exclusive Products” shall mean those products identified as such in Schedule A with the corresponding rights defined in Section 2.01(b) below.

"Existing Products" shall mean those Medical Device Products, Disposable Products and Accessory Products indicated for use in the Field, as described in Schedule A attached hereto, and which shall be revised from time to time by agreement of the Parties.

"Field" shall mean the practice of neurocranial and neurospinal surgery.

"Governmental  Registration" shall mean the filing of product documentation including, but not limited to, labeling and Product Certifications with country governmental bodies or health authorities to obtain an approval or license to distribute product in the specific markets.  Filing a Governmental Registration requires that all relevant Product Certifications have been obtained.

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"Know-How" shall mean the know-how relating to the development or manufacture of any Existing Product, including, without limitation, processes, techniques, methods, products, apparatuses, and other materials and compositions which are reasonably related thereto.

"Manufacturing Costs" shall mean the direct labor, direct overhead and Raw Materials costs incurred in the manufacture of Existing Products.

"Medical Device Products" shall have the meaning set forth in Schedule A attached hereto.

"New Product" shall mean any product or product idea not listed among the Existing Products on Schedule A, but which either Party desires to add to Schedule A after any necessary development and testing thereof, including improvements to any Existing Product.

"Patents" shall mean the U.S. Patents set forth on Schedule C along with any foreign counterparts thereof, as well as all continuations, continuations-in-part, divisions and renewals thereof, all patents which may be granted thereon, and all reissues, reexaminations, extensions, patents of addition, and any subsequent improvement patents or applications, such improvement patents and applications being those the practice of which falls within the claims any of said patents.

"Product Certification" shall mean the provision and demonstration of performance characteristics and design process showing conformance with internationally recognized product safety and conformance standards and the associated documentation (test reports, product specifications, etc.).  This activity is conducted by third party Certified Body (“CB”) scheme organization authorized to register medical devices.  Upon successful completion of this activity the CB scheme organization will issue a product certificate describing the scope of the registration.  The product certificate is then provided to a Notified Body.

"Raw Materials" shall mean the materials, components, and packaging required to manufacture and to package any Existing Product in accordance with the Specifications.

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"Specifications" shall mean the specifications for the design, composition, product safety assurance, manufacture, packaging, and/or quality control of any Existing Products as the same may hereafter be modified by mutual agreement of the parties in writing.  Schedule D attached hereto references the document that contains the agreed upon Specifications for the Existing Products, which is made a part hereof.

"Synergetics Patents" shall mean (i) all of the Patents as defined above (ii) all other patents and applications for patents that cover the manufacture, use, importation or sale of any Existing Product in which Synergetics (or any Affiliate of Synergetics) has any rights, any foreign counterparts thereof as well as all continuations, continuations-in-part, divisions and renewals thereof, all patents which may be granted thereon and all reissues, reexaminations and extensions.

"Term" shall have the meaning set forth in Section 10.01 herein.

ARTICLE TWO

SUPPLY OF PRODUCT, PRICE, OTHER TERMS

2.01    Distribution of Products.

(a)       This Agreement hereby supercedes the interim agreement between the Parties referenced in the recitals hereto.  Synergetics hereby appoints CODMAN, and CODMAN hereby accepts appointment, as a worldwide distributor of Existing Products (as any such Existing Product may be hereafter changed or modified pursuant to Section 3.04 hereof) for the Term of this Agreement.  It is the understanding and the good faith intent of the Parties that the list of Existing Products presented in Schedule A will be modified during the first year of this Agreement to add New Product generators (to be developed as contemplated in Schedule G and in accordance with Section 3.08 (as further defined on Schedule G (the “Schedule G Generators”)) that the Parties anticipate eventually will replace the CMC III and Synergy generators; provided that it is understood and agreed that subsequent to the commencement of commercial sales by CODMAN of a Schedule G Generator or of a CMC XL generator (as defined on Schedule G), if Synergetics is unable to obtain the necessary parts to continue to produce CMC III or Synergy generators, then by written notice from Synergetics to CODMAN the CMC III or Synergy generators (or both), as the case may be, shall be removed from Schedule A; provided further that (i) Synergetics gives as much advanced notice of such parts deficiency as is feasible to enable CODMAN to adjust its marketing accordingly, and (ii) Synergetics shall continue to fulfill existing purchase orders for such generators to the extent that the supply of parts allows.  Synergetics understands and agrees that during the term of this Agreement, CODMAN may utilize its Affiliates to act as distributors hereunder in certain geographic areas, provided that CODMAN shall at all times remain responsible for performance of all of its obligations under this Agreement.

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(b)       With respect to Exclusive Products, CODMAN shall have the exclusive right, even as to Synergetics, to sell such products in the Field.  With respect to Co-Exclusive Products, both CODMAN and Synergetics shall have the right to sell such products, directly or indirectly, in the Field.  For purposes of the foregoing, Exclusive Products and Co-Exclusive Products shall be specifically limited to products that are identical with respect to functionality, technology, performance and appearance as the Exclusive Products and Co-Exclusive Products identified on Schedule A hereto.  Subject to CODMAN’s exercise of the Option, but notwithstanding any other provision of this Agreement to the contrary, to the extent Synergetics (or any Affiliate of Synergetics) proposes to market and sell a product in the Field that is not identical to an Exclusive Product or a Co-Exclusive Product, as the case may be, with respect to functionality, technology, performance and appearance, even if such other product would be considered a competing product of an Exclusive Product or Co-Exclusive Product, Synergetics (or any Affiliate of Synergetics) is free to do so without restriction or limitation of any kind under this Agreement; provided, however, that neither Synergetics nor any Affiliate of Synergetics shall sell any product that has confusingly similar trade dress (including packaging, product name, trade name, etc.) to an Exclusive Product or Co-Exclusive Product.  Synergetics will consult with CODMAN on any trade dress issues, and the parties will in good faith resolve any differences prior to launch of any Synergetics’ product in the Field and thereafter should issues arise.

(c)       Except as specifically provided for in Sections 2.06(b), 3.08, 7.01 and 7.02 hereof, during the Term CODMAN shall purchase all of its requirements for products of like kind as the Existing Products for use in the Field solely from Synergetics and shall not, directly or indirectly, offer or sell a product that would compete with any Existing Product in the Field.  For purposes of the foregoing, CODMAN’s requirements shall be measured by the requirements of its distributors and end-user customers for such products; provided, however, that nothing contained in this Section 2.01(c) shall restrict an Affiliate of CODMAN from engaging in good faith (i.e. not with a view toward circumventing this Section 2.01(c)) in any of the above described activities independently of CODMAN, provided such Affiliates do not have access to, or use of, Synergetics' confidential information.  Furthermore, it is agreed that nothing contained in this Section 2.01(c) shall restrict CODMAN during the Term from marketing or selling its own or another bipolar generator solely for the use in the field of the percutaneaous pain treatment, but in no other field.  Subject to the confidentiality provisions in this Agreement and other agreements entered into between CODMAN and Synergetics, after the Term, CODMAN shall be free to market or sell its own or another manufacturer's bipolar generators, associated products for use with such bipolar generators, irrigators, integrated cord and tubing sets, footswitches, footpedals, footswitch cables, generator remote controls, disposable hand-held surgical bipolar electrosurgery pens, disposable hand-held surgical bipolar electrosurgery coagulation balls, or disposable hand-held surgical bipolar electrosurgery loops.  Nothing in this Section 2.01(c) will restrict CODMAN from investigating any technologies as long as such investigation, to the extent it relates to technologies reflected in the Existing Products, is limited to evaluation of product specifications and does not involve the negotiation of any commercial terms of supply with any third party.  The foregoing shall not be deemed in any manner to modify CODMAN’s obligation under Section 3.08 hereof to negotiate first with Synergetics any proposal to develop a New Product.  Furthermore, nothing in this Section 2.01(c) will restrict CODMAN from investigating, developing, selling or marketing products that compete in the Field with the monopolar or bipolar or “Combination” (of monopolar and bipolar) generators supplied to CODMAN under this Agreement, but are not based on monopolar or bipolar or Combination generator technology; provided, however, that in the event CODMAN sells or markets such a competing product that is not based on monopolar or bipolar or Combination generator technology, all Exclusive Products hereunder shall cease to be “exclusive” and shall be deemed to be “non-exclusive” meaning that Synergetics shall thereafter be free under this Agreement to supply such products to any other party without limitation or restriction of any kind.

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2.02 Exclusivity Option.

(a)        Synergetics grants to Codman an option to become the exclusive marketer and distributor (even as to Synergetics) of all monopolar or bipolar or Combination generators made by or for Synergetics for use in the Field and those accessories and disposables used therewith as listed in Schedule A (and for the avoidance of doubt, all Existing Products listed as Co-Exclusive Products in Schedule A shall become Exclusive Products), except for those RF generators marketed for minimally invasive pain control (“Option”).  Codman’s right to exercise the Option shall arise on the date of the first receipt by Codman of a Schedule G Generator, or of a CMC XL generator as a New Product hereunder, for commercial resale (such date being the “Opening Date”).  Codman shall have the right to exercise the Option during a period of 180 consecutive days, inclusive of and following the Opening Date (“Exercise Period”), after which time the Option will expire.  Codman’s exercise of the Option shall be performed by delivering a written notice thereof (“Notice”) to Synergetics along with a first Exercise Payment (as defined in Subsection 2.02(b), below).  The Notice shall not be delivered to Synergetics earlier than the Opening Date, and shall be effective on the effective date stated therein (“Exclusivity Date”), so long as such Exclusivity Date is within the Exercise Period, and the first Exercise Payment is received therewith.

(b)       To establish exclusivity, Codman will pay Synergetics Six Hundred Thousand Dollars ($600,000.00) in four quarterly installments of One Hundred Fifty Thousand Dollars ($150,000.00) (each such installment being an “Exercise Payment”).  As stated above, the first Exercise Payment shall be received with the Notice.  The remaining three Exercise Payments shall be received quarterly thereafter on the first day of the months that are three, six, and nine months after the Exclusivity Date, respectively.  Failure to deliver an Exercise Payment to Synergetics by the fifteenth day of each such month shall terminate Codman’s exclusive rights under the Option, and shall allow Synergetics all other remedies available at law or in equity.

(c)       Synergetics shall have three (3) months after the Exclusivity Date in which to stop marketing and distributing all monopolar or bipolar or Combination generators as well as those accessories and disposables used therewith as listed in Schedule A for use in the Field, except those RF generators marketed and distributed for minimally invasive pain control; provided that such sales of electrosurgical generators and accessories and disposables are in monthly quantities and at prices consistent with Synergetics’ ordinary course past practice during the prior 12 months.(d)

(d)       After the Exclusivity Date, Codman shall continue to provide forecasts in accord with Section 2.05, except as such forecasting provision may be temporarily revised to account for market transitions (e.g., exit of Synergetics and entrance of one or more Schedule G Generators).

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(e) Synergetics shall, in cooperation with CODMAN, use good faith reasonable efforts to make improvements to the manufacturing process for Existing Products to reduce the cost of manufacturing and packaging over time while maintaining existing quality standards in the goal of improving the economics to both parties of the product supply arrangements hereunder.  To the extent that the quantity of any Existing Product purchased by CODMAN in any calendar year exceeds the annual purchase forecast provided to Synergetics in advance of that calendar year, and the manufacture of such above-forecast quantity creates material cost efficiencies, Synergetics shall pass those cost efficiencies on to Codman by way of reducing the transfer price for such Existing Product.

2.03     Supply of Products. During the Term, Synergetics shall supply all product quantities of Existing Products as required by CODMAN (and its Affiliates), subject to such qualifications set forth in Section 2.05 hereof and elsewhere herein, for distribution for use in the Field.  Each such Existing Product shall be manufactured and packaged by Synergetics or its suppliers in accordance with the Specifications.

2.04     Prices; Shipping Terms.

(a)       The initial price (the "Price") for each Existing Product (other than sample, special or prototype products) during the Term is as set forth on Schedule A attached hereto.  The Prices set forth in Schedule A include all costs of manufacturing and packaging in accordance with the Specifications.  All deliveries of the Existing Products by Synergetics to CODMAN hereunder shall be FOB Origin.  Title to and risk of loss for any such product shall pass from Synergetics to CODMAN or its designee when it is delivered to the carrier at Synergetics’ manufacturing facility.  At CODMAN’s or its designee’s request, Synergetics will arrange for carriage on CODMAN’s behalf.

(b)       The Prices set forth on Schedule A shall remain in effect through December 31, 2009; provided, however, that for each year of the Term following the first year of the Term, with 90 days written notice to CODMAN, Synergetics may adjust the pricing applicable to CODMAN’s purchases of Existing Products for such year by an amount not to exceed the lesser of (A) [redacted**] or (B) the percentage increase in the [redacted**] from the prior twelve (12) months to the time of such written notice to CODMAN reflecting such price increase.

** Information marked as "[redacted**]" has been omitted pursuant to a request for confidential treatment and has been filed separately with the Securities and Exchange Commission.

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2.05    Forecasts.Attached hereto as Schedule E is CODMAN’s initial estimated purchases of the Existing Products from Synergetics in the form of a written, non-binding, rolling twelve (12) month forecast (the “Forecast”).  After the date hereof, the Forecast shall be updated and revised by CODMAN not more frequently than on a biannual basis, which update shall include the next successive six-month period added to the last such six-month period of the previous Forecast (i.e. the Forecast shall cover each of the next succeeding two biannual periods).  Although the Forecast is non-binding, CODMAN understands that Synergetics shall use the Forecast for planning purposes (including Raw Material acquisitions and investment in equipment and other resources) in order to make available the production capacity required to manufacture and supply the forecasted amounts of the Existing Products within the time frames specified therein and herein.

2.06     Orders; Shortages.

(a)       CODMAN shall place any binding orders for Existing Products by written purchase order (or by any other means agreed to by the parties) to Synergetics.  Such purchase orders shall set forth the desired date of delivery with respect to the Existing Products ordered and shall be placed at least one-hundred and twenty days (120) days prior to such desired date of delivery for all Medical Device Products and at least sixty (60) days prior to such desired date of delivery for all Disposable Products and Accessory Products (hereinafter referred to as the “Minimum Lead Times”); provided, however, that Synergetics shall use commercially reasonable efforts to reduce the Minimum Lead Time for Medical Device Products from 120 days to 90 days by June 30, 2010.  Such purchase orders shall be binding on CODMAN, and to the extent they meet the Minimum Lead Time requirements set forth above and do not exceed the Committed Amount (as defined below), such purchase orders shall be binding on Synergetics.  To the extent there is any conflict or inconsistency between this Agreement and any purchase order, purchase order release, confirmation, acceptance or any similar document, the terms of this Agreement shall govern.  Notwithstanding Section 2.03 hereof, Synergetics shall be contractually obligated to supply only up to the lesser of:  (i) [redacted**] of the biannual quantity forecasted pursuant to Section 2.05 or (ii) [redacted**] of the average biannual volume purchased by CODMAN over the prior six month period (the “Committed Amount”).  Synergetics shall use commercially reasonable efforts to meet any orders in excess of the Committed Amount or with requested delivery times less than the applicable Minimum Lead Time.

** Information marked as "[redacted**]" has been omitted pursuant to a request for confidential treatment and has been filed separately with the Securities and Exchange Commission.

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(b)       If Synergetics, at any time, becomes aware that it may not be able to supply CODMAN with ordered quantities of Existing Products, including because materials and/or resources required to manufacture and supply Existing Products to CODMAN in a timely manner are, or are reasonably anticipated to become, in short supply, Synergetics shall promptly provide CODMAN a written notice to that effect.  If Synergetics so notifies CODMAN, Synergetics and CODMAN shall promptly meet to discuss how to address the potential shortage.

(c)       If by the 60^th day following the expiration of the desired delivery date with regard to Medical Device Products, Synergetics is not able to meet an order for the Committed Amount, then Synergetics shall ship the shortfall as soon as reasonably possible and, unless the failure is a result of a Force Majeure event as set forth in Section 7.02 hereof, Synergetics shall discount the price applicable to such shortfall units by [redacted**] for any monopolar or bipolar or Combination generator and by [redacted**] for any irrigation system.

(d)       If by the 10^th day following the expiration of the desired delivery date with regard to Accessory Products or Disposable Products, Synergetics is not able to meet an order for the Committed Amount, then CODMAN may order from an alternative supplier any such shortfall in the  Accessory Products or Disposable Products that were ordered by CODMAN from Synergetics (“Shortfall”) without being deemed to be in breach of its obligation under Section 2.01(c) hereof.  If such alternative supplier has a reasonable, good faith, minimum-order-quantity requirement from which CODMAN cannot reasonably obtain an exemption, CODMAN may hereunder purchase such minimum quantity even though it is larger than the Shortfall.  Other than the discrete order for the Shortfall or such minimum quantity allowed hereunder, which may be placed with the alternative supplier as described in this Subsection 2.06(d), CODMAN shall place all orders with Synergetics as required by 2.01(c).

2.07    Delivery.All charges for final packaging and transport packaging are included in the Price.  All shipments must be accompanied by a packing slip that describes the articles, states the purchase order number and shows the shipment's destination.  Synergetics agrees to promptly forward the original bill of lading or other shipping receipt for each shipment in accordance with CODMAN's instructions.  Synergetics further agrees to promptly render correct and complete invoices to CODMAN and to accept payment by check or, at CODMAN's discretion, cash or electronic transfer of funds.  All invoices submitted by Synergetics shall be payable upon receipt and due net within [redacted**] days after receipt of such invoices.  The date of invoice with respect to any Existing Product shall not be earlier than the date of shipment of such Existing Product.

** Information marked as "[redacted**]" has been omitted pursuant to a request for confidential treatment and has been filed separately with the Securities and Exchange Commission.

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2.08    Shipment.Synergetics shall ship Existing Products, at CODMAN's cost to the extent set forth in Section 2.04, to any location chosen by CODMAN utilizing carriers approved by CODMAN.  The risk of loss with respect to all Existing Products shall remain with Synergetics until the products to be shipped are loaded onto the carrier specified by CODMAN.  Synergetics will package all Existing Products in accordance with the packaging requirements included in the Specifications.

2.09    Minimum Purchase Requirements. Except as set for in Section 2.02 regarding the Option, CODMAN is not obligated to make any minimum purchases under this Agreement, but is required to purchase its requirements for the Existing Products as described in Section 2.01(c) hereof.

2.10    Meetings.  In the spirit of cooperation with which this Agreement is entered, during the Term, the parties hereto agree to use good faith efforts to meet not less than bi-annually to discuss issues that may arise from time to time in connection with each party’s performance of this Agreement.  Such meeting should occur at a mutually acceptable location and time and should include the CODMAN and Synergetics individuals responsible for managing supply under this Agreement and may include senior management from both CODMAN and Synergetics.

ARTICLE THREE

ADDITIONAL OBLIGATIONS OF THE PARTIES

3.01     Sales of Existing Products.  All business decisions relating to the sale, price, marketing and promotion of any Existing Product supplied under this Agreement (to the extent not in conflict with CODMAN’s obligations under the License Agreement) shall be within the sole discretion of CODMAN.  Synergetics further agrees that payment by CODMAN to Synergetics of the Prices set forth in Section 2.04 hereof for purchased Existing Product shall constitute complete satisfaction of any duty, whether express or implied, which could be imposed upon CODMAN to commercially exploit its rights under this Agreement and are accepted by Synergetics in lieu of any best efforts obligations on the part of CODMAN.

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   3.02     Package Labeling.

    (a)Synergetics shall be responsible for the text and regulatory compliance of all package labels, labeling and Existing Product inserts used in connection with the Existing Products.  For purposes of this Agreement the terms "label" and "labeling" shall have the meanings set forth in Sections 201(k) and 201(m) respectively of the U.S. Federal Food, Drug and Cosmetics Act.

    (b)Synergetics shall have the right to apply reasonable patent marking on the Existing Products indicating Synergetics’ Patents covering the Existing Products, as well as reasonable marking (i) on those products that Synergetics manufactures indicating such manufacture by Synergetics and (ii) that the Malis trademark is used under a license from Synergetics; provided, however that it is understood and agreed that this clause (b) shall be applied prospectively as new labeling is developed and existing Existing Product packaging inventories are drawn down.  For the avoidance of doubt, the parties agree that CODMAN is not required to repackage any Existing Products solely to comply with this clause (b).

(c)Synergetics shall be responsible for the development and approval of the label content.  Synergetics shall provide the English version of the label to CODMAN.  CODMAN shall be responsible for copy format, artwork preparation, translations and production.  All related costs for the labeling, including, but not limited to, translations and production shall be the responsibility of CODMAN.

3.03    Provision of Information by Synergetics.  Synergetics shall, at the reasonable request of CODMAN, provide CODMAN with the following information relating to the Existing Products and New Products and to the extent reasonably available to Synergetics, at no cost to CODMAN:

(i)provide all relevant information on product safety, efficacy, reliability and performance characteristics;

(ii)the Device Master Record and Device History Record, as defined in 21 Code of Federal Regulations, Part 820, for the Existing Products;

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(iii)copies of all U.S. and foreign regulatory submissions, including any 510(k) submissions, held by Synergetics for the Existing Products;

(iv)supply the written text of a technical service manual and user manual for each Existing Product in "print ready" form at no cost to CODMAN.  CODMAN will supply Synergetics with a quantity of technical service manuals and user manuals at its cost and Synergetics will ship the same with each unit of Existing Product purchased.

3.04    Changes.

(a)       In no event shall any significant change in form, fit or function, safety, efficacy or reliability, or the appearance of an Existing Product be made without the prior written approval of CODMAN.  If the parties agree on any such change, they shall modify the Specifications to reflect the same.  Synergetics further agrees that no significant changes to the method or process of manufacture or production of any Existing Product or the Raw Materials shall be made without prior written notification to and approval of CODMAN.  As used in this Section 3.04, the term "significant change" shall mean any change that (i) results in a material change to the Specifications, labeling or packaging; (ii) affects an Existing Product’s performance, physical appearance or configuration, software (other than debugging or other error correction which does not otherwise affect the performance of the software) or sterilization processes or any user output, (iii) affects product safety, reliability or integrity; (iv) requires a submission to or approval from a governmental body; or (v) is a change in the indications for use or a material change in the instructions for use.  In the event of any significant change, CODMAN shall have the responsibility to establish an appropriate and reasonable qualification protocol, if required by CODMAN, and CODMAN and Synergetics shall determine an appropriate inventory level for the pre-change Existing Product in order to cover on-going requirements during the qualification process.

(b)      At any time and from time to time during the Term, CODMAN may request that Synergetics change the Specifications and/or the Existing Products, if and to the extent that any such change is reasonably required to make the affected Existing Product(s) meet applicable safety standards, governmental statutes, rules, orders or regulations or necessary electronic certification requirements.  Synergetics shall use commercially reasonable efforts to effect any such changes in a reasonably prompt manner.  As for requests by CODMAN for changes to Specifications that are not reasonably necessary to meet such requirements, including changes requested to address customer complaints, the parties shall utilize the process of Section 3.08, New Product Development, to request such a product change.

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(c)       The parties will negotiate in good faith to determine the change in the purchase price, if any, or delivery schedule that may be required by any change to any Specifications of any Existing Product under this Section 3.04.

3.05   Insurance. Synergetics agrees to procure and maintain in full force and effect during the Term valid and collectible insurance policies in connection with its activities as contemplated hereby, which policies shall provide Comprehensive General Liability coverage including Existing Products and Contractual Liability coverage in an amount not less than [redacted**] per occurrence.  Such policy shall name CODMAN as an insured or an additional insured.  Upon CODMAN’s request, Synergetics shall provide to CODMAN certificate of coverage or other written evidence reasonably satisfactory to CODMAN of such insurance coverage.  Such insurance policy shall provide that in the event such insurance coverage should be materially adversely changed or terminated for any reason, the insurer thereunder will give Synergetics and CODMAN ten (10) days' prior notice.  The existence of such coverage shall in no way limit Synergetics’ liability or obligations hereunder.  CODMAN represents and warrants that it has access to insurance and other financial resources adequate to met any financial obligation reasonably foreseeable under this Agreement.

3.06     Product Certifications and Governmental Registrations.

(a)Product  Certifications.  Synergetics  will obtain the necessary Product  Certifications that will benefit and will be made available to CODMAN in order to permit Codman to file Governmental Registrations. Synergetics shall apply for such Product Certifications at Synergetics’ expense including any required updates due to any applicable change in worldwide product safety and compliance standards.

(b)Governmental Registrations.  CODMAN shall apply, in its name and at its cost, for all Governmental Registrations required for CODMAN to market Existing Products during the Term. Synergetics shall reasonably cooperate with CODMAN in its efforts to obtain such Governmental Registrations.  Synergetics agrees that CODMAN shall have access to all of Synergetics’ non-confidential regulatory submissions and Product Registrations for the Existing Products to the extent necessary to exercise its rights or fulfill its obligations hereunder.  Likewise, CODMAN agrees that Synergetics shall have access to all of CODMAN’s non-confidential regulatory submissions for the Existing Products

** Information marked as "[redacted**]" has been omitted pursuant to a request for confidential treatment and has been filed separately with the Securities and Exchange Commission.

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(c)EU Authorized Representative.Synergetics appoints CODMAN to be the authorized representative in the European Union countries with respect to Existing Products. CODMAN will be responsible to carry all activities of the authorized representative as defined in the EU Medical Device Directive 93/42.  CODMAN’s name and contact information will appear on all product labeling

3.07     Additional Rights of CODMAN.  CODMAN shall be permitted to:

(i)advertise the Existing Products in those medical journals and/or direct mail campaigns which in its judgment are best suited for sale of the Existing Products.  In disagreements as to marketing or sales content, CODMAN shall prevail to the extent such marketing or sales content otherwise is in compliance with any requirement set forth in the License Agreement.  On matters of technical description or medical use or practice, Synergetics shall prevail.

(ii)show the Existing Products at the AANS and CNS and such other trade shows as mutually agreed upon by CODMAN and Synergetics, but not to the exclusion of similar rights of Synergetics.

3.08     New Product Development.At any time during the Term, either Party (“Offering Party”) may offer in writing to the other Party (“Other Party”) a proposal (“Proposal”) for the development of a New Product to be manufactured by Synergetics or by a third party for Synergetics and marketed by CODMAN hereunder.  The Other Party will have sixty (60) days to respond in writing to the Offering Party to state whether the Other Party accepts or rejects or conditionally accepts the Proposal.  If the Other Party accepts or conditionally accepts the Proposal, the parties will have an additional sixty (60) days to negotiate a definitive agreement with respect to the development of the New Product.  New Product development is expected to be a cooperative effort by the Parties in order to obtain an agreed upon result within a reasonable time schedule and at a reasonable cost.  Schedule G sets forth certain guiding principles applicable to the New Product development process.  Schedule A shall be revised in accord with the Parties agreement related to the New Product after such New Product is ready for sale (after which revision the New Product will become one of the Existing Products).

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(a)        Unless CODMAN has exercised the Option, if CODMAN has offered the Proposal and the parties do not sign a definitive agreement at the end of the second sixty (60) day period or Synergetics does not accept or conditionally accept the Proposal within the first sixty (60) day period (such first 60-day period and, upon acceptance or conditional acceptance, such 120-day period being referred to hereinafter as the “Offer Period”), then CODMAN shall be free to directly or indirectly offer or sell the product of such Proposal in competition with an Exclusive Product without being deemed to be in breach of Section 2.01(c) hereof.  At no time during the Term shall CODMAN enter into any discussions with any other party with respect to commercial terms for a transaction similar to the Proposal unless the Proposal has been first made to Synergetics and the Offer Period has expired without a definitive agreement being signed as specified above.  At the time CODMAN elects pursuant to this Section 3.08 to directly or indirectly offer or sell a product that competes with an Exclusive Product in the Field and CODMAN has its first commercial sale of such competing product, such Exclusive Product hereunder shall cease to be “exclusive” and shall be deemed to be “non-exclusive” meaning that Synergetics shall thereafter be free under this Agreement to supply such product to any other party and to market such product on its own without limitation or restriction of any kind.

(b)       Once CODMAN has exercised the Option, all monopolar and bipolar and Combination generator products as well as all accessories and disposables used therewith as listed in Schedule A for use in the Field shall only be developed and manufactured by Synergetics for CODMAN and Synergetics shall not for itself or third parties develop, manufacture, or market monopolar or bipolar or Combination generator products that would compete with generator products and accessories and disposables to which Codman is granted exclusive rights under this Agreement.

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ARTICLE FOUR

QUALITY/DEFECTIVE PRODUCT/INSPECTIONS/TESTING

4.01     Inspections.  CODMAN shall have the right, upon reasonable notice to Synergetics and during regular business hours, to inspect and audit the facilities being used by Synergetics (or any third party) for production and storage of Existing Products to assure compliance by Synergetics (and its suppliers) with (i) all applicable statutes, laws and regulations, including, without limitation, Quality System Regulations ("QSRs") enforced by the United States Food and Drug Administration (the "FDA"), (ii) CODMAN Quality Assurance Policies, (iii) Johnson & Johnson Corporate Quality Assurance Requirements, and (iv) the terms and provisions of this Agreement.  Synergetics shall within fourteen days remedy or cause the remedy of any deficiencies which may be noted in any such audit or, if any such deficiencies cannot reasonably be remedied within such fourteen day period, present to CODMAN a written plan to remedy such deficiencies as soon as possible; and the failure by Synergetics to remedy or cause the remedy of any such deficiencies within such fourteen day period or to present such a plan within such fourteen day period and then use commercially reasonable efforts to remedy or cause the remedy of such deficiencies in accordance with such written plan, as the case may be, shall be deemed a material breach of this Agreement.  Synergetics acknowledges that the provisions of this Section 4.01 granting CODMAN certain audit rights shall in no way relieve Synergetics of any of its obligations under this Agreement, nor shall such provisions require CODMAN to conduct any such audits.

4.02    Acceptance; Disposition of Non-Compliant Product.  CODMAN shall have no obligation to pay for any Existing Product that is subject to a claim of non-compliance with the Specifications; provided that any such claim of non-compliance is based upon product acceptance testing performed by CODMAN in accordance with the test protocols set forth in the Specifications; and provided further that CODMAN shall pay for Existing Product within [redacted**] days of receipt unless such Existing Product has been rejected within such [redacted**]-day period.  Synergetics shall replace at its own cost and expense, including reimbursement of freight costs incurred by CODMAN, Existing Product that fails to comply with the Specifications or other warranties made in Article Five hereof, which replacement shall constitute CODMAN's sole and exclusive remedy therefore (but in no way limiting Synergetics’ indemnity obligations under Section 6.01). CODMAN shall notify Synergetics of the existence and nature of any non-compliance with the Specifications that comes to its attention and shall return such non-compliant Existing Product to Synergetics within [redacted**] days after it is rejected by CODMAN.  Synergetics shall have a reasonable opportunity, not to exceed [redacted**] days from receipt of such Existing Product, to inspect such non-compliant product and provide CODMAN an explanation of the non-compliance and proposed course of action (i.e. repair (including the nature of the repair) or replacement of the Existing Product).  The acceptance (or non-rejection) of any Existing Products shall in no way limit CODMAN's rights under Synergetics product warranty or for indemnification hereunder; provided however that Synergetics shall, subject to return from CODMAN of the non-compliant product, replace non-compliant product (i) under this Section 4.02 if found to be non-compliant within [redacted**] days following receipt thereof by CODMAN and (ii) under Section 5.01 if found to be non-compliant after such [redacted**] day period.

** Information marked as "[redacted**]" has been omitted pursuant to a request for confidential treatment and has been filed separately with the Securities and Exchange Commission.

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4.03    Independent Testing.If, after Synergetics’ inspections of any Existing Product, the parties disagree as to whether such Existing Product conforms to the Specifications, either party may deliver the item to an independent third-party laboratory, mutually and reasonably acceptable to both parties, for analytical testing to confirm such item's conformance to the Specifications.  All costs associated with such third-party testing shall be at CODMAN's expense unless the tested item is deemed by such third-party to be not in compliance with the Specifications, in which case all such costs, including reimbursement of freight and disposition costs, shall be promptly paid by Synergetics.  No inspection or testing of or payment for Existing Product by CODMAN or any third-party agent of CODMAN shall constitute acceptance by CODMAN thereof, nor shall any such inspection or testing be in lieu or substitution of any obligation of Synergetics for testing, inspection and quality control as provided in the Specifications or under applicable local, state, or federal laws, rules, regulations, standards, codes or statutes.

4.04    Corrective Action. In the event any governmental agency having jurisdiction shall request or order, or if CODMAN shall reasonably determine to undertake, any corrective action with respect to any Existing Product, including any recall, corrective action or market action, and the cause or basis of such recall or action is reasonably attributable to a breach by Synergetics of any of its warranties, guarantees, representations, obligations or covenants relating to that Existing Product, then Synergetics shall actively cooperate with CODMAN in executing such corrective action relating to Existing Product quality and performance, and, Synergetics shall reimburse CODMAN for the reasonable out of pocket costs of such action, including the cost of replacing any Existing Product which is so recalled, whether or not any such specific unit of Existing Product shall be established to be in breach of any warranty by Synergetics hereunder; provided, however, that any such amount to be reimbursed to CODMAN shall be proportionately reduced by an appropriate amount based on the degree to which such corrective action may also be reasonably attributable to a breach by CODMAN of any of its obligations or covenants hereunder or its negligence or willful misconduct, and provided, further, that if none of the units of Existing Product returned to Synergetics are determined to be (in accordance with the terms of Sections 4.02 and 4.03) in breach of any warranty provided by Synergetics hereunder, then CODMAN shall reimburse Synergetics for its reasonable out of pocket costs for such action, and CODMAN shall offset amounts owing to Synergetics for the cost of any Existing Product returned to Synergetics.  Before undertaking any such corrective action, CODMAN shall provide, to the extent reasonably practicable under the circumstances, reasonable advance notice to Synergetics of the proposed corrective action and shall discuss in good faith with Synergetics its rationale for such proposed corrective action.

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4.05     Notice of Audit or Inquire.  Each party agrees to promptly notify the other of any FDA audit, or any audit by any other regulatory body, of its facilities used for the manufacture, storage or distribution of Existing Products, or any request for information from the FDA, or other regulatory body, related to the manufacture of Existing Products, as soon as practicable after it received notice of such audit or request.

4.06.  Warranty Service. With the exception of disposable and limited-use products, Synergetics agrees to perform repair, maintenance, modification and other services (including warranty repairs) on a timely basis on Existing Products purchased by CODMAN, its Affiliates, or its customers.  When requests for service from customers shall be directed to CODMAN, CODMAN will arrange for the customer to ship the applicable Existing Product directly to Synergetics.  Unless not reasonably repairable, Synergetics will repair and return product in accordance with CODMAN instructions.  In the case of out-of-warranty service, Synergetics will bill CODMAN, who in turn will bill the customer.  The rates for out-of-warranty service shall be as shown in Schedule F, which shall be subject to reasonable amendment on an annual basis by Synergetics.  Subject to the availability of specific parts from suppliers, Synergetics agrees to use commercially reasonable efforts to maintain an inventory of spare and replacement parts for each Existing Product sold under this Agreement if and when production ceases for a period of at least three (3) years following the delivery date of the particular Existing Product.  When requests for service are directed to a CODMAN Affiliate, such Affiliate may arrange for service to be performed by Synergetics or may arrange for service at a CODMAN- or Affiliate-sponsored service center outside the United States.  Synergetics will support such service centers outside the United States by providing at commercially reasonable prices a supply of spare and replacement parts for Existing Products (subject to the availability of such parts) and training to service center personnel on the service and repair of Existing Products.

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4.07.   Medical Device Reports. The parties agree to cooperate in good faith with respect to responding to or making any Medical Device Reports (“MDR’s”) pertaining to the Existing Products.  Synergetics and CODMAN shall actively cooperate in investigating the circumstances underlying in the Medical Device Report and in responding to FDA inquiries.  With respect to Disposable Products, Codman shall file any necessary manufacturer MDR’s for all complaints that are found to meet the definition of MDR reportable events (as defined in 21 CFR, Part 803).  Otherwise, Synergetics shall file any necessary manufacturer MDR’s for all complaints that are found to meet the definition of MDR reportable events (as defined in 21 CFR, Part 803).

ARTICLE FIVE

REPRESENTATIONS AND WARRANTIES

5.01    Product Warranty.

(a)        Synergetics warrants to CODMAN that the Existing Products will meet the Specifications in all material respects and will be free from material defects in material, workmanship and design, PROVIDED THAT:

(i)The Existing Product has been installed, stored, used and maintained in strict compliance with the safety procedures, Operating Instructions and storage and handling requirements provided with the Existing Product;

(ii)Synergetics or an authorized Synergetics representative is notified within 10 business days of the warranty claim, and as soon as notice of an alleged defect is received by CODMAN or the alleged defect appears, the Existing Product shall be taken out of service;

(iii)The Existing Product has not been subject to (1) neglect, misuse or operation contrary to the Operating Instructions provided with the Existing Product or (2) improper storage or handling contrary to the storage and handling instructions provided with the Existing Product; and

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(iv)  No repairs have been attempted or parts replaced by anyone not authorized by Synergetics to perform such repair, and the Existing Product serial number, date stamp or other identification marks have not been removed or defaced.

(b)       Synergetics' liability under the warranty under Section 5.01(a) above is limited to the (i) supply of replacement parts or Existing Product or (ii) labor and parts repair at an authorized Synergetics facility (including shipping costs from CODMAN to Synergetics’ facility and back) up to a value not exceeding the original Synergetics’ invoice price of the Existing Product.

(c)       The duration of the warranty under Section 5.01(a) above shall be two-years from the date of shipment by Codman of the Existing Product.

(d)       The warranty under Section 5.01(a) above does not include:

(i)Packaging, freight or insurance for shipments between the end-user customer and CODMAN; or

(ii)Existing Products not provided by Synergetics or damage to the Existing Product that is caused by any such products.

(e)       Synergetics represents and warrants that it complies and shall comply with applicable statutes, laws, ordinances, rules and regulations relating to the manufacture, assembly and supply of the Existing Product, including, without limitation, those enforced by the FDA (including compliance with CFR 21 Part 820 Quality System Regulation and cGMPs) and by the International Standards Organization (including IEC 60601-1 Programmable Electromechanical Equipment, and all applicable, related, IEC collateral standards).  Synergetics represents and warrants that it has obtained ISO 13485 certification and has submitted to the FDA an application for 510(k) clearance for the Existing Products and that the applications for such certification and clearance contain (or prior to certification or clearance will contain) complete and accurate information and that the information contained therein was provided in good faith in compliance with all applicable statutes, laws, ordinances, rules and regulations.

5.02    Execution and Performance of Agreement. Synergetics and CODMAN each represents and warrants to the other that it has full right, power and authority to enter into and perform its obligations under this Agreement.  Synergetics and CODMAN each further represents and warrants to the other that the performance of its obligations under this Agreement will not result in a violation or breach of, and will not conflict with or constitute a default under any agreement, contract, commitment or obligation to which such party or any of its Affiliates is a party or by which it is bound and that it has not granted and will not grant during the term of this Agreement or any renewal thereof, any conflicting rights, license, consent or privilege with respect to the rights granted herein.

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5.03    Intellectual Property.Synergetics represents and warrants to CODMAN that Synergetics owns all of the rights, title and interest in and to the Synergetics Patents and Know-How and all other Synergetics intellectual property that may be used in connection with the Existing Products; no academic institution, member of an academic institution, corporation or other entity, or any local, state or federal government holds any property rights through it in any Existing Product; Synergetics is able to consummate this Agreement in the capacity of a free agent; to the knowledge of Synergetics’ Chief Executive Officer and Chief Scientific Officer, the manufacture, use and sale of the Existing Products in accordance with the terms of this Agreement does not and will not infringe any third party's rights under any patent; and Synergetics is presently aware of no infringement by any third party of any Synergetics Patent.

5.04    Further Warranty Limitations.

(a)       SYNERGETICS MAKES NO WARRANTY OTHER THAN THOSE EXPRESSLY MADE HEREIN, EXPRESS OR IMPLIED, INCLUDING WITHOUT LIMITATION, ANY WARRANTY OF MERCHANTABILITY OR OF FITNESS FOR ANY PARTICULAR PURPOSE.

(b)       THE ABOVE WARRANTIES SHALL SUPERSEDE ANY DISCLAIMER OF WARRANTIES STATEMENT WHICH IS INCLUDED IN THE OPERATING INSTRUCTIONS, OR ANY OTHER DOCUMENTATION PROVIDED WITH THE EXISTING PRODUCT, TO THE EXTENT THE PROVISIONS OF SUCH DISCLAIMER OF WARRANTIES ARE INCONSISTENT WITH THIS AGREEMENT.

(c)       NOTHING CONTAINED IN THIS ARTICLE FIVE SHALL IN ANY WAY LIMIT SYNERGETICS’ INDEMNITY OBLIGATIONS UNDER SECTION 6.01.

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ARTICLE SIX

INDEMNIFICATION

6.01    Indemnification by Synergetics. Synergetics shall indemnify, defend and hold harmless CODMAN and its Affiliates and their respective officers, directors and employees from and against any and all claims, damages, lawsuits, liabilities, costs, charges, judgments and expenses (including interest, penalties and reasonable attorneys' fees) (collectively "Damages") incurred by such party arising out of or resulting from (i) material breach by Synergetics of any of its representations, warranties, guarantees, covenants or obligations contained herein; or (ii) manufacturing defects in Existing Products supplied by Synergetics to CODMAN pursuant to this Agreement, except to the extent caused by CODMAN's distribution practices, CODMAN's advertising or promotional material for the Existing Products that has not been approved by Synergetics, or misrepresentations of the Existing Products by CODMAN, or improper use of the Existing Products.  Except for the parties to this Agreement and their affiliates, no other persons shall be a third party beneficiary of this Section 6.01.

6.02    Indemnification by CODMAN.  CODMAN shall indemnify, defend and hold harmless Synergetics and its Affiliates and their respective officers, directors and employees from and against any and all Damages incurred by such party arising out of or resulting from (i) any material breach by CODMAN of any of its representations, warranties, guarantees, covenants or obligations contained herein or (ii) the use of the Existing Products (including personal injury and product liability claims) to the extent caused by CODMAN's distribution practices, CODMAN's advertising or promotional material for the Existing Products that has not been approved by Synergetics, or misrepresentations of the Existing Products by CODMAN.  Except for the parties to this Agreement and their affiliates, no other persons shall be a third party beneficiary of this Section 6.02.

6.03     Claims.  Each indemnified party agrees to give the indemnifying party prompt written notice of any matter upon which such indemnified party intends to base a claim for indemnification (an "Indemnity Claim") under this Article Six.  The indemnified party, at its own expense, shall have the right to participate with the indemnifying party in the indemnifying party's defense, settlement or other disposition of any Indemnity Claim, subject to the ultimate control of the indemnifying party.  With respect to any Indemnity Claim relating solely to the payment of money damages and which could not result in the indemnified party's becoming subject to injunctive or other equitable relief or otherwise materially adversely affect the business of the indemnified party in any manner, and as to which the indemnifying party shall have acknowledged in writing the obligation to indemnify the indemnified party hereunder, the indemnifying party shall have the sole right to defend, settle or otherwise dispose of such Indemnity Claim, on such terms as the indemnifying party, in its sole discretion, shall deem appropriate, provided that the indemnifying party shall provide reasonable evidence of its ability to pay any damages claimed and with respect to any such settlement shall have obtained the written release of the indemnified party from the Indemnity Claim.  The indemnifying party shall obtain the written consent of the indemnified party prior to ceasing to defend, settling or otherwise disposing of any Indemnity Claim if as a result thereof the indemnified party would become subject to injunctive or other equitable relief or the business of the indemnified party would be adversely affected in any manner.

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6.04    Survival. This Article Six shall survive any termination of this Agreement.

ARTICLE SEVEN

INABILITY TO MANUFACTURE, FORCE MAJEURE

7.01    Failure to Manufacture. (a)  During the Term, should Synergetics be unable to or fail for any reason, other than as set forth in paragraph 7.02 hereof, to manufacture an Existing Product in accordance with the agreed upon Specifications or to comply with applicable Good Manufacturing Practices as specified in paragraph 5.01(a) (hereinafter referred to as a "Manufacturing Deficiency"), CODMAN within sixty (60) days of the discovery of the Manufacturing Deficiency, on ninety (90) days prior written notice to Synergetics, may remove the particular Existing Product from the terms of this Agreement.  During the ninety (90) day notice period set forth in the preceding sentence, Synergetics will have the right to cure such Manufacturing Deficiency in order to keep the particular Existing Product in compliance with the terms of this Agreement, in which event the notice shall be null and void.

7.02     Force Majeure.Synergetics shall not be liable for any failure to supply or deliver or for any delay in the delivery of the Existing Products hereunder, when any such failure or delay is caused, directly or indirectly, by fires, floods, accidents, explosions, strikes or other labor disturbances (regardless of the reasonableness of the demands of labor), wars, shortages of fuel, power, or raw materials, inability to obtain or delays of transportation facilities, acts of God, or any cause, whether similar or dissimilar, to the foregoing beyond the reasonable control of Synergetics, as the case may be affecting Synergetics’ production and/or delivery of the Existing Products covered by this Agreement or CODMAN's acceptance or resale thereof.  Such failure will be excused for three months or as long as such event shall be continuing (whichever period is shorter) provided that Synergetics gives prompt written notice to CODMAN of the Force Majeure Event.  Synergetics shall exercise all reasonable efforts to eliminate the Force Majeure event and to resume performance.  In the event the failure continues beyond three months then CODMAN may, at CODMAN's option and for as long as such Force Majeure event continues, find another source to manufacture and supply a substitute for the Existing Products without be deemed to be in breach of Section 2.01(c) hereof.  The provisions of this paragraph shall not serve to modify any rights CODMAN may have under paragraph 7.01 concerning Synergetics' inability to manufacture.

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ARTICLE EIGHT

CONFIDENTIALITY

8.01    Confidential Information.  As used herein, "Confidential Information" shall mean the Specifications, the Know-How, the Manufacturing Costs, information pertaining to any Synergetics product (including information obtained from the testing and evaluation of any such Synergetics product) the Raw Materials, and all other confidential or proprietary information that is reduced to writing, marked as confidential and given to one party by the other party relating to such other party or any of its Affiliates, including information regarding any of the products of such other party or any of its Affiliates, information regarding its advertising, distribution, marketing or strategic plans or information regarding its costs, productivity or technological advances.  Neither party shall, during the Term and for a period of five years following the termination or expiration of this Agreement for any reason, use, or disclose to third parties any Confidential Information of the other (except to the extent reasonably necessary to exercise its rights or comply with its obligations under this Agreement) and each party shall insure that its employees, officers and agents shall not use, or disclose to third parties any Confidential Information of the other (except to the extent reasonably necessary to exercise its rights or comply with its obligations under this Agreement); provided, however, that CODMAN may disclose Confidential Information of Synergetics to CODMAN's Affiliates and consultants if such persons reasonably need to know such information for purposes of this Agreement, are informed of the confidential nature of such information and are under contractual obligation to CODMAN to keep such information confidential and not use or disclose such Confidential Information.  Confidential Information shall not include information that (i) was already known to the receiving party at the time of its receipt thereof, as evidenced by its written records (other than information obtained from Synergetics or from a third party that did not have the right to make a disclosure of information without violating an obligation of confidentiality), (ii) is disclosed to the receiving party after its receipt thereof by a third party who has a right to make such disclosure without violating any obligation of confidentiality, (iii) is or becomes part of the public domain through no fault of the receiving party, (iv) is subsequently independently developed by the receiving party without use of or reference or access to the disclosing party’s Confidential Information or (v) is required to be disclosed to comply with applicable laws or regulations, including without limitation the rules or regulations of the United States Securities and Exchange Commission or of any stock exchange (including without limitation Nasdaq) or an order of a court or regulatory body having competent jurisdiction.

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ARTICLE NINE

LICENSE RIGHTS

9.01    License Upon Bankruptcy.  Synergetics hereby grants to CODMAN a non-exclusive, worldwide license, with the right to grant sub-licenses to its Affiliates, under the Synergetics Patents and Know How, to use, sell, make and have made the Existing Products in the Field for the Term (collectively the "Bankruptcy License Rights"); provided, however, that the Bankruptcy License Rights granted hereunder shall be subject to the terms of Section 9.02, and shall be effective only if during the Term (i) a Title 11 proceeding has been voluntarily filed by Synergetics, or filed by a third party and not dismissed within 90 days thereafter, and (ii) this Agreement has been rejected in the Title 11 proceeding (a "Bankruptcy Event").  Notwithstanding anything in this Article 9 to the contrary, CODMAN shall not have any Bankruptcy License Rights, nor shall it exercise any Bankruptcy License Rights, other than after the occurrence of a Bankruptcy Event.  Furthermore, notwithstanding anything in this Article 9 to the contrary, any and all Bankruptcy License Rights shall terminate at expiration of the Term.

9.02    Rights Upon Bankruptcy.The rights and licenses to Synergetics Patents and Know-How granted under Section 9.01 of this Agreement by Synergetics to CODMAN are, for all purposes of Section 365(n) of Title 11 of the U.S. Code ("Title 11"), licenses of rights to intellectual property as defined in Title 11. Synergetics agrees during the Term to create and maintain current copies or, if not amenable to copying, detailed descriptions or other appropriate embodiments, of all such Synergetics Patents and Know-How.  If a case is commenced by or against Synergetics under Title 11, then, unless and until this Agreement is rejected as provided in Title 11, Synergetics (in any capacity, including debtor-in-possession) and its successors and assigns (including, without limitation, a Title 11 trustee) at its option shall either perform all of the obligations provided in this Agreement to be performed by Synergetics or permit CODMAN to exercise its rights under the license granted by Section 9.01 above.

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9.03    Third-Party Infringement. In the event there is infringement by a third party of any Synergetics Patent (“Third Party Infringement”) and CODMAN becomes aware of such infringement, CODMAN shall give Synergetics written notice to that effect, including with such written notice evidence establishing a prima facie case of infringement by such third party.  Synergetics shall bear all expenses of any suit brought by it based upon such infringement and shall retain all damages or other monies awarded or received in settlement of such suit.  If, after the expiration of ninety (90) days from the date of such notice, Synergetics has not obtained a discontinuance of such infringement or brought suit against the third party infringer, then the parties shall appoint by mutual agreement an attorney with at least 15 years experience in litigating patent infringement lawsuits in the United States, who is a partner at a law firm with a nationally recognized intellectual property practice and who has no prior relationship with either party (“Independent Patent Counsel”).  Such Independent Patent Counsel shall evaluate the identified Third Party Infringement and advise the parties in writing by not later than 60 days after his or her appointment whether he or she believes there is a reasonable likelihood of success in pursuing a claim for the Third Party Infringement.  The cost of Independent Patent Counsel shall be shared equally by the parties.  If Independent Patent Counsel determines that there is a reasonable likelihood of success and by the 30^th day after such advice Synergetics has still not obtained a discontinuance of such infringement or brought suit against the third party infringer, then CODMAN shall have the right, but not the obligation, to bring suit against such infringer.  Synergetics will cooperate with CODMAN in any such suit for infringement brought by CODMAN against such third party, and shall have the right to consult with CODMAN and to participate in and be represented by independent counsel in such litigation at its own expense.  CODMAN shall bear all expenses of such suit, and shall retain any damages or other monies awarded or received in consequence of such litigation.

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9.04    Ownership of Developments.

(a)       All inventions made, conceived or acquired by Synergetics, and the intellectual property related to any Existing Product, the New Product, or any other product including any improvement of any such product and Know-How related to any such product shall be the exclusive property of Synergetics.

(b)       Except as provided in Section 9.04(a), above, all inventions made, conceived or acquired by CODMAN, and the intellectual property related thereto, will be the exclusive property of CODMAN.

ARTICLE TEN

TERM AND TERMINATION

  10.01  Term.  The "Term" of this Agreement shall commence with retroactive effect as of January 1, 2009 and continue until December 31, 2011, or such later date that is mutually agreed to in writing by CODMAN and Synergetics, or such earlier date as provided in this Article Ten.  This Agreement shall automatically renew for a Renewal Term of three years, beginning January 1, 2012 and ending December 31, 2014, unless either Party provides written notice to the other Party of its intent not to renew the Agreement at least twelve (12) months prior to the end of the original Term, i.e., on or before December 31, 2010 or, with respect to any Renewal Term, at least twelve (12) months prior to the end of such Renewal Term.  Written notice of intent not to renew by either party on or before December 31, 2010, shall automatically enable Codman and Synergetics to seek and negotiate with an alternate supplier(s) or distributor(s), respectively, for future supply or distribution of products that would compete with Existing Products, notwithstanding any other provisions to the contrary in this Agreement.

  10.02  Termination Agreement.  Upon receipt of a notice of one Party’s intent not to renew the Agreement for the Renewal Term, as allowed for in Section 10.01, the Parties shall have thirty (30) days to negotiate a mutually agreeable written termination plan that will allow for a smallest reasonably impact of the termination on the then current Forecast and on continuing support for end-user customers of either Party throughout the remainder of the Term,

   10.03  Termination for Breach.  If either Synergetics, on the one hand, or CODMAN, on the other hand, shall materially breach any covenant, agreement or obligation under this Agreement, then the other party may give notice to terminate this Agreement by giving such party notice of such breach.  The party receiving such notice shall have ninety (90) days from the date of receipt thereof to cure such breach.  If such breach is not cured within such ninety (90) day period, then the non-breaching party shall have the right to terminate this Agreement effective as of the end of such period.  In the event such breach is cured during such period, such notice shall be of no force or effect and this Agreement shall not be terminated.

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 10.04  Termination for Insolvency.Either party may terminate this Agreement upon notice if the other party makes an assignment for the benefit of creditors, is the subject of proceedings in voluntary or involuntary bankruptcy instituted on behalf of or against such party, or has a receiver or trustee appointed for all or substantially all of its property; provided that in the case of an involuntary bankruptcy proceeding, such right to terminate shall only become effective if the other party consents to the involuntary bankruptcy or such proceeding is not dismissed within ninety (90) days after the filing thereof.

  10.05  Termination for Patent Infringement. Either party may terminate this Agreement at the end of a 90-day period following Synergetics’ receipt of written notice from CODMAN if a judgment from a court of competent jurisdiction in the United States holds that the manufacture, use, importation or sale of a Medical Device Product, which has not been discontinued or otherwise removed from Schedule A, infringes the patent rights of a third party.

 10.06  Effect of Termination.  Notwithstanding the termination of this Agreement for any reason, each party hereto shall be entitled to recover any and all damages (other than consequential damages or other damages expressly excluded by this Agreement) that such party shall have sustained by reason of the breach by the other party hereto of any of the terms of this Agreement.  Termination of this Agreement for any reason shall be without prejudice to Synergetics’ right to receive all payments accrued and unpaid on the effective date of termination and shall not release either party hereto from any liability which at such time has already accrued or which thereafter accrues from a breach or default prior to such expiration or termination, nor affect in any way the survival of any other right, duty or obligation of either party hereto which is expressly stated elsewhere in this Agreement to survive such termination.  In the event of termination for any reason, CODMAN shall have the non-exclusive right to continue to market and distribute the Existing Products until its inventory is fully depleted, unless such termination is for non-cured material breach of this Agreement by CODMAN or results from the termination of the License Agreement for non-cured material breach by CODMAN, which shall result in CODMAN having no right to continue to market or distribute the Existing Products .

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 10.07  Survival of Certain Provisions. The provisions of this Agreement set forth in Article Six, Article Eight, Section 10.06 and Article Eleven, and any remedies for the breach thereof, shall survive the termination of this Agreement under the terms hereof.

ARTICLE ELEVEN

MISCELLANEOUS

11.01  Arbitration.

(a)        Any dispute, claim or controversy arising from or related in any way to this Agreement or the interpretation, application, breach, termination or validity thereof, including any claim of inducement of this Agreement by fraud or otherwise, will be submitted for resolution to final and binding arbitration pursuant to the commercial arbitration rules then pertaining of the Center for Public Resources ("CPR"), except where those rules conflict with these provisions, in which case these provisions control.  The arbitration will be held in Chicago, Illinois.

(b)        The panel shall consist of three arbitrators chosen from the CPR Panels of Distinguished Neutrals each of whom is a lawyer specializing in business litigation with at least 15 years experience with a law firm of over 25 lawyers or was a judge of a court of general jurisdiction.  In the event the aggregate damages sought by the claimant are stated to be less than $5 million, and the aggregate damages sought by the counterclaimant are stated to be less than $5 million, and neither side seeks equitable relief, then a single arbitrator shall be chosen, having the same qualifications and experience specified above.

(c)        The parties agree to cooperate (1) to obtain selection of the arbitrator(s) within 30 days of initiation of the arbitration, (2) to meet with the arbitrator(s) within 30 days of selection and (3) to agree at that meeting or before upon procedures for discovery and as to the conduct of the hearing which will result in the hearing being concluded within no more than 9 months after selection of the arbitrator(s) and in the award being rendered within 60 days of the conclusion of the hearings, or of any post-hearing briefing, which briefing will be completed by both sides with 20 days after the conclusion of the hearings.  In the event no such agreement is reached, the CPR will select arbitrator(s), allowing appropriate strikes for reasons of conflict or other cause and three peremptory challenges for each side.  The arbitrator(s) shall set a date for the hearing, commit to the rendering of the award within 60 days of the conclusion of the evidence at the hearing, or of any post-hearing briefing (which briefing will be completed by both sides in no more than 20 days after the conclusion of the hearings), and provide for discovery according to these time limits, giving recognition to the understanding of the parties hereto that they contemplate reasonable discovery, including document demands and depositions, but that such discovery be limited so that the time limits specified herein may be met without undue difficulty. In no event will the arbitrator(s) allow either side to obtain more than a total of 40 hours of deposition testimony from all witnesses, including both fact and expert witnesses. In the event multiple hearing days are required, they will be scheduled consecutively to the greatest extent possible.

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(d)        The arbitrator(s) shall render their award following the substantive law of New Jersey. The arbitrator(s) shall render an opinion setting forth findings of fact and conclusions of law with the reasons therefore stated.  A transcript of the evidence adduced at the hearing shall be made and shall, upon request, be made available to either party.

(e)         To the extent possible, the arbitration hearings and award will be maintained in confidence.

(f)         The United States District Court for New Jersey may enter judgment upon any award.  In the event the panel's award exceeds $5 million in monetary damages or includes or consists of equitable relief, then the court shall vacate, modify or correct any award where the arbitrators' findings of fact are clearly erroneous, and/or where the arbitrators' conclusions of law are erroneous; in other words, it will undertake the same review as if it were a federal appellate court reviewing a district court's findings of fact and conclusions of law rendered after a bench trial. An award for less than $5 million in damages and not including equitable relief may be vacated, modified or corrected only upon the grounds specified in the Federal Arbitration Act. The parties consent to the jurisdiction of the above-specified Court for the enforcement of these provisions, the entry of judgment on any award, and the vacatur, modification and correction of any award as above specified.  In the event such Court lacks jurisdiction, then any court having jurisdiction of this matter may enter judgment upon any award and provide the same relief, and undertake the same review, as specified herein.

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(g)        Each party has the right before or during the arbitration to seek and obtain from the appropriate court provisional remedies such as attachment, preliminary injunction, replevin, etc. to avoid irreparable harm, maintain the status quo, or preserve the subject matter of the arbitration.

(h)        EACH PARTY HERETO WAIVES ITS RIGHT TO TRIAL OF ANY ISSUE BY JURY.

(i)         EACH PARTY HERETO WAIVES ANY CLAIM TO PUNITIVE OR EXEMPLARY DAMAGES FROM THE OTHER.

(j)          EACH PARTY HERETO WAIVES ANY CLAIM OF CONSEQUENTIAL DAMAGES (INCLUDING LOST PROFITS) FROM THE OTHER.

11.02  Publicity. Except as provided in Section 3.02, and excepting public press releases or other disclosures describing material events as required under applicable regulations of the Securities and Exchange Commission and applicable stock exchanges (including NASDAQ), neither party hereto shall originate any publicity, news release, or other announcement, written or oral, whether to the public press, the trade, CODMAN’s or Synergetics’ customers or otherwise, relating to this Agreement, or to performance hereunder or the existence of an arrangement between the parties without the prior written approval of the other party hereto. Synergetics shall not use the name of Johnson & Johnson, CODMAN, or any of its Affiliates for advertising or promotional purposes without the prior written consent of CODMAN.

11.03  Headings.  The Article and Section headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning and interpretation of this Agreement.

11.04  Notices. All notices and other communications hereunder shall be in writing. All notices hereunder of an Indemnity Claim, a Force Majeure Event, default or breach hereunder, or, if applicable, termination of the term hereof, or any other notice of any event or development material to this Agreement taken as a whole, shall be delivered personally, or sent by national overnight delivery service or postage pre-paid registered or certified U.S. mail, and shall be deemed given when delivered, if by personal delivery or overnight delivery service, or three business days after deposit in the mail, if sent by U.S. mail, and shall be addressed as follows:

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If to Synergetics:Chief Executive Officer

Synergetics USA, Inc.

3845 Corporate Centre Drive

O’Fallon, MO 63368

with a Copy to:General Counsel

Synergetics USA, Inc.

3845 Corporate Centre Drive

O’Fallon, MO 63368

If to CODMAN:Codman & Shurtleff, Inc.

325 Paramount Drive

Raynham, MA 02767-0350

Attention: President

with a Copy to:Codman Board Attorney

Johnson & Johnson

One Johnson & Johnson Plaza

New Brunswick, NJ 08933

or to such other place as either party may designate by written notice to the other in accordance with the terms hereof.

11.05  Failure to Exercise. The failure of either party to enforce at any time for any period any provision hereof shall not be construed to be a waiver of such provision or of the right of such party thereafter to enforce each such provision.

11.06  Assignment.  This Agreement, or any of the rights and obligations created herein, shall not be assigned or transferred, in whole or in part, by either party hereto without the prior written consent of the other party; provided, however, that either party shall have the right to assign any or all of its rights or obligations under this Agreement to a successor to that part of its business to which this Agreement relates. Any attempted assignment or transfer of such rights or obligations without such consent, except as provided herein, shall be void. Subject to the foregoing sentence, this Agreement shall bind and inure to the benefit of the parties hereto and their respective successors and assigns.

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    11.07  Severability.  In the event that anyone or more of the provisions (or any part thereof) contained in this Agreement or in any other instrument referred to herein, shall, for any reason, be held to be invalid, illegal or unenforceable in any respect, then to the maximum extent permitted by law, such invalidity, illegality or unenforceability shall not affect any other provision of this Agreement or any other such instrument. Any term or provision of this Agreement which is invalid, illegal or unenforceable in any jurisdiction shall, to the extent the economic benefits conferred by this Agreement to both parties remain substantially unimpaired, not affect the validity, legality or enforceability of any of the terms or provisions of this Agreement in any other jurisdiction.

11.08  Relationship of the Parties.  The relationship of CODMAN and Synergetics established by this Agreement is that of independent contractors, and nothing contained herein shall be construed to (i) give either party any right or authority to create or assume any obligation of any kind on behalf of the other or (ii) constitute the parties as partners, joint venturers, co-owners or otherwise as participants in a joint or common undertaking.

11.09  Entire Agreement.  It is the desire and intent of the parties to provide certainty as to their future rights and remedies against each other by defining the extent of their undertakings herein. This Agreement constitutes and sets forth the entire agreement and understanding between the parties with respect to the subject matter hereof and is intended to define the full extent of the legally enforceable undertakings of the parties hereto, and no promise, agreement or representation, written or oral, which is not set forth explicitly in this Agreement is intended by either party to be legally binding. Each party acknowledges that in deciding to enter into this Agreement and to consummate the transactions contemplated hereby it has not relied upon any statements, promises or representations, written or oral, express or implied, other than those explicitly set forth in this Agreement. This Agreement supersedes all previous understandings, agreements and representations between the parties, written or oral, with respect to the subject matter hereof.

11.10  Counterparts.  This Agreement may be executed in one or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.

11.11  Expenses. Each party shall pay all of its own fees and expenses (including all legal, accounting and other advisory fees) incurred in connection with the negotiation and execution of this Agreement and the arrangements contemplated hereby.

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11.12  Modifications and Amendments. This Agreement shall not be modified or otherwise amended except pursuant to an instrument in writing executed and delivered by each of the parties hereto.

11.13  Construction. The parties have participated jointly in the negotiation and drafting of this Agreement. In the event an ambiguity or question of intent or interpretation arises, this Agreement shall be construed as if drafted jointly by the parties and no presumption or burden of proof shall arise favoring or disfavoring any party by virtue of the authorship of any of the provisions of this Agreement.

11.14  Governing Law.  This Agreement shall be governed by, and construed in accordance with, the laws of the State of New Jersey, without giving effect to the choice of law provisions thereof.

11.15  Incorporation of Exhibits and Schedules.The Exhibits and Schedules identified in this Agreement are incorporated herein by reference and made a part hereof.

11.16  CODMAN Compliance with Laws. CODMAN agrees to comply with all laws and regulations applicable to the performance of its obligations hereunder and/or applicable to its marketing and sale of the Existing Products.

IN WITNESS WHEREOF, the parties hereto intending legally to be bound hereby, have each caused this Agreement to be duly executed as of the date first above written.

SYNERGETICS, INC.
By:	/s/ Robert H. Dick
	Robert H. Dick
	Chairman of the Board

CODMAN & SHURTLEFF, INC.
By:	/s/ P. Laxminarain
Name:	P. Laxminarain
Title:	Worldwide President

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SCHEDULE A

EXISTING PRODUCTS

[Redacted** (1 page)]

** Information marked as "[redacted**]" has been omitted pursuant to a request for confidential treatment and has been filed separately with the Securities and Exchange Commission.

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SCHEDULE B

Intentionally left blank.

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SCHEDULE C

Patent Portfolio of Synergetics USA, Inc.

Pertaining to Existing Products

[Redacted** (1 page)]

** Information marked as "[redacted**]" has been omitted pursuant to a request for confidential treatment and has been filed separately with the Securities and Exchange Commission.

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SCHEDULE D

PRODUCT SPECIFICATIONS

[Redacted** (1 page)]

** Information marked as "[redacted**]" has been omitted pursuant to a request for confidential treatment and has been filed separately with the Securities and Exchange Commission.

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SCHEDULE E

NON-BINDING FORECAST

[Redacted** (1 page)]

** Information marked as "[redacted**]" has been omitted pursuant to a request for confidential treatment and has been filed separately with the Securities and Exchange Commission.

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SCHEDULE F

OUT OF WARRANTY SERVICE

PARTS & LABOR PRICES

[Redacted** (13 pages)]

** Information marked as "[redacted**]" has been omitted pursuant to a request for confidential treatment and has been filed separately with the Securities and Exchange Commission.

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SCHEDULE G

NEW PRODUCT DEVELOPMENT

Background.  In about September 2008 Synergetics offered to replace the Existing Product generators (CMC III and Synergy) with newly designed and developed generators.  After observing prototypes of several generators of varying functionality and capability, CODMAN conditionally accepted Synergetics’ offer with a request that two new generators (provisionally referred to as the CMC I and the CMC V and for purposes of this Agreement, referred to herein as the “Schedule G Generators”) be developed by Synergetics.  CODMAN’s conditional acceptance was based on a requirement for further input by CODMAN into the setting of initial specifications for the generators that will be developed.   In order to facilitate and provide clarity with respect to the development of the Schedule G Generators and any additional New Product development under this Agreement (including any necessary development work needed to add a possible New Product generator to Exhibit A as an interim step toward development of the Schedule G Generators in order to address component availability and regulatory compliance matters with respect to the Schedule G Generator development (such interim New Product generator referred to as a “CMC XL”)), the Parties set forth below the following guiding principles to govern such product development.

Responsibilities and Costs.  Throughout product development CODMAN shall be allowed to assist in the making of decisions that will affect the functionality of the new products.  However, product development (e.g., designing, prototyping and testing of generators) as well as obtaining and maintaining Product Certification, will be the responsibility of Synergetics.  CODMAN shall provide Government Registrations.  Synergetics shall fund its own costs associated with its internal development and certification efforts.  CODMAN shall fund its own costs associated with its participation in development and Government Registrations.    In providing any assistance during product development as contemplated hereunder of the Schedule G Generators, CODMAN shall give reasonable consideration to potential CMC III and Synergy generator part supply constraints, as information on such constraints is provided to CODMAN by Synergetics, as well as to its good faith intent to receive for commercial resale such new generators developed hereunder during the first year of the Term.

Joint Development Team.  Each of Synergetics and CODMAN will identify a primary contact person for coordination of communications between the Parties related to the product development projects.  Further, each Party will identify the appropriate, responsible persons to participate in, and make decisions with respect to the development projects.  Such persons will be members of a joint development team, which shall meet as often as mutually agreed between the Parties.  It is expected that the joint development team will be comprised of persons whose job functions include management of sales, marketing, quality engineering, manufacturing engineering, purchasing, customer service, and finance, as needed from either Party.  Team meetings may be conducted by conference call or in person.  It is expected that the location of in-person meetings will alternate between the primary location of Synergetics development effort in King of Prussia, Pennsylvania, and the CODMAN headquarters in Raynham, Massachusetts.

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Specifications and Timeline.  The Parties will agree on written product specifications, including a target transfer price, and on a detailed, written development project plan (with each of the various steps to be taken to complete development of the New Product) and timeline (having beginning and ending dates assigned to each step of the plan) – which for each of the Schedule G Generator projects shall be agreed prior to April 30, 2009.  The Parties will work diligently and in good faith to meet milestones (beginning and ending dates set in the timeline for each of the steps of the plan) set forth in each such project plan and timeline.  As soon as either Party reasonably believes a milestone may not be timely begun or completed, such Party will communicate the same to the other Party.  After such communication, the Parties will promptly meet to mutually agree on whether a revision to the specifications or plan or timeline is necessary and, if so, on such revision.

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EX-10.30

EXECUTION COPY

Exhibit 10.30

** Information marked as "[redacted**]" has been omitted pursuant to a request for confidential treatment and has been filed separately with the Securities and Exchange Commission.

AMENDMENT No. 1

AMENDMENT AGREEMENT, dated as of October 21, 2009 (the “First Amendment”), to the Product Development and Marketing Agreement, dated as of January 1, 2009 (the “Distribution Agreement”), between Codman & Shurtleff, Inc., having an address at 325 Paramount Drive, Raynham, MA 02767, a New Jersey corporation ("Codman"), and Synergetics USA, Inc., having an address at 3845 Corporate Centre Drive, O'Fallon, Missouri  63368, a Delaware corporation ("Synergetics" and together with Codman, the “Parties” and each, individually, a “Party”).

WHEREAS, Synergetics makes and sells a certain neurosurgical forceps under the brand name ‘Spetzler™-Malis®’ (as such product is further described on Exhibit A attached hereto, the “Spetzler-Malis Forceps” or the “Product”) that is not included within the scope of the Distribution Agreement and the Parties desire pursuant hereto to extend the scope of the Distribution Agreement to cover the Spetzler-Malis Forceps;

NOW, THEREFORE, in consideration of the mutual promises, covenants and agreements hereinafter set forth, the parties hereto agree as follows:

1. The Distribution Agreement is hereby amended to include the Spetzler-Malis Forceps as an “Exclusive Product” under Section 2.01(b) and the new defined term  “Spetzler-Malis Forceps” is hereby added to Article One as follows:

“Spetzler-Malis Forceps” means the Spetzler-Malis® bipolar forceps listed on Schedule A attached hereto.

2. Schedule A (Existing Products), Schedule D (Product Specifications) and Schedule E (Non-Binding Forecast) to the Distribution Agreement are hereby replaced with the corresponding Schedules attached hereto in order to reflect the Spetzler-Malis Forceps as an Exclusive Product and to set forth its pricing, order lead times and initial purchase forecast volumes.

3. Section 3.02 (Package Labeling) of the Distribution Agreement is hereby replaced with the following new Section 3.02:

“3.02  Packaging and Labeling.

(a)Unless otherwise agreed by the Parties, CODMAN shall be responsible for packaging the Existing Products, other than the Spetzler-Malis® Forceps, in finished package form.  Synergetics shall be responsible for packaging the Spetzler-Malis Forceps in finished package form in accordance with the packaging specifications set forth in Schedule D.

(b)For all Existing Products, Synergetics shall be responsible for the text, content and regulatory compliance of the labels on the package and the product, the labeling and product package inserts.   For purposes of this Agreement the terms “label” and “labeling” shall have the meanings set forth in Sections 201(k) and 201(m) respectively of the U.S. Federal Food, Drug and Cosmetics Act.  Synergetics shall provide the English version of all Existing Product labels to CODMAN.

Amendment No. 1 to Distribution Agreement

Exhibit 10.30

(c)Synergetics shall have the right to apply reasonable patent marking on the Existing Products indicating Synergetics’ Patents covering the Existing Products, as well as reasonable marking (i) on those products that Synergetics manufactures indicating such manufacture by Synergetics and (ii) that the Malis trademark (and in the case of the Spetzler-Malis Forceps, the Spetzler™ trademark) is used under license from Synergetics; provided, however that it is understood and agreed that this clause (c) shall be applied prospectively as new labeling is developed and existing Existing Product packaging inventories are drawn down.  For the avoidance of doubt, the parties agree that CODMAN is not required to repackage any Existing Products solely to comply with this clause (c).

(d)For all Existing Products other than the Spetzler-Malis® Forceps, CODMAN shall be responsible for copy format, artwork preparation, translations and production and all related costs for the labeling, including, but not limited to, translations and production shall be the responsibility of CODMAN.  With respect to the Spetzler-Malis® Forceps, Synergetics shall be responsible for copy format, artwork preparation, translations and production and all related costs for the labeling, including, but not limited to, translations and production, all in accordance with labeling specifications agreed between the Parties.”

4. Section 3.06(b) (Government Registrations) of the Distribution Agreement is hereby replaced with the following new Section 3.06(b):

“(b)         (i)   Synergetics shall apply for and maintain, in its name and at its cost, a CE-Mark (or any other required EU-wide Governmental Registration) for all Existing Products during the Term in the European Union and CODMAN shall apply for and maintain in its name and at its cost any other (i.e., national or local) Governmental Registrations in EU member states for CODMAN and/or its relevant affiliates to market all Existing Products during the Term in the European Union.

(ii)  If the Parties agree that CODMAN will be identified as the legal manufacturer on product label and labeling of an Existing Product in the European Union, CODMAN shall apply for and maintain, in its name and at its cost, an Own-Brand Label Government Registration required to market that Existing Product during the term in the European Union under the CODMAN name. 

(iii)  Synergetics shall apply for and maintain, in its name and at its cost all Governmental Registrations required for CODMAN to market all Existing Products during the Term in the United States.

(iv) CODMAN and/or its relevant affiliates shall apply for and maintain, in its name and at its cost, all Governmental Registrations required for CODMAN and/or its relevant affiliates to market all Existing Products during the Term in countries other than the United States or the European Union. 

(v)  Synergetics shall reasonably cooperate with CODMAN in its efforts to obtain any Governmental Registrations under clauses (ii) or (iv),above.

(vi)  Synergetics agrees that CODMAN shall have access, upon ten (10) days’ prior written notice, to all of Synergetics’ documents required to complete all Governmental Registrations for the Existing Products to the extent necessary to enable CODMAN to exercise its rights or fulfill its obligations hereunder.  Likewise, CODMAN agrees that Synergetics shall have access, upon ten (10) days’ prior written notice, to all of CODMAN’s non-confidential regulatory submissions for the Existing Products.”

5. Section 3.06(c) (EU Authorized Representative) of the Distribution Agreement is hereby deleted in its entirety.

Amendment No. 1 to Distribution Agreement

Exhibit 10.30

6. Section 4.07 (Medical Device Reports) of the Distribution Agreement is hereby replaced with the following new Section 4.07:

“4.07 Medical Device Reports.   The Parties agree to cooperate in good faith with respect to responding to or making any Medical Device Reports (“MDRs”) pertaining to the Existing Products.  Synergetics and CODMAN shall actively cooperate in investigating the circumstances underlying the Medical Device Report and in responding to FDA inquiries.   Synergetics shall file any necessary manufacturer MDRs for all complaints that are found to meet the definition of MDR reportable events (as defined in 21 CFR, Part 803); provided that (i) with respect to Disposable Products (other than the Spetzler-Malis Forceps), CODMAN shall file any necessary manufacturer MDRs for all complaints that are found to meet the definition of MDR reportable events (as defined in 21 CFR, Part 803) and (ii) with respect to Spetzler-Malis Forceps, (A) CODMAN will provide timely  notification to Synergetics of any product complaints it receives, (B) Synergetics will be responsible to investigate all complaints received and to make MDR reporting determinations and filings as required under Part 803, (C) Synergetics will provide to CODMAN a copy of the completed investigation files as well as copies of any MDRs submitted within 60 days of receipt of the complaint information.”

7. A new Section 3.09 (Samples) shall be added to the Distribution Agreement as follows:

“3.09Samples.   Synergetics shall provide to CODMAN unpackaged, non-sterile Spetzler-Malis Forceps samples (“Forceps Samples”) in such quantities as CODMAN may reasonably request, up to but not in excess of 100 forceps annually, in support of its distribution activities under this Agreement, subject to the lead times and shipping terms otherwise applicable to the supply of finished product.  The price to CODMAN of the Forceps Samples shall be seventy percent (70%) of the then-current transfer price to CODMAN of the Spetzler-Malis Forceps.”

8. Consistent with the provisions of Section 3.06(a) of the Distribution Agreement, Synergetics agrees to achieve compliance with IEC 60601-2-2:2006; 4^th Edition (Particular Requirements for the Safety of High Frequency Surgical Equipment) prior to December 1, 2009, in order to enable commercial sales of the Spetzler-Malis Forceps in the European Union.

9. The Product Specifications referenced in Schedule D attached hereto include specifications for outer packaging that reflects CODMAN as exclusive distributor.  The Parties agree, however, that until March 31, 2010, Synergetics may supply Spetzler-Malis Forceps to CODMAN in the existing outer packaging for such products as used by Synergetics on the date hereof, provided that Synergetics uses only inventory of such packaging that (i) is already in existence as of the date hereof and (ii) meets Synergetics’ own specifications as of the date hereof for such packaging.

10. CODMAN acknowledges that the price reductions for the Spetzler-Malis Forceps, effective on January 1 , 2010, and thereafter, as described on Schedule A attached hereto, assume the implementation of certain cost-savings measures by Synergetics that may require one or more changes to the Product Specification which have not yet been reviewed or approved by CODMAN.   In the event that CODMAN does not agree to any such Product Specification change, the Parties agree to renegotiate in good faith what, if any, reduction in the price would be effective on and after January 1, 2010.

11. Synergetics has licensed certain trademarks under a License Agreement, dated February 20, 1998, with Robert F. Spetzler, M.D. (the “Spetzler License Agreement”).  Synergetics hereby sublicenses to CODMAN its rights to the Licensed Marks (as defined in the Spetzler License Agreement) and Codman accepts such sublicense and agrees to abide by the terms and conditions of such license set forth in the Spetzler License Agreement.  The Malis trademark shall be used by Codman under the Trademark License Agreement between the Parties dated January 1, 2009, which shall be and is hereby amended to include the Spetzler-Malis Forceps in Schedule Aattached thereto.

Amendment No. 1 to Distribution Agreement

Exhibit 10.30

12. Miscellaneous Provisions.

a. Effectiveness.  CODMAN’s distribution rights under this Amendment shall become effective upon, and CODMAN shall commence commercial sales of the Spetzler-Malis Forceps on, December 1, 2009 in the United States (the “US Effective Date”) and on the date that is the later of February 1, 2010, or three (3) months after the date hereof outside the U.S (the “Ex-US Effective Date”); provided that CODMAN shall have no distribution rights in Italy until the date that is the later of February 15, 2010, or four (4) months after the date hereof.

b. General Representation and Warranty.  Each Party represents and warrants to the other that the execution and delivery of this Amendment and the performance of the obligations contemplated hereunder do not violate any law, rule or regulation or order, judgment or decree binding upon the representing Party and will not result in a breach of any term of the certificate of incorporation or by-laws of the representing Party or of any contract, agreement or other instrument to which it is a party.

c. Conduct of Business Pending Effectiveness.  Other than as necessary to comply with its obligations under this Amendment or as the Parties may otherwise agree in writing, between the date of this Amendment and the US Effective Date and Ex-US Effective Date, Synergetics shall (i) conduct its Spetzler-Malis Forceps business in the ordinary course consistent with its past practice, and (ii) not materially accelerate or delay any Spetzler-Malis Forceps sales or make any material payments, discount activity or any other consideration to distributors or customers other than in the ordinary course of business consistent with its past practice and (iii) not sell into the trade inventory materially in excess of those amounts which are required to maintain reasonable levels of trade inventory of Spetzler-Malis Forceps consistent with past practices.

d. Governing Law. The Amendment shall be governed by and construed in accordance with the laws of the State of New Jersey, without giving effect to the choice of law provisions thereof.

e. Counterparts.  This Amendment may be executed in one or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.

(signature page follows)

Amendment No. 1 to Distribution Agreement

Exhibit 10.30

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their duly authorized respective representatives as of the day and year first above written.

CODMAN & SHURTLEFF, INC.
By:	/s/ P. Laxminarain
Name:	Prattipati Laxminarain
Title:	President
SYNERGETICS, INC.
By:	/s/ David Hable
Name:	David Hable
Title:	President and Chief Executive Officer

Amendment No. 1 to Distribution Agreement

Exhibit 10.30

Exhibit A to Amendment No. 1

SCHEDULE A

EXISTING PRODUCTS

[Redacted** (3 pages)]

** Information marked as "[redacted**]" has been omitted pursuant to a request for confidential treatment and has been filed separately with the Securities and Exchange Commission.

Amendment No. 1 to Distribution Agreement

Exhibit 10.30

Exhibit B to Amendment No. 1

SCHEDULE D

PRODUCT SPECIFICATIONS

[Redacted** (3 pages)]

** Information marked as "[redacted**]" has been omitted pursuant to a request for confidential treatment and has been filed separately with the Securities and Exchange Commission.

Amendment No. 1 to Distribution Agreement

Exhibit 10.30

Exhibit C to Amendment No. 1

SCHEDULE E

NON-BINDING FORECAST

[Redacted** (2 pages)]

** Information marked as "[redacted**]" has been omitted pursuant to a request for confidential treatment and has been filed separately with the Securities and Exchange Commission.

Amendment No. 1 to Distribution Agreement

EX-10.31

EXECUTION COPY

Exhibit 10.31

** Information marked as "[redacted**]" has been omitted pursuant to a request for confidential treatment and has been filed separately with the Securities and Exchange Commission.

TRADEMARK LICENSE AGREEMENT

THIS TRADEMARK LICENSE AGREEMENT (“Agreement”) is made effective as of January 1, 2009 (“Effective Date”) by and between Synergetics IP, Inc., a Delaware corporation having a place of business at 3845 Corporate Centre Drive, O’Fallon, MO 63368 (“Licensor”), and Codman & Shurtleff, Inc., a Massachusetts corporation having a place of business at 325 Paramount Drive, Rayham, MA 08767 (“Licensee”) (collectively, the “Parties”).

WHEREAS, Licensee develops, manufactures and markets medical instruments, implants and accessories in the field of neurocranial and neurospinal surgery, including instruments marketed under the MALIS trademark pursuant to that certain Trademark License Agreement dated January 1, 2006, between the PartiesWHEREAS, Licensor is the current owner of the MALIS Trademark;

WHEREAS, simultaneously with the execution of this Agreement, the parent company of Licensor, Synergetics USA, Inc. (“Parent”), and Licensee are entering into that certain Product Development and Marketing Agreement, dated even date herewith, providing for, among other things, the distribution by Licensee in the Fields (as defined below) of certain products manufactured by Parent (the “Distribution Agreement”);

WHEREAS, Licensee wishes to obtain, and Licensor wishes to grant to Licensee, a license to use the MALIS trademark in connection with the advertising, use and sale in the Fields of certain products in addition to those products covered by the Distribution Agreement;

NOW THEREFORE, in consideration of the mutual covenants and obligations contained herein, the Parties agree as follows:

1. Definition of Trademarks.  As used in this Agreement, “Trademarks” shall mean the registered word mark, MALIS, as described and defined in U.S. Registrations No. 873,123 and 1,644,328 and all trademark applications and resulting registrations based thereon throughout the world.

2. Grant of License.  Subject to the terms and conditions of this Agreement, Licensor hereby grants to Licensee and Licensee hereby accepts, a sole (i.e., no additional licensees), non-transferable license for the term of this Agreement to use the Trademarks and associated goodwill with respect to the advertising, use and sale of the specific products set forth in Schedule A, attached hereto and incorporated herein by reference (the “Products”) along with any MALIS-marked products added from time to time to the Existing Products of Schedule A of the Distribution Agreement by mutual consent of the Parties, in the fields of neurocranial and neurospinal surgery (the “Fields”) to the extent of Licensor’s rights throughout the world.  Licensor retains for itself and its affiliates the right to use the Trademarks in the Fields throughout the world, both directly, and indirectly through its resellers.  Notwithstanding the foregoing, in the event that Licensee elects pursuant to Section 2.01(c) or Section 3.08 of the Distribution Agreement to directly or indirectly offer to sell a competing product in the manner specified in such sections of the Distribution Agreement such that all Exclusive Products cease to be “exclusive” and become “nonexclusive” under the terms of the Distribution Agreement, the sole license granted herein shall simultaneously become non-exclusive, such that Licensor shall be free to grant licenses to third parties to use the Trademarks for uses similar or identical to the licensed use.  By mutual written agreement the parties may extend the license to cover other products not specifically listed in Schedule A.  The license does not include the right to grant sublicenses or to otherwise permit others to use the Trademarks, except that Licensee may contract with appropriate manufacturers and distributors of Products to manufacture, market, promote, advertise and sell such products.  Any action inconsistent with the terms of this Agreement by a manufacturer or distributor doing business with Licensee and authorized to imprint the Trademarks or apply tags or labels containing the Trademarks or otherwise mark product with the Trademarks will constitute a default by Licensee subject to the terms set forth in Section 9.1 below.  Licensor retains all rights not expressly licensed under this Agreement.

3. Use of Trademarks.  Use of the Trademarks by Licensee is and will be subject to the following terms and restrictions:

3.1 Licensee will conduct all of its activities hereunder and in the Distribution Agreement in compliance with all applicable local, state and national laws and administrative regulations.

3.2 Licensee will use the Trademarks and will conduct business only in a manner that in Licensor’s reasonable discretion reflects and promotes the positive image of the Licensor and Parent.  For purposes of the foregoing, Licensee’s continuation of its business and the use of the Trademarks in a manner consistent with its past practices shall be deemed to reflect and promote the positive image of the Licensor and Parent.

3.3 Licensee shall not make any statements, representations or warranties or accept any liabilities or responsibilities whatsoever to or with regard to any person or entity which are inconsistent with this Agreement.

3.4 Each Product must prominently bear one or more of the Trademarks, where practicable, and Licensee agrees to use the Trademarks prominently in conjunction with the advertising, use and sale of Products.  Nothing herein shall preclude Licensee from use or display of its own name or trademarks in conjunction with the advertising, use and sale of Products under this Agreement except that Licensee shall observe the brand standard guidelines established by previous practice.

3.5 Licensee shall not use the Trademarks for any purpose other than for the licensed purpose as set forth in this Agreement.

4. Royalty.  Licensee shall pay quarterly to Licensor a royalty that is equivalent to the below stated percentage of its Net Proceeds from Sales of Products sold during such quarter pursuant to the license granted herein.

4.1 The royalty rate for Products set forth on Schedule A shall be [redacted**] unless and until Licensee exercises the Exclusivity Option of Section 2.02 of the Distribution Agreement, after which the royalty rate for electrosurgical generators sold exclusively by Licensee thereunder shall be [redacted**].

4.2 Royalties shall be calculated and paid quarterly for all Products sold during each Licensee fiscal quarter, Royalties shall be payable immediately at the end of such fiscal quarter, and are due to be received by Licensee within forty-five (45) calendar days following the end of each Licensee fiscal quarter for all sales made during such Licensee fiscal quarter.  In the event such royalty payments are not paid when due, Licensee shall be obligated to pay to Licensor interest on the total amount past due (including accrued interest) at a rate of one percent (1%) per month or portion thereof that said payment is late.

4.3 It is understood that on sales by Licensee to its sublicensees or affiliatedcompanies of a particular Product, royalties shall be paid on such sales on theaverage United States Net Proceeds from Sales for that instrument in the quarterlyperiod in which the sale is made regardless of the actual price at which the instrument is sold to an affiliated company or sublicense or to the ultimate user of the instrument.  Licensee will pay only a single royalty per device sold by Licensee or its sublicensees or affiliates.

4.4 For purposes of this Agreement, “Net Proceeds from Sales” shall meanLicensee’s billing price of Products, less discounts allowed, credits for claims orallowances, returns, and less taxes or other government charges added to the faceof the invoice and paid by Licensee.

4.5 Licensee shall keep true books of account containing an accurate and complete record of all data necessary for the computation of royalties payable to Licensor hereunder.  Licensor shall, at its own expense, have the right to nominate an independent certified public accountant who shall have access, during reasonable business hours, but no more than once per year, to such of Licensee’s records as are necessary to verify the accuracy of the royalty payments made under this license.  If in an audit of Licensee’s records it is determined, and not disputed, that there is a shortfall in royalties reported for any reporting period under this Agreement, Licensee shall, upon request by Licensor, pay such shortfall (with interest as described in Section 4.2) within ten (10) business days and, if the shortfall is three percent (3%) or more in royalties reported for the audited period, Licensee shall also reimburse Licensor for the reasonable out-of-pocket costs of the audit.

** Information marked as "[redacted**]" has been omitted pursuant to a request for confidential treatment and has been filed separately with the Securities and Exchange Commission.

5. Ownership Rights.  Licensee acknowledges Licensor’s exclusive right, title and interest in and to the Trademarks.  Licensee will not do or cause to be done any act or thing which contests or in any way impairs or tends to impair any part of such right, title and interest, or any other right of Licensor in the word mark MALIS anywhere around the world.  Upon termination of this Agreement, Licensee will cease and desist from all use of the Trademarks.  Licensee will at no time during or after the term of this Agreement adopt or use any word or mark that is confusingly similar to the Trademarks with respect to any business activity except as specifically permitted in this Agreement.  Licensee acknowledges and agrees that all goodwill relating to the Trademarks and all uses of the word mark MALIS by Licensee shall inure to the benefit of Licensor.

6. Trademarks Notices and Registrations.   Where requested by Licensor, Licensee shall cause to be placed adjacent to all use of the Trademarks the letter R in a circle (®).  Upon request, Licensee will provide Licensor with reasonable documentation to support trademark application, registration, and renewal requirements .

7. Quality Control.  Licensee shall use the Trademarks only on Products that shall be produced by or on behalf of Licensee in accordance with the standards and specifications originating with and/or approved by Licensor.  It is agreed that the standards and specifications presently employed for instruments currently distributed by Licensee in association with the Trademarks shall be deemed the standards and specifications of Licensor for such instruments under this Agreement.  With respect to any new instrument intended for distribution in association with the Trademarks under this Agreement that has been approved in writing by Licensee, Licensee shall use the Trademarks in a manner compatible with the quality control procedures established by Licensor from time-to-time.  Such procedures may include preapproval of advertising and/or other materials displaying the Trademarks.  In the absence of such procedures, Licensee agrees to provide Licensor on or prior to each anniversary date of this Agreement with the opportunity to inspect representative samples showing Licensee’s use of the Trademarks.  Licensee agrees to promptly modify all uses of the Trademarks that are not, in Licensor’s sole discretion, compatible with the quality control procedures established by Licensor.

8. Inspections.   Licensor may, from time-to-time, but no more than once per year and upon reasonable written notice to Licensee, send representatives to Licensee’s place of business to inspect Licensee’s records and facilities and to confirm Licensee’s compliance with the provisions of this Agreement.  Licensee shall cooperate reasonably with Licensor and its representatives with respect to such inspections.  Licensor shall bear the cost of all such inspections.

9. Term and Termination.   The term of this Agreement shall commence on the Effective Date hereof and shall continue for a term of three (3) years unless terminated as set out below.  This Agreement shall automatically renew for three years, beginning January 1, 2012, and ending December 31, 2014, unless or until terminated as set out below.

9.1 Licensor may terminate this Agreement without prejudice to any rights under this Agreement, in law, in equity, or otherwise if Licensee breaches any of its material obligations in this Agreement (hereinafter called “defaults”).  If any defaults occur, Licensor may give notice to Licensee of termination.  Licensee shall have 30 days in which to correct all outstanding defaults, and failing such, this Agreement shall terminate.

9.2 Licensor may terminate this Agreement immediately upon termination of the Distribution Agreement or at any time thereafter.

9.3 Either party may terminate this Agreement on written notice to the other upon appointment of a receiver of the other, or upon the making by the other of an assignment for the benefit of creditors, or upon the institution of proceedings for a reorganization of the other under any bankruptcy laws.

9.4 Any termination of this Agreement shall not operate to relieve Licensee of its obligation to pay all unpaid earned royalties provided under this Agreement.  Licensee shall have the right to sell, at any time after the effective date of termination (unless such termination is as a result of Licensee’s default hereunder), any Products authorized to be sold under this Agreement that are in inventory or are being manufactured on the effective date of termination, subject only to the obligations of Articles 4, 6, 7 and 8.

9.5 Sections 4, 5, 10, 12, 21, and 22 shall survive termination of this Agreement.

10.  Indemnification.

10.1 Licensor hereby agrees to indemnify, defend and hold Licensee harmless from any and all losses, liabilities, damages, costs and expenses (including reasonable attorneys fees and costs) arising out of any claims, demands, actions, suits or judgments that may be brought or made against Licensee by a third party alleging that Licensee’s use of the Trademarks as authorized hereunder infringes upon the trademark rights of said third party.

10.2 Licensee hereby agrees to indemnify, defend and hold Licensor harmless from any and all losses, liabilities, damages, costs and expenses (including reasonable attorneys fees and costs) arising out of any claims, demands, actions, suits or judgments that may be brought or made against Licensor by a third party due to any improper or unauthorized use of the Trademarks, or arising in any way from the existence, manufacture, advertising, marketing, sale, distribution or use of the Products, except as would nullify Licensor’s indemnity of Licensee in Section 10.1, or as would nullify Licensor’s warranty under the Distribution Agreement.

10.3 For purposes of this Section 10, a reference to either party includes that party’s elected officials, employees, and agents.

11. Use of the Licensor’s Name and Trademarks.  Either party shall not, without the prior written consent of the other, in any advertising or other promotional materials to be disseminated to the public: (a) refer to the other party or use the name of the other party in a manner suggesting or inferring a connection, affiliation or sponsorship with the other party; or (b) use the name or likeness of any elected official or employee of the other party, or any trademark, service mark, trade name, or symbol owned by or associated with the other party, other than the Trademarks.

12. Representations and Warranties.

12.1 Each party represents and warrants to the other that the entering into of this Agreement by such party, and the consummation by it of the matters contemplated hereby, does not and shall not violate any agreement with or obligation under (whether express, implied or by operation of law) any other person, company or entity to which it is a party or subject, and that this Agreement is binding upon it pursuant to the laws of its domicile.

12.2 Licensor represents and warrants to Licensee that it has good and valid title to the Trademarks, free and clear of all liens and encumbrances except for that security interest granted to the Estate of Leonard I. Malis pursuant to that Security Agreement dated October 12, 2005.

13. Third Party Infringement.  If Licensee learns of the infringement or alleged infringement of the Trademarks by a third party, the Licensee shall promptly notify Licensor with respect thereto.  Licensor shall have sole right to bring any action with respect to such infringement or alleged infringement; provided, however, that Licensor shall not be required to bring any action or otherwise take any action with respect to such infringement or alleged infringement.

14. Notices.  All notices, approvals, consents and other communications under this Agreement shall be deemed to have been fully given when done in writing, with reference to this Agreement, and when (i) delivered personally; (ii) sent by confirmed email or facsimile; (iii) five days after having been sent by United States mail, registered or certified, return receipt requested, postage prepaid; or (iv) one day after deposit with a commercial overnight carrier, with written verification of receipt.  All communications will be sent to the address set forth in the first paragraph of this Agreement or to such other address as may be designated by a party by giving written notice to the other party.

15. No Agency or Partnership.  The relationship between the parties is that of independent contractors.  Neither party shall be deemed to be an agent of the other.  This Agreement does not and shall not be construed to constitute a partnership or joint venture between Licensor and Licensee.  Neither party may obligate or bind the other party, and no third party is granted rights hereunder.

16. Assignment.  This Agreement is personal to Licensee, except that Licensee may transfer this Agreement and its rights to an affiliate company or though a sale of the assets related to the Products.  Neither this Agreement nor any of the rights of Licensee hereunder shall be sold, transferred or assigned by Licensee by operation of law or otherwise, without the prior consent of the Licensor.  Licensor may assign this Agreement.  The covenants, terms and provisions of this Agreement shall be binding upon and inure to the benefit of the parties and their respective permitted successors and assigns.

17. Entire Agreement; Amendments.  This Agreement contains the entire understanding of the parties with respect to the matter contained herein.  The parties may, from time to time during the continuance of this Agreement, modify, vary or alter any of the provisions of this Agreement, but only by an instrument duly executed by authorized representatives of both parties hereto.

18. Waiver.  No waiver by either party of any breach of this Agreement, no matter how long continuing or how often repeated, shall be deemed a waiver of any subsequent breach thereof, nor shall any delay or omission on the part of either party to exercise any right, power, or privilege hereunder be deemed a waiver of such right, power or privilege.

19. Invalidity.  In the event that any term, provision, or covenant of this Agreement shall be determined by a court of competent jurisdiction to be invalid, illegal or unenforceable, that term will be curtailed, limited or deleted, but only to the extent necessary to remove such invalidity, illegality or unenforceability, and the remaining terms, provisions and covenants shall not in any way be affected or impaired thereby.

20. Rights and Remedies Cumulative.   The rights and remedies under this Agreement are cumulative and in addition to any other remedies at law or in equity.

21. Applicable Law.  This Agreement, and the application or interpretation hereof, shall be governed by Missouri law without giving effect to its choice of law provisions.

22. Further Assurances.  The parties agree to fully cooperate and execute any documents to effectuate or perfect the transactions and matters set forth herein.

23. Counterparts.  This Agreement may be executed in counterparts, each of which shall be deemed an original but all of which shall constitute one and the same instrument.

IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first above written.

SYNERGETICS IP, INC.		CODMAN & SHURTLEFF, INC.
By:	/s/ Robert H. Dick	By:	/s/ P. Laxminarain
	Robert H. Dick, Chairman of the Board		P. Laxminarain, Worldwide President

Schedule A

[Redacted** (7 pages)]

** Information marked as "[redacted**]" has been omitted pursuant to a request for confidential treatment and has been filed separately with the Securities and Exchange Commission.

EX-10.47

Exhibit 10.46

TENTH AMENDMENT TO CREDIT AND SECURITY AGREEMENT

This Tenth Amendment to Credit and Security Agreement (this “Agreement”) is entered into and is dated as of September __, 2013, by and among Synergetics, Inc. and Synergetics USA, Inc., jointly and severally (the “Borrowers” and each individually a “Borrower”) and Regions Bank (the “Lender”).

RECITALS

A.Lender and Borrowers entered into a Credit and Security Agreement dated as of March 13, 2006 (as amended, modified, restated or replaced from time to time, the “Loan Agreement”).

B.Borrowers and Lenders desire to amend the Loan Agreement as hereinafter provided.

AGREEMENT

NOW, THEREFORE, in consideration of the foregoing and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Lender and Borrowers agree as follows:

1.Defined Terms.  Each term used herein without definition shall have the same meaning as set forth in the Loan Agreement.

2.Effectivenessof Agreement.   This Agreement shall become effective as of the date first written above, but only if this Agreement has been executed by Borrower and Lender, and if the other items listed on Exhibit A attached hereto, if any, have been delivered and, as applicable, executed, sealed, attested, acknowledged, certified, or authenticated, each in form and substance satisfactory to Lender.

3.Amendments.  The Loan Agreement is hereby amended as follows

3.1.Section 1.2, “Primary Definitions,” is hereby amended by adding the following definition:

““Total Funded Debt” means without duplication, all Indebtedness of the Borrowers and their subsidiaries, determined on a consolidated basis, excluding trade payables.”

3.2.Section 1.2, “Primary Definitions,” is hereby amended by deleting the definition of “Tangible Net Worth”.

3.3.Section 1.2, "Primary Definitions," is hereby amended by modifying the following definitions:

““Applicable Percentage” means the percentage value of the Applicable LIBOR Rate Margin and the Unused Line Fee set forth in the table below with respect to each Leverage Ratio level identified in the first column of each row:

If the Leverage Ratio as of the last day of the prior fiscal quarter is:	The Applicable LIBOR Rate Margin is:			The Applicable Prime Rate Margin is:			The Unused Line Fee (see Section 2.17(b)) is:
Less than to 1.00		1.75	%		0.00	%		0.200	%
Greater than or equal to 1.00		2.00	%		0.00	%		0.250	%”

““Equipment Purchase Loan Maturity Date" means September __, 2016.”

““Fixed Charge Coverage Ratio” means EBITDA minus unfinanced Capital Expenditures and cash taxes paid divided by Current Maturities of Long Term Debt plus interest expense plus distributions (including dividend distributions).”

““Notes” means the 2008 Amended and Restated Revolving Note, and the 2008 Equipment Purchase Note, as any such note may be further amended, modified, restated or replaced from time to time.”

““Leverage Ratio” means Total Funded Debt divided by EBITDA.”

““Termination Date" means September __, 2016.”

3.4.2008 Equipment Purchase Loan.  Subsection 2.1B is hereby deleted in its entirety and replaced with the following:

“Section 2.1B  2008 Equipment Purchase Loan.  The Lender agrees, on the terms and subject to the conditions herein set forth, to make an equipment purchase loan (“2008 Equipment Purchase Loan”) and, pursuant thereto, to make advances thereunder from time to time through the date that is the earlier of (a) the date on which the aggregate of such advances total $1,000,000 or (b) the Equipment Purchase Loan Maturity Date, for the purpose of purchasing machinery and equipment.  The 2008 Equipment Purchase Loan shall be secured by the Collateral as provided in Article III hereof.  Borrowers will furnish Lender such documents and information as Lender may reasonably require in connection with each request for an advance hereunder.  Repayments of principal under the 2008 Equipment Purchase Loan will not be readvanced.  Each advance of the 2008 Equipment Purchase Loan shall be in amounts no greater than 80% of the actual net invoice amount of each item of equipment.  Following an advance on the 2008 Equipment Purchase Loan, the Borrower shall begin to repay each advance on the first day of the first calendar month following the 90^th day after such advance, with each such advance being repaid based on a 36 month amortization, and together with accrued but unpaid interest thereon.  The 2008 Equipment Purchase Loan shall be evidenced by, and repayable with interest in accordance with, a 2008 Equipment Purchase Note (as amended, modified, restated or replaced from time to time, the “2008 Equipment Purchase Note”), under which the principal thereof shall be payable on the Equipment Purchase Loan Maturity Date.  The 2008 Equipment Purchase Loan shall bear interest as provided in Section 2.8(o) hereof.”

2

3.5.Notes; Obligations Joint and Several.  Section 2.2 is hereby deleted in its entirety and replaced with the following:

“Section 2.2 Notes; Obligations Joint and Several.  All Advances made by the Lender under Section 2.1 hereof shall be evidenced by, and repayable with interest in accordance with, the 2008 Amended and Restated Revolving Note.  The principal of the Revolving Note shall be payable as provided herein and on the earlier of the Termination bate or acceleration by the Lender pursuant to Section 8.2 hereof, and shall bear interest as provided in Section 2.9 hereof.  The 2008 Term Loan has been repaid in full.  The 2008 Equipment Purchase Loan shall be evidenced by, and repayable with interest in accordance with, the 2008 Equipment Purchase Note, under which the principal thereof shall be payable as set forth therein.  All Obligations of Borrowers are their joint and several obligations.”

3.6.2008 Equipment Purchase Loan Interest rate.  Subsection 2.8(o) is deleted in its entirety and replaced with the following:

“(o) The outstanding principal amount from time to time of the 2008 Equipment Purchase Note shall bear interest at the same interest rates as the Revolving Credit Loans.  Interest shall be due on the first day of each calendar month during which any amounts are outstanding under the 2008 Equipment Term Loan.”

3.7.Reporting Requirements—Quarterly Financial Statements and Agings.  Subsections (b) and (c) to Section 6.1 are is hereby amended to read as follows in its entirety

“(b)as soon as available and in any event within 45 days after the end of each fiscal quarter, an unaudited/internal balance sheet and statements of income and retained earnings of the Borrowers as at the end of and for such fiscal quarter and for the fiscal year to date period then ended, prepared on a consolidating and consolidated basis, in reasonable detail and stating in comparative form the figures for the corresponding date and periods in the previous fiscal year, all prepared in accordance with GAAP; and accompanied by a certificate of the chief financial officer of the Borrowers, on the terms requested by Lender, stating (i) that such financial statements have been prepared in accordance with GAAP, (ii) whether or not such officer has knowledge of the occurrence of any Default or Event of Default hereunder not theretofore reported and remedied and, if so, stating in reasonable detail the facts with respect thereto, (iii) whether or not any Borrower has changed (a) its corporate name; (b) the location of its chief executive office; (c) the location where the books and records relating to Accounts are located; or (d) its identity or structure (whether by merger, consolidation, acquisition, change in form, nature or jurisdiction of organization, or otherwise) or has conducted business or owned any property under any name or conducted business or stored Equipment, Eligible Inventory or other property at any address not theretofore reported to the Lender and, if so, setting forth in reasonable detail the facts with respect thereto, and (iv) all relevant facts in reasonable detail to evidence, and the computations as to, whether or not the Borrowers are in compliance with the requirements set forth in Section 6.10 and Section 6.11 hereof on the form attached hereto as Exhibit C;”

“(c)Intentionally Omitted;”

3.8.Borrowing Base.  Subsection (d) to Section 6.1 is hereby amended to read as follows in its entirety

3

“(d) Intentionally Omitted;”

3.9.Fixed Charge Coverage Ratio.  Section 6.10 of the Loan Agreement is deleted in its entirety and replaced with the following:

“Section 6.10.Minimum Fixed Charge Coverage Ratio.  Borrowers shall, as of the end of each fiscal quarter, beginning with the fiscal quarter ending October 31, 2013, maintain a Fixed Charge Coverage Ratio for the four fiscal quarters then ended of not less than the 1.25 to 1.00.”

3.10.Leverage Ratio.  Section 6.11 of the Loan Agreement is deleted in its entirety and replaced with the following:

“Section 6.11.Maximum Leverage Ratio.  The Borrowers shall not, as of the end of each fiscal quarter, beginning with the fiscal quarter ending October 31, 2013, allow, permit or have their Leverage Ratio to be greater than 2.25 to 1.00.”

3.11.Exhibit C to Loan Agreement.  Exhibit C - Form of Compliance Certificate to the Loan Agreement is deleted in its entirety and replaced with the Exhibit C attached hereto.

4.           Representations and Warranties.  Borrowers hereby jointly and severally covenant, represent and warrant to Lender as follows:

4.1.This Agreement, the Loan Agreement and each other Loan Document have been duly and validly executed by each Borrower and constitutes the legal, valid and binding obligation of each Borrower enforceable against each Borrower in accordance with its terms.  No consents are necessary from any third parties for the Borrowers’ execution, delivery or performance of this Agreement, the Loan Agreement or any other Loan Document.  The Loan Agreement and each of the other Loan Documents remain in full force and effect and remain the valid and binding obligation of each Borrower enforceable against each Borrower in accordance with its terms.  Each Borrower hereby ratifies and confirms the Loan Agreement and each other Loan Document.

4.2.After giving effect to this Agreement, no default or Event of Default has occurred or now exists under the Loan Agreement and no default or Event of Default will occur as a result of the effectiveness of this Agreement.

4.3.    The representations and warranties of each Borrower contained in the Loan Agreement and the other Loan Documents are true and correct in all material respects on and as of the date hereof (except to the extent that any such representation and warranty is qualified by materiality, material adverse effect or a similar standard in which case such representation and warranty shall be true and correct in all respects on and as of the date hereof).

5.Release.  IN CONSIDERATION OF THE CONSENTS OF THE LENDER CONTAINED HEREIN, EACH BORROWER HEREBY RELEASES, DISCHARGES AND ACQUITS FOREVER LENDER AND ANY OF ITS OFFICERS, DIRECTORS, SERVANTS, AGENTS, EMPLOYEES AND ATTORNEYS, PAST AND PRESENT, FROM ANY AND ALL CLAIMS, DEMANDS AND CAUSES OF ACTION, OF WHATEVER NATURE, WHETHER IN CONTRACT OR TORT, ACCRUED OR TO ACCRUE, CONTINGENT OR VESTED, KNOWN OR UNKNOWN, ARISING OUT OF OR RELATING TO THE LOANS EVIDENCED BY THE LOAN AGREEMENT, LENDER’S ADMINISTRATION OF THE LOANS, THE LOAN AGREEMENT AND THE OTHER LOAN DOCUMENTS, AND ANY OTHER ACTIONS TAKEN PURSUANT TO OR IN CONNECTION WITH THE LOAN AGREEMENT AND THE OTHER LOAN DOCUMENTS; PROVIDED, HOWEVER, THAT THE FOREGOING RELEASE AND THE FOLLOWING INDEMNITY RELATE ONLY TO ACTIONS OR INACTIONS OF LENDER THROUGH THE DATE HEREOF.  EACH BORROWER HEREBY FURTHER INDEMNIFIES AND HOLDS LENDER, AND ALL OFFICERS, DIRECTORS, SERVANTS, AGENTS, EMPLOYEES AND ATTORNEYS OF LENDER, PAST OR PRESENT, HARMLESS FROM ANY AND ALL SUCH CLAIMS, DEMANDS AND CAUSES OF ACTION BY BORROWERS, OR ANYONE CLAIMING BY, THROUGH OR UNDER BORROWERS, SAID INDEMNITY TO COVER ALL LOSSES, EXPENSES INCURRED BY LENDER, ITS OFFICERS, DIRECTORS, SERVANTS, AGENTS, EMPLOYEES OR ATTORNEYS, PAST OR PRESENT, IN CONNECTION WITH ANY SUCH CLAIMS, DEMANDS, OR CAUSE OF ACTION, INCLUDING ALL ATTORNEYS’ FEES AND COSTS.

4

6.Payment of Costs/Expenses.  Without limiting the generality of provisions in the Loan Agreement relating to payment of Lender’s costs and expenses, Borrowers will pay all reasonable out-of-pocket expenses, costs and charges of attorneys to Lender in connection with the preparation and implementation of this Agreement.

7.Other Documents/Provisions to Remain in Force.  The Loan Agreement and each of the other Loan Documents and all indebtedness incurred pursuant thereto, shall remain in full force and effect and are in all respects hereby ratified and affirmed.  Borrowers have no defenses to their obligations under the Loan Agreement and the other Loan Documents, and the Obligations are due and owing to Lender without setoff or counterclaim.  The Security Interests of Lender under the Loan Agreement and the other Loan Documents secure all the Obligations, are reaffirmed in all respects, continue in full force and effect, have the same priority as before this Agreement, and are not impaired or extinguished in any respect by this Agreement.  This Agreement does not create or constitute, and is not, a novation of the Loan Agreement and the other Loan Documents, and Borrowers hereby ratify and confirm the Obligations.  Until the Obligations are paid in full in cash and all obligations and liabilities of Borrower under this Loan Agreement and the Loan Documents are performed and paid in full in cash, Borrower agrees and covenants that they are respectively bound by the covenants and agreements set forth in the Loan Agreement, the other Loan Documents and in this Agreement.  Borrowers have no claim against Lender arising from or in connection with the Loan Agreement or the other Loan Documents.

8.Successors and Assigns.  Subject to any restriction on assignment by the Borrowers set forth in the Loan Agreement, this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns.

9.Section Titles; Recitals.  The Section titles in this Agreement are for convenience of reference only and shall not be construed so as to modify any provisions of this Agreement.  The Recitals to this Agreement are substantive in nature and are incorporated herein.

10.Counterparts.  This Agreement may be executed m any number of counterparts, each of which shall constitute one and the same Agreement.  Signatures to this Agreement may be given by facsimile, PDF format or other electronic transmission, and such signatures shall be fully binding on the party sending the same.

11.Incorporation by Reference; Governing Law.  The Loan Agreement and all exhibits thereto, and the exhibits to this Agreement are incorporated herein by this reference.  This Agreement shall be governed by the laws of the State of Missouri without reference to conflicts of law principles thereunder.

12.Customer Identification - USA PATRIOT Act Notice. Lender hereby notifies each of the Borrowers that, pursuant to the requirements of the USA Patriot Act, Title III of Pub. L. 107-56, signed into law October 26, 2001 (as amended from time to time (including any successor statute) and together with all rules promulgated thereunder, collectively, the “Act”), it is required to obtain, verify and record information that identifies the Borrowers and each other Person liable on or with respect to the Obligations, which information includes the name and address of the Borrowers and each such other Person and other information that will allow Lender to identify the Borrowers and each such other Person in accordance with the Act.

5

13.Notice-Oral Commitments Not Enforceable.  The following notice is given pursuant to Section 432.045 and Section 432.047 of the Missouri Revised Statutes; nothing contained in such notice shall be deemed to limit or modify the terms of the Loan Documents:

ORAL AGREEMENTS OR COMMITMENTS TO LOAN MONEY, EXTEND CREDIT OR TO FORBEAR FROM ENFORCING REPAYMENT OF A DEBT INCLUDING PROMISES TO EXTEND OR RENEW SUCH DEBT ARE NOT ENFORCEABLE, REGARDLESS OF THE LEGAL THEORY UPON WHICH IT IS BASED THAT IS IN ANY WAY RELATED TO THE CREDIT AGREEMENT. TO PROTECT YOU (BORROWER(S)) AND US (LENDER) FROM MISUNDERSTANDING OR DISAPPOINTMENT, ANY AGREEMENTS WE REACH COVERING SUCH MATTERS ARE CONTAINED IN THE CREDIT AGREEMENT, THE LOAN DOCUMENTS AND THIS WRITING, WHICH IS THE COMPLETE AND EXCLUSIVE STATEMENT OF THE AGREEMENT BETWEEN US, EXCEPT AS WE MAY LATER AGREE IN WRITING TO MODIFY IT.

Each Borrower acknowledges that there are no other agreements between Lender and any Borrower, oral or written, concerning the subject matter of the Loan Documents, and that all prior agreements concerning the same subject matter, including any proposal or commitment letter, are merged into the Loan Documents and thereby extinguished.

14.Notice-Insurance.  The  following notice is given pursuant to Section 427.120 of the Missouri Revised Statutes; nothing contained in such notice shall be deemed to limit or modify the terms of the Loan Documents:

UNLESS YOU PROVIDE EVIDENCE OF THE INSURANCE COVERAGE REQUIRED BY YOUR AGREEMENT WITH US, WE MAY PURCHASE INSURANCE AT YOUR EXPENSE TO PROTECT OUR INTERESTS IN YOUR COLLATERAL.  THIS INSURANCE MAY, BUT NEED NOT, PROTECT YOUR INTERESTS.  THE COVERAGE THAT WE PURCHASE MAY NOT PAY ANY CLAIM THAT YOU MAKE OR ANY CLAIM THAT IS MADE AGAINST YOU IN CONNECTION WITH THE COLLATERAL.  YOU MAY LATER CANCEL ANY INSURANCE PURCHASED BY US, BUT ONLY AFTER PROVIDING EVIDENCE THAT YOU HAVE OBTAINED INSURANCE AS REQUIRED BY OUR AGREEMENT.  IF WE PURCHASE INSURANCE FOR THE COLLATERAL, YOU WILL BE RESPONSIBLE FOR THE COSTS OF THAT INSURANCE, INCLUDING THE INSURANCE PREMIUM, INTEREST AND ANY OTHER CHARGES WE MAY IMPOSE IN CONNECTION WITH THE PLACEMENT OF THE INSURANCE, UNTIL THE EFFECTIVE DATE OF THE CANCELLATION OR EXPIRATION OF THE INSURANCE.  THE COSTS OF THE INSURANCE MAY BE ADDED TO YOUR TOTAL OUTSTANDING BALANCE OR OBLIGATION.  THE COSTS OF THE INSURANCE MAY BE MORE THAN THE COST OF INSURANCE YOU MAY BE ABLE TO OBTAIN ON YOUR OWN.

6

[Remainder of page intentionally blank.  Signature page follows.]

7

IN WITNESS WHEREOF, Lender and the Borrowers have caused this Agreement to be executed as of the date and year first above written.

BORROWERS:
SYNERGETICS, INC.
By:
Name:
Title:
SYNERGETICS USA, INC.
By:
Name:
Title:
LENDER:
REGIONS BANK
By:
Name:	Anne D. Silvestri
Title:	Senior Vice President

SIGNATURE PAGE TO TENTH AMENDMENT TO CREDIT AND SECURITY AGREEMENT

EXHIBIT A

TO TENTH AMENDMENT TO CREDIT AND SECURITY AGREEMENT

1. This Tenth Amendment to Credit and Security Agreement.

2. Second Amended and Restated 2008 Term Loan Note.

3. Good Standing Certificate from the Secretary of State of Missouri with respect to Synergetics, Inc.

4. Good Standing Certificate from the Secretary of State of Delaware with respect to Synergetics USA, Inc.

5. Secretary’s or Assistant Secretary’s Certificate of Synergetics, Inc. certifying resolutions authorizing the execution, delivery and performance of the Tenth Amendment.

6. Secretary’s or Assistant Secretary’s Certificate of Synergetics USA, Inc. certifying resolutions authorizing the execution, delivery and performance of the Tenth Amendment.

7. UCC Searches with respect to Synergetics, Inc. from the Secretary of State of Missouri.

8. UCC Searches with respect to Synergetics USA, Inc. from the Secretary of State of Delaware.

A - 1

EXHIBIT C

TO TENTH AMENDMENT TO CREDIT AND SECURITY AGREEMENT

FORM OF COMPLIANCE CERTIFICATE

TO: REGIONS BANK

This Compliance Certificate is furnished pursuant to that certain Credit and Security Agreement dated as of,  (as the same may be amended, restated or otherwise modified from time to time, the “Credit Agreement”), among SYNERGETICS, INC., a Missouri corporation (“Synergetics”) and SYNERGETICS USA, INC., a Delaware corporation (“Synergetics USA”) (individually, a “Borrower” and together, the “Borrowers”), and Regions Bank.  Unless otherwise defined herein, capitalized terms used in this Compliance Certificate have the meanings defined in the Credit Agreement.

THE UNDERSIGNED HEREBY CERTIFIES THAT:

A. I am the duly elected Chief Financial Officer of Borrowers.

B. I have reviewed the terms of the Credit Agreement and the other Loan Documents and I have made, or have caused to be made under my supervision, a review of the transactions and conditions of Borrowers during the accounting period covered by the attached Financial Statements.

C. The examinations described in paragraph 2 did not disclose, and I have no knowledge of, the existence of any condition or event which constitutes a Default or an Event of Default as of the date of this Compliance Certificate; and to my knowledge all of the representations and warranties of Borrowers contained in the Credit Agreement and other Loan Documents are true and correct.

D. The attached Financial Statements are complete and correct in all material respects and have been prepared in accordance with GAAP applied consistently throughout the period and with prior periods (except as disclosed therein).

E. Borrowers are in compliance with all of the covenants in the Credit Agreement, including the financial covenants in Sections 6.10 and 6.11 and the schedule attached hereto, contains calculations based on Borrowers’ Financial Statements and other financial records that show Borrowers’ compliance with such financial covenants.  The calculations and the data upon which they are based are believed by me to be complete and correct.

This Compliance Certificate, together with the schedules hereto, is executed and delivered this ___ day of ____________________, 200__

Print Name:

Title:

C - 1

Covenant Calculations

NOTE:  All Definitions are as set forth in the Credit Agreement.
 

1. Leverage Ratio (Total Funded Debt divided by EBITDA):

 

As of the Quarter Ended	Required:
	No more than 2.25:1.00
All Indebtedness (excluding Trade Payables)	$	-
EBITDA	$	-
Leverage Ratio

2. Fixed Charge Coverage Ratio (EBITDA minus unfinanced Capital Expenditures and cash taxes paid divided by Current Maturities of Long Term Debt plus interest expense plus distributions (including dividend distributions).

12 Months Ended	Required:
	No less than 1.25 to 1.00

	Trailing Twelve Months Ended:
Consolidated Net After-Tax Income	$	-
Plus:
Depreciation and Amortization Expense	$	-
Interest Expense	$	-
Taxes	$	-
Other non-cash non-operating expense items	$	-
Minus:
Unfinanced Capital Expenditures	$	-
Cash Taxes Paid	$	-
Numerator	$	-
Current Maturities of Long Term Debt	$	-
Interest Expense	$	-
Distributions (including Dividend Distributions)	$	-
Denominator	$	-
Fixed Charge Coverage Ratio

Pamela G. Boone, EVP & CFO Date:

C - 2

EX-10.47

Exhibit 10.47

THIRD AMENDED AND RESTATED REVOLVING NOTE

THIS NOTE IS NOT A NOVATION

$9,500,000.00	St. Louis, Missouri
	September __, 2013

FOR VALUE RECEIVED, the undersigned, SYNERGETICS, INC., a Missouri corporation, and SYNERGETICS USA, INC., a Delaware corporation (individually, a “Borrower” and together, the “Borrowers”), hereby jointly and severally promise to pay on the Termination Date to the order of Regions Bank (the “Lender”), at its main office in St. Louis, Missouri, or at any other place designated at any time by the holder hereof, in lawful money of the United States of America and in immediately available funds, the principal sum of Nine Million Five Hundred Thousand and 00/100 ($9,500,000.00) or, if less, the aggregate unpaid principal amount of all Advances and Swing Line Loans made by the Lender to the Borrowers under the Credit Agreement (defined below), together with interest on the principal amount hereunder remaining unpaid from time to time, computed on the basis of the actual number of days elapsed and a 360-day year, from the date hereof until this Note is fully paid at the rate from time to time in effect under the Credit and Security Agreement dated as of March 13, 2006 (as so amended, modified, restated or replaced from time to time, the “Credit Agreement”) by and among the Lender and the Borrowers.  The principal hereof and interest accruing thereon shall be due and payable as provided in the Credit Agreement.  This Note may be prepaid only in accordance with the Credit Agreement.

This Note is issued pursuant, and is subject, to the Credit Agreement, which provides, among other things, for acceleration hereof.

This Note, among other things, is secured pursuant to the Credit Agreement and the Security Documents as therein defined, and may now or hereafter be secured by one or more other security agreements, mortgages, deeds of trust, assignments or other instruments or agreements.

The Borrowers hereby agree to pay all costs of collection, including attorneys' fees and legal expenses in the event this Note is not paid when due, whether or not legal proceedings are commenced.

Presentment or other demand for payment, notice of dishonor and protest are expressly waived.

This Note shall be governed by the internal substantive laws of the State of Missouri, without regard for its conflicts-of-law principles.

ORAL OR UNEXECUTED AGREEMENTS OR COMMITMENTS TO LOAN MONEY, EXTEND CREDIT OR TO FORBEAR FROM ENFORCING REPAYMENT OF A DEBT INCLUDING PROMISES TO EXTEND OR RENEW SUCH DEBT ARE NOT ENFORCEABLE, REGARDLESS OF THE LEGAL THEORY UPON WHICH IT IS BASED THAT IS IN ANY WAY RELATED TO THE CREDIT AGREEMENT. TO PROTECT YOU (BORROWER(S)) AND US (CREDITOR) FROM MISUNDERSTANDING OR DISAPPOINTMENT, ANY AGREEMENTS WE REACH COVERING SUCH MATTERS ARE CONTAINED IN THIS WRITING, WHICH IS THE COMPLETE AND EXCLUSIVE STATEMENT OF THE AGREEMENT BETWEEN US, EXCEPT AS WE MAY LATER AGREE IN WRITING TO MODIFY IT.

This Note is a replacement for, but not a novation or refinancing of, the Second 2008 Amended and Restated Revolving Note dated December 1, 2008.  This Note does not evidence or effect a release, or relinquishment of the priority of, security interests in any Collateral (as defined in the Credit Agreement).

BORROWERS:
SYNERGETICS, INC.
By:
	Name:	Pamela G. Boone
	Title:	Chief Financial Officer
and
SYNERGETICS USA INC.
By:
	Name:	Pamela G. Boone
	Title:	Chief Financial Officer

Signature Page to Second 2008 Amended and Restated Revolving Note

EX-10.48

Exhibit 10.48

SECOND AMENDED AND RESTATED

2008 EQUIPMENT PURCHASE NOTE

THIS NOTE IS NOT A NOVATION

$1,000,000.00	St. Louis, Missouri
	September ___, 2013

FOR VALUE RECEIVED, the undersigned, Synergetics, Inc., a Missouri corporation, and Synergetics USA, Inc., a Delaware corporation (“Borrowers”), hereby jointly and severally promise to pay to the order of Regions Bank (the “Lender”), at its main office in St.  Louis, Missouri, or at any other place designated at any time by the holder hereof, in lawful money of the United States of America and in immediately available funds, the principal sum of One Million and 00/100 Dollars ($1,000,000.00) or such lesser amount may be outstanding from time to time, reflecting the 2008 Equipment Purchase Loan made by Lender to Borrowers under the Credit Agreement (defined below), together with interest on the principal amount hereunder remaining unpaid from time to time, computed on the basis of the actual number of days elapsed and a 360-day year, from the date hereof until this Note is fully paid at the rate from time to time in effect under the Credit and Security Agreement dated as of March 13, 2006 (as so amended, modified, restated or replaced from time to time, the “Credit Agreement”) by and among the Lender and the Borrowers.  The principal hereof shall be due and payable on the Equipment Purchase Loan Maturity Date, as defined in the Credit Agreement.  Interest shall be payable in arrears on the first day of each month after the date of this Note, until all principal under this Note is paid in full.  This Note may be prepaid in whole or in part from time to time without prepayment penalty.

This Note is the 2008 Equipment Purchase Note referred to in the Credit Agreement.  This Note is secured pursuant to the Credit Agreement and the Security Documents as therein defined, and may now or hereafter be secured by one or more other security agreements, mortgages, deeds of trust, assignments or other instruments or agreements.

The Borrowers hereby agree to pay all costs of collection, including attorneys’ fees and legal expenses in the event this Note is not paid when due, whether or not legal proceedings are commenced.

Presentment or other demand for payment, notice of dishonor and protest are expressly waived.

This Note shall be governed by the internal substantive laws of the State of Missouri, without regard for its conflicts-of-law principles.

ORAL OR UNEXECUTED AGREEMENTS OR COMMITMENTS TO LOAN MONEY, EXTEND CREDIT OR TO FORBEAR FROM ENFORCING REPAYMENT  OF A DEBT INCLUDING PROMISES TO EXTEND OR RENEW SUCH DEBT ARE NOT ENFORCEABLE,  REGARDLESS OF THE LEGAL THEORY UPON WHICH IT IS BASED THAT IS IN ANY WAY RELATED  TO THE CREDIT AGREEMENT. TO PROTECT YOU (BORROWER(S)) AND US (CREDITOR) FROM  MISUNDERSTANDING OR DISAPPOINTMENT, ANY AGREEMENTS WE REACH COVERING SUCH  MATTERS ARE CONTAINED IN THIS WRITING, WHICH IS THE COMPLETE AND EXCLUSIVE  STATEMENT OF THE AGREEMENT BETWEEN US, EXCEPT AS WE MAY LATER AGREE IN WRITING TO MODIFY IT.

This Note is a replacement for, but not a novation or refinancing of, the 2008 Equipment Purchase Note dated as of June 5, 2009.  This Note does not evidence or effect a release, or relinquishment of the priority of, security interests in any Collateral (as defined in the Credit Agreement).

BORROWERS:
SYNERGETICS, INC.
By:
	Name:
	Title:
SYNERGETICS USA, INC.
By:
	Name:
	Title:

Signature Page to Amended and Restated 2008 Equipment Purchase Note

EX-21

Exhibit 21

Subsidiaries of Registrant

Name of Company	Jurisdiction of Incorporation
Synergetics, Inc.	Missouri
Synergetics IP, Inc.	Delaware
Synergetics Delaware, Inc.	Delaware
Synergetics Development Company, L.L.C.	Missouri
(Wholly Owned Subsidiary of Synergetics, Inc.)
Synergetics Germany GmbH (Wholly Owned Subsidiary of Synergetics Delaware, Inc.)	Germany
Synergetics Italia, Srl	Italy
(Wholly-Owned Subsidiary of Synergetics Delaware, Inc.)
Synergetics Surgical Australia PTY, Ltd.	Australia
(Wholly Owned Subsidiary of Synergetics Delaware, Inc.)
Synergetics France, SARL	France
(Wholly Owned Subsidiary of Synergetics Delaware, Inc.)
Synergetics Surgical EU Ltd. (Wholly Owned Subsidiary of Synergetics Delaware, Inc.)	United Kingdom
M.I.S.S. Ophthalmics Limited	United Kingdom
(Wholly-Owned Subsidiary of Synergetics Surgical EU Ltd.)

EX-23.1

Exhibit 23.1

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We hereby consent to the incorporation by reference in Registration Statement No. 333-176105 on Form S-3 and in Registration Statement No’s. 333-63637, 333-72134, 333-72296, 333-130773, 333-130774 and 333-189310 on Form S-8 of Synergetics USA, Inc. and Subsidiaries (the “Company”) of our report dated October 1, 2013, with respect to the consolidated financial statements of the Company as of July 31, 2013 and 2012, and for each of the three fiscal years in the period ended July 31, 2013, and to our report dated October 1, 2013 on the effectiveness of the Company’s internal control over financial reporting as of July 31, 2013 included in this Annual Report on Form 10-K for the year ended July 31, 2013.

/s/UHY LLP

St. Louis, Missouri

October 1, 2013

EX-31.1

Exhibit 31.1

CERTIFICATIONS

I, David M. Hable, certify that:

1. I have reviewed this annual report on Form 10-K of Synergetics USA, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date:   October 1, 2013	/s/ David M. Hable.
	David M. Hable
	President and Chief Executive Officer

EX-31.2

Exhibit 31.2

CERTIFICATIONS

I, Pamela G. Boone, certify that:

1. I have reviewed this annual report on Form 10-K of Synergetics USA, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and;

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date:   October 1, 2013	/s/ Pamela G. Boone
	Pamela G. Boone
	Executive Vice President and Chief Financial Officer

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Annual Report of Synergetics USA, Inc. (the “Company”) on Form 10-K for the period ended July 31, 2013, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, David M. Hable, President and Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:

1. The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date:   October 1, 2013	/s/ David M. Hable
	David M. Hable
	President and Chief Executive Officer

A signed original of this written statement required by Section 906, or other document authenticating, acknowledging or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to Synergetics USA, Inc. and will be retained by Synergetics USA, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.

EX-32.2

Exhibit 32.2

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Annual Report of Synergetics USA, Inc. (the “Company”) on Form 10-K for the period ended July 31, 2013, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Pamela G. Boone, Executive Vice President and Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:

1. The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date:   October 1, 2013	/s/ Pamela G. Boone
	Pamela G. Boone
	Executive Vice President and Chief Financial Officer

A signed original of this written statement required by Section 906, or other document authenticating, acknowledging or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to Synergetics USA, Inc. and will be retained by Synergetics USA, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.

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Operating Leases

12 Months Ended

Jul. 31, 2013

Operating Leases [Abstract]

Operating Leases

Note 10. Operating Leases

The Company leases various equipment, a portion of its facilities in O’Fallon, Missouri and the facility in King of Prussia, Pennsylvania under operating leases.  The O’Fallon, Missouri lease expires in February 2016 and the King of Prussia, Pennsylvania lease has been renewed through October 2015.

The approximate minimum rental commitment under non-cancelable operating leases as of July 31, 2013 is due as follows (dollars in thousands):

Year Ending July 31,	Amount
2014	$	388
2015		265
2016		87
2017		--
2018		--
	$	740

Rent expense incurred and charged to cost of sales and selling, general and administrative expenses was approximately $364,000, $353,000 and $358,000 for the years ended July 31, 2013, 2012 and 2011, respectively.

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Employee Benefit Plan (Details) (USD $)	12 Months Ended
	Jul. 31, 2013	Jul. 31, 2012	Jul. 31, 2011
Employee Benefit Plan [Abstract]
Minimum age required for 401(k) savings plan	18 years
Requisite service period for 401(k) savings plan	1 year
Company's contribution to the plan	$ 203,000	$ 79,000	$ 51,000

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Consolidated Statements of Income and Comprehensive Income (USD $) In Thousands, except Share data, unless otherwise specified	12 Months Ended
	Jul. 31, 2013	Jul. 31, 2012	Jul. 31, 2011
Condensed Consolidated Statements of Income and Comprehensive Income (Unaudited) [Abstract]
Net sales	$ 62,796	$ 60,014	$ 55,657
Cost of sales	30,425	25,495	22,876
Gross profit	32,371	34,519	32,781
Operating expenses
Research and development	3,643	3,642	3,713
Sales and marketing	13,805	11,881	11,474
Medical device excise tax	289	0	0
General and administrative	10,932	10,515	9,245
Total operating expenses	28,669	26,038	24,432
Operating income	3,702	8,481	8,349
Other income (expenses)
Investment income	31	40	99
Interest expense	(9)	(43)	(202)
Loss on sale of product line	0	0	(99)
Miscellaneous	(35)	(11)	(11)
Total other income (expenses)	(13)	(14)	(213)
Income from continuing operations before provision for income taxes	3,689	8,467	8,136
Provision for income taxes	1,130	2,499	2,467
Income from continuing operations	2,559	5,968	5,669
Loss from discontinued operations, net of income tax benefit of $--, $193 and $24, respectively	0	382	36
Net income	2,559	5,586	5,633
Basic
Income from continuing operations (in dollars per share)	$ 0.10	$ 0.24	$ 0.23
Loss from discontinued operations (in dollars per share)	$ 0	$ (0.02)	$ 0
Net income (in dollars per share)	$ 0.10	$ 0.22	$ 0.23
Diluted
Income from continuing operations (in dollars per share)	$ 0.10	$ 0.24	$ 0.23
Loss from discontinued operations (in dollars per share)	$ 0	$ (0.02)	$ 0
Net income (in dollars per share)	$ 0.10	$ 0.22	$ 0.23
Basic weighted average common shares outstanding (in share)	25,243,010	25,100,064	24,901,832
Diluted weighted average common shares outstanding (in share)	25,337,525	25,256,584	25,035,095
Net income	2,559	5,586	5,633
Foreign currency translation adjustment	47	(595)	112
Comprehensive income	$ 2,606	$ 4,991	$ 5,745

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Discontinued Operations

12 Months Ended

Jul. 31, 2013

Discontinued Operations [Abstract]

Discontinued Operations

Note 3.  Discontinued Operations

In September 2011, the Company adopted a plan to close its plastic injection molding operations and transitioned this production to an outside vendor.  During the Company’s first quarter of fiscal 2012, substantially all operational activities of this unit were discontinued and the Company classified them as discontinued operations.  The Company completed the sale of these assets prior to the end of the second quarter of fiscal 2012.  The assets included in the disposal group were primarily equipment.  The following table summarizes the results of the discontinued operations fiscal years ended July 31, 2013, 2012 and 2011 (dollars in thousands):

	Year Ended July 31
	2013		2012			2011
Net sales	$	--	$	23		$	188
Operating costs		--		(191	)		(248	)
Impairment, restructuring and other charges		--		(253	)		--
Write-off of goodwill		--		(29	)		--
Loss on sale of fixed assets		--		(125	)		--
Loss from discontinued operations before benefit for income taxes		--		(575	)		(60	)
Income tax benefit		--		193			24
Loss from discontinued operations	$	--	$	(382	)	$	(36	)

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Commitments and Contingencies

12 Months Ended

Jul. 31, 2013

Commitments and Contingencies [Abstract]

Commitments and Contingencies

Note 17. Commitments and Contingencies

The Company has entered into change of control agreements with each of its President and Chief Executive Officer, Chief Financial Officer, Chief Scientific Officer, Vice President of Domestic Sales and Vice President of Marketing and Technology.  The change in control agreements with its executive officers provide that if employment is terminated within one year for cause or disability following a change in control (as each term is defined in the change in control agreements), as a result of the officers’ death, or by the officer other than as an involuntary termination (as defined in the change in control agreements), the Company shall pay the officer all compensation earned or accrued through his or her employment termination date, including (i) base salary; (ii) reimbursement for reasonable and necessary expenses; (iii) vacation pay; (iv) bonuses and incentive compensation; and (v) all other amounts to which they are entitled under any compensation or benefit plan of the Company (“Standard Compensation Due”).

If the officer’s employment is terminated within one year following a change in control without cause and for any reason other than death or disability, including an involuntary termination, and provided the officer enters into a separation agreement within 30 days of his or her employment termination, he or she  shall receive the following: (i) all Standard Compensation Due and any amount payable as of the termination date under the Company’s objectives-based incentive plan, the sum of which shall be paid in a lump sum immediately upon such termination; and (ii) an amount equal to one times his or her annual base salary at the rate in effect immediately prior to the change in control, to be paid in 12 equal monthly installments beginning in the month following his or her employment termination. Furthermore, all of the officer’s awards of shares or options shall immediately vest and be exercisable for one year after the date of his or her employment termination.

Various claims, incidental to the ordinary course of business, are pending against the Company.  In the opinion of management, after consultation with legal counsel, resolution of these matters is not expected to have a material effect on the accompanying financial statements.

The Company is subject to regulatory requirements throughout the world. In the normal course of business, regulatory agencies may require companies in the medical industry to change their products or operating procedures, which could affect the Company.  The Company regularly incurs expenses to comply with these regulations and may be required to incur additional expenses.  Management is not able to estimate any additional expenditures outside the normal course of operations which will be incurred by the Company in future periods in order to comply with these regulations.

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Research and Development Costs (Details) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Jul. 31, 2013	Jul. 31, 2012	Jul. 31, 2011
Research and Development Costs [Abstract]
R&D costs incurred	$ 3,643	$ 3,642	$ 3,713

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Income Tax Matters

12 Months Ended

Jul. 31, 2013

Income Tax Matters [Abstract]

Income Tax Matters

Note 11. Income Tax Matters

The Company and its wholly owned subsidiaries file as a single entity for income tax reporting purposes.  The net deferred income tax amounts included in the accompanying consolidated balance sheets as of July 31, 2013 and 2012 include the following amounts as deferred income tax assets and liabilities (dollars in thousands):

	2013		2012
Deferred tax assets:
Accounts receivable	$	119	$	85
Inventories		847		185
Accrued liabilities		186		165
Deferred revenue		5,940		6,423
Other		133		813
Loss on foreign subsidiaries		2,080		1,949
		9,305		9,620
Deferred tax liability
Property and equipment		1,561		1,362
Other intangible assets		2,360		2,923
		3,921		4,285
	$	5,384	$	5,335

The deferred tax amounts noted above have been classified on the accompanying consolidated balance sheets as of July 31, 2013 and 2012, as follows (dollars in thousands):

	2013		2012
Current assets	$	1,827	$	1,247
Long-term asset		3,557		4,088
	$	5,384	$	5,335

The provision for income taxes for the years ended July 31, 2013, 2012 and 2011, consisted of the following (dollars in thousands):

	2013			2012		2011
Current payable	$	1,179		$	2,153	$	8,831
Deferred		(49	)		153		(6,388	)
	$	1,130		$	2,306	$	2,443

Reconciliation of the Company’s income tax at the statutory rate to the Company’s effective rate is as follows:

	2013			2012			2011
Computed at the statutory rate		34.0	%		34.0	%		35.0	%
State taxes, net of federal tax benefit		2.5			2.4			2.3
Production deduction for domestic manufacturers		(4.3	)		(2.9	)		(2.9	)
Research and experimentation		(5.3	)		(0.8	)		(3.5	)
Other		3.7			(3.2	)		(0.6	)
		30.6	%		29.5	%		30.3	%

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Other Intangible Assets (Details) (USD $)	12 Months Ended			12 Months Ended									12 Months Ended
	Jul. 31, 2006	Jul. 31, 2013	Jul. 31, 2012	Jul. 31, 2013 M.I.S.S. [Member]	Jul. 31, 2013 Proprietary Know-How [Member]	Jul. 31, 2012 Proprietary Know-How [Member]	Jul. 31, 2013 Trademark [Member]	Jul. 31, 2012 Trademark [Member]	Jul. 31, 2013 Licensing Agreements [Member]	Jul. 31, 2012 Licensing Agreements [Member]	Jul. 31, 2013 Customer Relationships [Member]	Jul. 31, 2013 Other Intangibles [Member]	Jul. 31, 2013 Patents [Member]	Jul. 31, 2012 Patents [Member]	Jul. 31, 2011 Patents [Member]
Finite-Lived Intangible Assets [Line Items]
Gross Carrying Value		$ 19,037,000	$ 17,687,000		$ 4,057,000	$ 4,057,000	$ 5,938,000	$ 5,923,000	$ 5,834,000	$ 5,834,000	$ 531,000	$ 407,000	$ 2,270,000	$ 1,873,000
Accumulated Amortization		5,911,000	5,231,000		2,286,000	2,039,000	0	0	2,766,000	2,498,000	0	0	859,000	694,000
Net		13,126,000	12,456,000		1,771,000	2,018,000	5,938,000	5,923,000	3,068,000	3,336,000	531,000	407,000	1,411,000	1,179,000
Goodwill acquired	10,660,000			1,495,000
Other intangible assets acquired				1,530,000
Amortization included in general and administrative expense													680,000	600,000	653,000
Future amortization expense [Abstract]
2014		800,000
2015		800,000
2016		800,000
2017		800,000
2018		$ 800,000

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Enterprise-wide Sales Information (Details) (USD $)	12 Months Ended
	Jul. 31, 2013		Jul. 31, 2012		Jul. 31, 2011
Revenue from External Customer [Line Items]
Net sales	$ 62,796,000		$ 60,014,000		$ 55,657,000
Revenues from External Customers [Line Items]
Net sales	62,796,000		60,014,000		55,657,000
Recognition of deferred revenue	1,300,000
Alcon [Member]
Revenues from External Customers [Line Items]
Recognition of deferred revenue			1,200,000
Codman exclusivity [Member]
Revenues from External Customers [Line Items]
Recognition of deferred revenue			266,000
Domestic [Member]
Revenues from External Customers [Line Items]
Net sales	46,489,000		44,047,000		38,997,000
International [Member]
Revenues from External Customers [Line Items]
Net sales	16,307,000		15,967,000		16,660,000
Ophthalmic [Member]
Revenue from External Customer [Line Items]
Net sales	35,446,000		35,240,000		34,547,000
OEM [Member]
Revenue from External Customer [Line Items]
Net sales	26,469,000	[1]	23,973,000	[1]	19,456,000	[1]
Other [Member]
Revenue from External Customer [Line Items]
Net sales	$ 881,000	[2]	$ 801,000	[2]	$ 1,654,000	[2]

[1] (1) Net sales from OEM represent sales of electrosurgery generators, disposable bipolar forceps and related accessories and royalties from Codman, multi-channel generators, disposable ultrasonic tips and related accessories to Stryker, sales of certain disposable products to Mobius along with sales of certain laser probes to Iridex in the comparable 2012 period. In addition, recognition of deferred revenues of $1.3 million from Alcon is included in this category for the fiscal year ended July 31, 2013. Recognition of deferred revenues of $266,000 and $1.2 million from Codman and Alcon, respectively, are included in this category for the fiscal year ended July 31, 2012.

[2] (2) Net sales from Other represent direct neurosurgery revenues and other miscellaneous revenues.

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Income Tax Matters (Tables)

12 Months Ended

Jul. 31, 2013

Income Tax Matters [Abstract]

Deferred income tax assets and liabilities

The Company and its wholly owned subsidiaries file as a single entity for income tax reporting purposes.  The net deferred income tax amounts included in the accompanying consolidated balance sheets as of July 31, 2013 and 2012 include the following amounts as deferred income tax assets and liabilities (dollars in thousands):

	2013		2012
Deferred tax assets:
Accounts receivable	$	119	$	85
Inventories		847		185
Accrued liabilities		186		165
Deferred revenue		5,940		6,423
Other		133		813
Loss on foreign subsidiaries		2,080		1,949
		9,305		9,620
Deferred tax liability
Property and equipment		1,561		1,362
Other intangible assets		2,360		2,923
		3,921		4,285
	$	5,384	$	5,335

The deferred tax amounts noted above have been classified on the accompanying consolidated balance sheets as of July 31, 2013 and 2012, as follows (dollars in thousands):

	2013		2012
Current assets	$	1,827	$	1,247
Long-term asset		3,557		4,088
	$	5,384	$	5,335

Provision for income taxes

The provision for income taxes for the years ended July 31, 2013, 2012 and 2011, consisted of the following (dollars in thousands):

	2013			2012		2011
Current payable	$	1,179		$	2,153	$	8,831
Deferred		(49	)		153		(6,388	)
	$	1,130		$	2,306	$	2,443

Reconciliation of income tax at statutory rate to effective rate

Reconciliation of the Company’s income tax at the statutory rate to the Company’s effective rate is as follows:

	2013			2012			2011
Computed at the statutory rate		34.0	%		34.0	%		35.0	%
State taxes, net of federal tax benefit		2.5			2.4			2.3
Production deduction for domestic manufacturers		(4.3	)		(2.9	)		(2.9	)
Research and experimentation		(5.3	)		(0.8	)		(3.5	)
Other		3.7			(3.2	)		(0.6	)
		30.6	%		29.5	%		30.3	%

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Subsequent Events

12 Months Ended

Jul. 31, 2013

Subsequent Events [Abstract]

Subsequent Events [Text Block]

Note 21. Subsequent Events

On September 30, 2013, the Company extended its revolving credit facility and its equipment line of credit through September 30, 2016.

On October 1, 2013, the Company announced that it plans to close its King of Prussia, Pennsylvania facility and consolidate the manufacturing operations into its existing facility in O’Fallon, Missouri.  The Company expects to spend approximately $900,000 over the next fourteen months to complete the closure.  The Company expects the closure to result in a reduction in operating expense of more than $1.0 million on an annualized basis beginning in fiscal 2016.

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Recent Accounting Pronouncements

12 Months Ended

Jul. 31, 2013

Recent Accounting Pronouncements [Abstract]

Recent Accounting Pronouncements

Note 19. Recent Accounting Pronouncements

Recently Adopted

In June 2011, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2011-05, “Presentation of Comprehensive Income” (“ASU No. 2011-05”). ASU No. 2011-05 amends current guidance to allow a company the option of presenting the total of comprehensive income, the components of net income, and the components of other comprehensive income either in a single continuous statement of comprehensive income or in two separate but consecutive statements. The provisions do not change the items that must be reported in other comprehensive income or when an item of other comprehensive nature must be reclassified to net income. The amendments do not change the option for a company to present components of other comprehensive income, either net of related tax effects or before related tax effects, with one amount shown for the aggregate income tax expense (benefit) related to the total of other comprehensive income items. The amendments do not affect how earnings per share is calculated or presented.   In December 2011, ASU No. 2011-05 was amended by ASU No. 2011-12, “Comprehensive Income (Topic 220):  Deferral of the Effective Date for Amendments to the Presentation of Reclassification of Items Out of Accumulated Other Comprehensive Income in Accounting Standards Update No. 2011-05,” to defer only those changes in ASU No. 2011-05 that relate to the presentation of reclassification adjustments.  All other requirements in ASU No. 2011-05 are not affected. The provisions of ASU No. 2011-05 have been adopted retrospectively effective August 1, 2012 and had no effect on the Company’s consolidated financial statements.

In September 2011, the FASB issued ASU No. 2011-08, “Intangibles – Goodwill and Other” (“ASU No. 2011-08”). ASU No. 2011-08 amends current guidance to allow a company to first assess qualitative factors to determine whether it is necessary to perform the two-step quantitative goodwill impairment test. Under this amendment, an entity would not be required to calculate the fair value of a reporting unit unless the entity determines based on a qualitative assessment that it is more likely than not that its fair value is less than its carrying amount. ASU No. 2011-08 applies to all companies that have goodwill reported in their financial statements. The provisions of ASU No. 2011-08 have been adopted effective August 1, 2012 and had no effect on the Company’s consolidated financial statements.

In February 2013, the FASB issued an amendment to the comprehensive income standard to improve the transparency of reporting reclassifications out of accumulated other comprehensive income/loss.  Other comprehensive income/loss includes gains and losses that are initially excluded from net income for an accounting period.  Those gains and losses are later reclassified out of accumulated other comprehensive income/loss into net income.  The amendments do not change the current requirements for reporting net income or other comprehensive income/loss in financial statements.  The new amendments require the Company to present the effects on income statement line items of certain significant amounts reclassified out of accumulated other comprehensive income/loss and cross-reference to other disclosures currently required under U.S. GAAP for certain other reclassification items.  The Company was required to adopt this revised standard in the fourth quarter of fiscal 2013.  This revised standard had no impact on the Company’s results of operations or financial position.

In July 2012, the FASB issued guidance concerning the testing of indefinite-lived intangible assets for impairment. This guidance gives an entity the option first to assess qualitative factors to determine whether the existence of events and circumstances indicates that it is more likely than not that the indefinite-lived intangible asset is impaired. If, after assessing the totality of events and circumstances, an entity concludes that it is not more likely than not that the indefinite-lived intangible asset is impaired, then the entity is not required to take further action. However, if an entity concludes otherwise, then it is required to determine the fair value of the indefinite-lived intangible asset and perform the quantitative impairment test by comparing the fair value with the carrying amount in accordance with ASC Subtopic 350-30, “Intangibles--Goodwill and Other, General Intangibles Other than Goodwill.” Under the guidance, an entity also has the option to bypass the qualitative assessment for any indefinite-lived intangible asset in any period and proceed directly to performing the quantitative impairment test. An entity will be able to resume performing the qualitative assessment in any subsequent period. The revised standard is effective for annual and interim impairment tests performed for fiscal years beginning after September 15, 2012. However, early adoption is permitted.  The revised standard did not have a material impact on the Company’s consolidated financial statements.

The Company has reviewed all other recently issued, but not yet effective, accounting pronouncements and does not believe any such pronouncements will have a material impact on its financial statements.

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Inventories (Details) (USD $) In Thousands, unless otherwise specified	Jul. 31, 2013	Jul. 31, 2012
Inventories [Abstract]
Raw material and component parts	$ 7,418	$ 8,670
Work in progress	1,133	1,663
Finished goods	6,274	5,346
Inventory, net	$ 14,825	$ 15,679

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Property and Equipment (Tables)

12 Months Ended

Jul. 31, 2013

Property and equipment [Abstract]

Property and equipment

Property and equipment as of July 31, 2013 and 2012 were as follows (dollars in thousands):

	2013		2012
Land	$	730	$	730
Building and improvements		6,365		5,896
Machinery and equipment		8,665		7,974
Furniture and fixtures		1,058		1,222
Software		1,107		1,014
Construction in progress		177		287
		18,102		17,123
Less accumulated depreciation		9,140		7,884
	$	8,962	$	9,239

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Enterprise-wide Sales Information (Tables)

12 Months Ended

Jul. 31, 2013

Enterprise-wide Sales Information [Abstract]

Enterprise-wide sales information

Enterprise-wide sales information as of July 31, 2013, 2012 and 2011 consisted of the following (dollars in thousands):

	Fiscal Year Ended July 31,
	2013		2012		2011
Net Sales
Ophthalmic	$	35,446	$	35,240	$	34,547
OEM (1)		26,469		23,973		19,456
Other (2)		881		801		1,654
Total	$	62,796	$	60,014	$	55,657
	Fiscal Year Ended July 31,
		2013		2012		2011
Net Sales
Domestic	$	46,489	$	44,047	$	38,997
International		16,307		15,967		16,660
Total	$	62,796	$	60,014	$	55,657

(1) Net sales from OEM represent sales of electrosurgery generators, disposable bipolar forceps and related accessories and royalties from Codman, multi-channel generators, disposable ultrasonic tips and related accessories to Stryker, sales of certain disposable products to Mobius along with sales of certain laser probes to Iridex in the comparable 2012 period. In addition, recognition of deferred revenues of $1.3 million from Alcon is included in this category for the fiscal year ended July 31, 2013.  Recognition of deferred revenues of $266,000 and $1.2 million from Codman and Alcon, respectively, are included in this category for the fiscal year ended July 31, 2012.

(2) Net sales from Other represent direct neurosurgery revenues and other miscellaneous revenues.

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Accrued Expenses (Details) (USD $) In Thousands, unless otherwise specified	Jul. 31, 2013	Jul. 31, 2012
Accrued Expenses [Abstract]
Payroll, commissions and employee benefits	$ 1,131	$ 786
Royalties	147	62
Warranty	15	15
Other	2,193	1,981
Accrued expenses	$ 3,486	$ 2,844

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Discontinued Operations (Tables)

12 Months Ended

Jul. 31, 2013

Discontinued Operations [Abstract]

Discontinued operations

The following table summarizes the results of the discontinued operations fiscal years ended July 31, 2013, 2012 and 2011 (dollars in thousands):

	Year Ended July 31
	2013		2012			2011
Net sales	$	--	$	23		$	188
Operating costs		--		(191	)		(248	)
Impairment, restructuring and other charges		--		(253	)		--
Write-off of goodwill		--		(29	)		--
Loss on sale of fixed assets		--		(125	)		--
Loss from discontinued operations before benefit for income taxes		--		(575	)		(60	)
Income tax benefit		--		193			24
Loss from discontinued operations	$	--	$	(382	)	$	(36	)

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Acquisition of MISS Ophthalmics LTD (Details) (USD $)	12 Months Ended
	Jul. 31, 2013	Jul. 31, 2012	Jul. 31, 2011	Jul. 31, 2013 M.I.S.S. Ophthalmics Limited [Member]	Mar. 31, 2013 M.I.S.S. Ophthalmics Limited [Member]
Business Acquisition [Line Items]
Cash consideration				$ 2,800,000
Contribution to revenue due to wholesale distribution activities				1,100,000
Revenues	62,796,000	60,014,000	55,657,000		3,200,000
Intellectual property				900,000
Goodwill				1,500,000
Transaction related costs				$ 70,000

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Quarterly Financial Data (Unaudited)

12 Months Ended

Jul. 31, 2013

Quarterly Financial Data (Unaudited) [Abstract]

Quarterly Financial Data (Unaudited)

Note 18. Quarterly Financial Data (Unaudited)

The following table provides the Company’s quarterly information as presented in the Form 10-Q (dollars in thousands except earnings per share):

Quarters ended:	July 31,  2013*		April 30, 2013		January 31,  2013			October 31, 2012
Net sales	$	17,857	$	16,264	$	14,055		$	14,620
Gross profit		9,676		9,051		5,171	**		8,473
Operating income		2,193		1,721		(2,153	)		1,941
Net income		1,439		1,150		(1,382	)		1,352
Earnings per share - basic
Net income	$	0.06	$	0.05	$	(0.05	)	$	0.05
Earnings per share - diluted
Net income	$	0.06	$	0.05	$	(0.05	)	$	0.05
Basic weighted average common shares outstanding		25,290,882		25,299,131		25,230,142			25,160,757
Diluted weighted average common shares outstanding		25,367,558		25,362,923		25,230,142			25,286,184

Quarters ended:	July 31, 2012		April 30, 2012			January 31,  2012		October 31, 2011
Net sales	$	16,861	$	14,568		$	15,080	$	13,505
Gross profit		9,809		7,822	***		8,972		7,916
Operating income		2,946		1,405			2,618		1,512
Income from continuing operations		1,942		1,006			1,867		1,153
Loss (income) from discontinued operations, net of tax		--		--			--		382
Net income		1,942		1,006			1,867		771
Earnings per share – basic
Income from continuing operations	$	0.08	$	0.04		$	0.07	$	0.05
Loss from discontinued operations		--		--			--		(0.02	)
Net income	$	0.08	$	0.04		$	0.07	$	0.03
Earnings per share – diluted
Income from continuing operations	$	0.08	$	0.04		$	0.07	$	0.05
Loss from discontinued operations		--		--			--		(0.02	)
Net income	$	0.08	$	0.04		$	0.07	$	0.03
Basic weighted average common shares outstanding		25,165,493		25,184,447			25,085,296		24,971,034
Diluted weighted average common shares outstanding		25,293,168		25,363,620			25,280,449		25,136,727

*      The M.I.S.S. acquisition has been reflected in our results of operations from July 8 through July 31, 2013.

**  In the second quarter of fiscal 2013, the Company recorded an inventory write-down of approximately $2.1 million, or approximately $0.06 per share, net of tax.

*** In the third quarter of fiscal 2012, the Company recorded an inventory write-down of approximately $367,000, or approximately $0.01 earnings per share, net of tax.

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Consolidated Statements of Stockholders' Equity and Comprehensive Income (USD $) In Thousands, except Share data, unless otherwise specified	Common Stock [Member]	Additional Paid-in Capital [Member]	Retained Earnings [Member]	Accumulated Other Comprehensive Income (Loss) [Member]	Total
Balance at Jul. 31, 2010	$ 25	$ 24,905	$ 19,319	$ (23)	$ 44,226
Balance (in shares) at Jul. 31, 2010	24,772,155
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net income	0	0	5,633	0	5,633
Foreign currency translation adjustment	0	0	0	112	112
Restricted stock grants	0	153	0	0	153
Restricted stock grants (in shares)	43,846
Stock-based compensation	0	205	0	0	205
Stock-based compensation (in shares)	13,466
Proceeds from stock options exercised	0	210	0	0	210
Proceeds from stock options exercised (in shares)	141,417
Tax benefit associated with stock options exercised	0	125	0	0	125
Balance at Jul. 31, 2011	25	25,598	24,952	89	50,664
Balance (in shares) at Jul. 31, 2011	24,970,884
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net income	0	0	5,586	0	5,586
Foreign currency translation adjustment	0	0	0	(595)	(595)
Restricted stock grants	0	336	0	0	336
Restricted stock grants (in shares)	166,707
Stock-based compensation	0	428	0	0	428
Stock-based compensation (in shares)	5,593
Proceeds from stock options exercised	0	35	0	0	35
Proceeds from stock options exercised (in shares)	16,885
Tax benefit associated with stock options exercised	0	24	0	0	24
Balance at Jul. 31, 2012	25	26,421	30,538	(506)	56,478
Balance (in shares) at Jul. 31, 2012	25,160,069
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net income		0	2,559	0	2,559
Foreign currency translation adjustment	0	0	0	47	47
Restricted stock grants	0	293	0	0	293
Restricted stock grants (in shares)	58,272
Stock-based compensation	0	638	0	0	638
Stock-based compensation (in shares)	15,309
Proceeds from stock options exercised	0	65	0	0	65
Proceeds from stock options exercised (in shares)	59,310
Tax benefit associated with stock options exercised	0	72	0	0	72
Balance at Jul. 31, 2013	$ 25	$ 27,489	$ 33,097	$ (459)	$ 60,152
Balance (in shares) at Jul. 31, 2013	25,292,960

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Nature of Business and Significant Accounting Policies

12 Months Ended

Jul. 31, 2013

Nature of Business and Significant Accounting Policies [Abstract]

Nature of Business and Significant Accounting Policies

Note 1. Nature of Business and Significant Accounting Policies

Nature of business: Synergetics USA, Inc. (“Synergetics USA” or the “Company”) is a Delaware corporation incorporated on June 2, 2005, in connection with the reverse merger of Synergetics, Inc. (“Synergetics”) and Valley Forge Scientific Corp. (“Valley Forge”) and the subsequent reincorporation of Valley Forge (the predecessor to Synergetics USA) in Delaware. Synergetics USA is a leading supplier of precision surgical devices.  Through continuous improvement and development of its people, the Company’s mission is to design, manufacture and market innovative surgical devices, surgical equipment and consumables of the highest quality in order to assist and enable surgeons who perform surgery around the world to provide a better quality of life for their patients.   The Company’s primary focus is on targeted segments within the surgical disciplines of ophthalmology and neurosurgery. Its distribution channels include a combination of direct and independent distributor sales organizations and important strategic alliances with market leaders. The Company is located in O’Fallon, Missouri, King of Prussia, Pennsylvania and Corby, United Kingdom.  During the ordinary course of its business, the Company grants unsecured credit to its domestic and international customers.

A summary of the Company’s significant accounting policies follows:

Use of estimates in the preparation of financial statements: The preparation of consolidated financial statements in conformity with U.S. generally accepted accounting principles (“U.S. GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenue and expenses during the reporting period.  Actual results could differ from those estimates.

Principles of consolidation: The consolidated financial statements include the accounts of Synergetics USA and its wholly owned subsidiaries: Synergetics, Synergetics IP, Inc., Synergetics Development Company, LLC and Synergetics Delaware, Inc.  All significant intercompany accounts and transactions have been eliminated.

Cash and cash equivalents: For purposes of the consolidated statements of cash flows, the Company considers all highly liquid debt instruments purchased with maturity of three months or less to be cash equivalents.

Accounts receivable: During the ordinary course of its business, the Company grants unsecured credit to its domestic and international customers.  Accounts receivable are carried at original invoice amount less an estimate made for doubtful accounts based on a review of all outstanding amounts on a monthly basis.  Collateral is not generally required on the Company’s accounts receivable.  Accounts receivable are generally considered past due based upon their specific terms.  Management determines the allowance for doubtful accounts by regularly evaluating individual customer receivables and considering a customer’s financial condition, credit history and current economic conditions.  Accounts receivable are written off when deemed uncollectible.  Recoveries of accounts receivable previously written off are recorded when received.  The Company generally does not charge interest on past-due amounts in accounts receivable.  The Company has a history of minimal uncollectible accounts.

Concentration of credit risk: Financial instruments, which potentially subject the Company to concentrations of credit risk, consist principally of cash and cash equivalents and accounts receivable.  The Company’s cash and cash equivalents are primarily held in a money market account in a bank and currently exceed the FDIC insurance limit.  Generally these deposits can be redeemed upon demand and therefore, bear minimal risk.

Inventories: Inventories, consisting of purchased materials, direct labor and manufacturing overhead, are stated at the lower of cost, with cost being determined using the first-in, first-out method, or market.  The Company’s inventory is very dynamic and new products are added frequently.  Thus, the Company reviews the valuation of its inventory on a quarterly basis and determines if a valuation allowance is necessary for items that have not had their values updated recently.

In addition, the Company evaluates inventories for excess quantities and identified obsolescence quarterly.  The Company’s evaluation includes an analysis of historical experience and monitoring current inventory activity by product.  As part of this analysis, the Company considers several factors, including the inventory’s length of time on hand, historical sales, product life cycle and product obsolescence.  Estimates are used to determine the necessity of recording these reserves based on periodic detailed analysis using both quantitative and qualitative factors.   If future cost valuations, future demand or market conditions are different from the Company’s projections, a change in recorded inventory valuation reserves may be required and would be reflected in cost of sales in the period the revision is made.  To the extent that the Company determines there are some excess quantities based on its projected levels of sales and other requirements, or obsolete material in inventory, the Company records a valuation reserves against all or a portion of the value of the related parts or products. During the second quarter of fiscal 2013, the Company completed a detailed analysis of its inventory and recorded a reserve for excess inventory of approximately $1,629,000.  In its continuous effort to manage its inventory, the Company had previously conducted an inventory analysis of obsolete inventory and recorded a provision for same in the third quarter of fiscal 2012.   The reserve was necessary to reflect not only the Company’s changing base ophthalmic business but also to reflect the appropriate level and mix identified in accordance with the Company’s lean methodology with respect to its inventory.

Property and equipment: Property and equipment are depreciated using the straight-line method over their estimated useful lives as follows:

	Useful lives (in years)
Building and improvements	7-39
Machinery and equipment	5-7
Furniture and fixtures	5-7
Software	3-10

Goodwill and other intangibles: Absent any impairment indicators, goodwill is tested for impairment on an annual basis.  The Company performs its goodwill impairment tests during the fourth fiscal quarter.  The Company has adopted the provisions of Accounting Standards Update (“ASU”) No. 2011-08, “Intangibles – Goodwill and Other:  Testing Goodwill for Impairment” and ASU No. 2012-12, “Intangibles – Goodwill and Other:  Testing Indefinite-Lived Intangible Assets for Impairment,” which permits the Company to assess qualitative factors to determine whether the existence of events or circumstances leads to a determination that it is more likely than not that that, goodwill and other intangibles have been impaired.  The Company has determined, based upon as assessment of qualitative factors, that it is more likely than not that goodwill and other intangibles have not been impaired and no further testing was performed.  Other intangible assets, consisting of licensing agreements and proprietary know-how, are amortized to operations under the straight-line method over their estimated useful lives or statutory lives, whichever is shorter.  These periods range from two to seventeen years.  The life of a trademark is inextricably related to the life of the product bearing the mark or the life of the business entity owning the trademark.  The Company intends to use the Malis® trademark indefinitely, and therefore, its useful life is not limited to any specific product. The trademark constitutes an indefinite-lived intangible that will be used in perpetuity.  Proprietary know-how consists of the patented technology which is included in the Company’s core product lines, bipolar electrosurgical generators.  As a proprietary technology is a distinguishing feature of the Company’s products, it represents a valuable intangible asset.

Patents: Incremental legal and other costs to obtain the patent are capitalized to a patent asset.  Salaries, benefits and other direct costs of product development are expensed as operating expenses in research and development (“R&D”) costs.  Patents are amortized to operations under the straight-line method over the remaining statutory life of the patent.  Total amortization for other intangibles including patents for the years ended July 31, 2013, 2012 and 2011 was $680,000, $600,000 and $653,000, respectively.

Deferred revenue:During the second quarter of fiscal 2011, the Company received a payment from Codman & Shurtleff, Inc. (“Codman”), a OEM partner, to establish exclusivity on certain generator products and accessories.  Revenue from the agreement has been deferred and is being amortized over its expected term.  The Company recognized $-, $266,000 and $334,000 in revenue for the fiscal years ended July 31, 2013, 2012 and 2011, respectively, under the terms of the exclusivity agreement.

On April 23, 2010, the Company entered into a Settlement and License Agreement with Alcon, Inc. (“Alcon”)  pursuant to which Alcon paid to the Company $32.0 million. The net proceeds to the Company were $21.4 million after contingency payments to attorneys. The Company recognized a gain from this agreement of $2.4 million in the third quarter of fiscal 2010. The remaining $19.0 million has been accounted for as an up-front license fee under the Confidential Settlement and License Agreement and was deferred and recognized as earned over a period estimated to be 15 years based upon estimated shipments to Alcon under a related Supply Agreement.  On February 13, 2012, Alcon informed the Company that it had decided to cancel the project, orders and forecasts covering the two products to have been supplied under the Supply Agreement. However, the Supply Agreement remains in effect and the Company has continuing performance obligations associated with the Supply Agreement. Therefore, the Company plans on recognizing the remaining deferred revenue associated with the Supply Agreement ratably over the next 13 years which is the remaining life of the patents and associated Supply Agreement.The Company recognized $1.3 million, $1.2 million and $696,000 of this deferred revenue for the fiscal years ended July 31, 2013, 2012 and 2011, respectively.

	July 31, 2013		July 31, 2012
Deferred revenue – Alcon settlement	$	15,818	$	17,106
Less:  Short-term		1,288		1,288
Long-term portion	$	14,530	$	15,818

Impairment of long-lived assets (excluding goodwill and other intangibles): The Company reviews long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.  Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to future undiscounted cash flows expected to be generated by the asset.  Measurement of an impairment loss for long-lived assets and certain identifiable assets that management expects to hold and use is based on the fair value of the asset.  Assets to be sold are reported at the lower of the carrying amount or the fair value less costs to sell.

Product warranty: The Company provides a warranty against manufacturing and workmanship defects. Under the Company’s general terms and conditions of sale, liability during the warranty period (typically three years) is limited to repair or replacement of the defective item. The Company’s warranty cost is not material.

Income taxes: The Company accounts for income taxes under Accounting Standards Codification (“ASC”) Topic 740, “Income Taxes” (“ASC Topic 740”).  Under ASC Topic 740, the deferred tax provision is determined using the liability method whereby deferred tax assets are recognized for deductible temporary differences and operating loss, tax credit carry-forwards and deferred tax liabilities are recognized for taxable temporary differences.  Temporary differences are the differences between the reported amounts of assets and liabilities and their tax bases.  Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized.  Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment.

In addition, under ASC Topic 740, the Company may recognize tax liabilities when, despite the Company’s belief that its tax return positions are supported, the Company believes that certain positions may not be fully sustained upon review by tax authorities.  The Company has identified no uncertain tax positions subsequent to the adoption of this standard on August 1, 2007.

The Company’s policy is to recognize interest and penalties through income tax expense.  As of July 31, 2013, the 2010 to 2012 tax years remain subject to examination by major tax jurisdictions.  There are no federal income tax audits in process as of July 31, 2013. There are one foreign audit and one state audit currently in progress.

Fair value of financial instruments: The Company’s financial instruments consist of cash and cash equivalents, accounts receivable, accounts payable, accrued expenses and debt.  As of July 31, 2013, 2012 and 2011, the carrying amounts of financial instruments, including cash and cash equivalents, accounts receivable, accounts payable and accrued expenses approximate fair value due to the short maturity of these instruments.

Non-financial assets such as goodwill, intangible assets and property, plant and equipment are measured at fair value when there is an indicator of impairment and recorded at fair value only when impairment is recognized.  No impairment indicators existed as of July 31, 2013.

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.  The fair value hierarchy distinguishes between (1) market participant assumptions developed based on market data obtained from independent sources (observable inputs) and (2) an entity’s own assumptions about market participant assumptions developed based on the best information available in the circumstances (unobservable inputs).  The fair value hierarchy consists of these broad levels, which gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3).  The Company’s Level 1 financial assets are money market funds, whose fair values are based on quoted market prices.  The Company does not have any Level 2 or Level 3 financial assets.

Foreign currency translation:  All balance sheet accounts have been translated using the exchange rates in effect at the balance sheet date.  Statements of income amounts have been translated using the average exchange rate for the year.  The gains and losses resulting from the changes in exchange rates from year to year have been reported in other comprehensive income (loss).  The foreign currency translation adjustment is the only component of accumulated other comprehensive loss.  Foreign currency translation adjustments exclude income tax expense (benefit) given that the Company’s investments in foreign subsidiaries are deemed to be reinvested for an indefinite period of time.

Revenue recognition: The Company primarily records revenue from product sales when the revenue is realized and the product is shipped from its facilities.  This includes satisfying the following criteria: the arrangement with the customer is evident, usually through the receipt of a purchase order; the sales price is fixed and determinable; delivery to the carrier has occurred; and collectability is reasonably ensured. Freight and insurance billed to customers is included in net sales, and the cost of freight and insurance is included in cost of sales.  Sales tax billed to customers is included as a liability as products are shipped.

The terms and conditions of sales to both the Company’s domestic and international distributors do not differ materially from the terms and conditions of sales to its domestic and international end-user customers.

Service revenue substantially relates to repairs of products and is recognized when the service has been completed.  Revenue from royalty fees is recorded as the products bearing the trademark are shipped.

Advertising: The Company follows the policy of charging the costs of advertising to expense as incurred. Advertising expense was approximately $146,000, $153,000 and $119,500 for the years ended July 31, 2013, 2012 and 2011, respectively.

Royalties: The Company pays royalties to doctors and medical institutions for providing assistance in the design and development of various devices and components.  Royalties are paid quarterly based on the sales of the instrument or components.  Royalty expense was approximately $331,300, $281,600 and $318,000 for the years ended July 31, 2013, 2012 and 2011, respectively.

Stock compensation: The Company has a stock plan for employees and consultants allowing for incentive and non-qualified stock options, restricted stock and stock awards which have been granted to certain employees and consultants of the Company.  In addition, the Company has a stock option plan for non-employee directors allowing for non-qualified stock options.  Options under this plan have been granted to all non-employee directors.  Stock-based compensation cost is measured at the grant date, based on the fair value of the award, and is recognized over the directors’ and employees’ requisite service period. Compensation expense is calculated using the Black-Scholes option pricing model.  In addition, compensation expense equal to number of shares granted multiplied by the market value on the date of the grant over the restriction period is recognized in net earnings for restricted stock awards.

Earnings per share: Basic earnings per share (“EPS”) data has been computed on the basis of the weighted average number of common shares outstanding during each period presented.  Diluted EPS data has been computed on the basis of the assumed conversion, exercise or issuance of all potential common stock instruments, unless the effect is to reduce the loss or increase the net income per common share (dollars in thousands, except share and per share data):

	Year Ended July 31,
	2013		2012			2011
Numerator:
Income from continuing operations	$	2,559	$	5,968		$	5,669
Loss from discontinued operations net of income tax		--		382			36
Net income		2,559		5,586			5,633
Denominator:
Weighted average common shares and denominator for basic calculation		25,243,010		25,100,064			24,901,832
Stock options and restricted stock		94,515		156,520			133,263
Denominator for diluted calculation		25,337,525		25,256,584			25,035,095
Earnings per share – basic
Income from continuing operations	$	0.10	$	0.24		$	0.23
Loss from discontinued operations		--		(0.02	)		--
Net income	$	0.10	$	0.22		$	0.23
Earnings per share – diluted
Income from continuing operations	$	0.10	$	0.24		$	0.23
Loss from discontinued operations		--		(0.02	)		--
Net income	$	0.10	$	0.22		$	0.23

Stock option shares excluded from computation of dilutive income per share because the effect would be antidilutive for the years ended July 31, 2013, 2012 and 2011 were 533,079, 215,734 and 60,000, respectively.

Segment reporting: Operating segments are defined as components of an enterprise about which separate financial information is available that is evaluated regularly by the chief decision maker or group in deciding how to allocate resources and in assessing performance.  The Company’s chief decision maker reviews the results of operations and requests for capital expenditures based on one industry segment: producing and selling products and procedures for surgery, primarily for vitreoretinal surgery and neurosurgery.  The Company’s entire revenue is generated through this segment.  Revenues are attributed to countries based upon the location of end-user customers or distributors.

Reclassifications: Certain reclassifications have been made to the prior year financial statements to conform to the current year’s presentation.

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OEM Partner Agreements

12 Months Ended

Jul. 31, 2013

OEM Partner Agreements [Abstract]

Marketing Partner Agreements

Note 4. OEM Partner Agreements

The Company sells all of its generators and a majority of its neurosurgery instruments and accessories to two U.S. based national and international OEM partners as described below:

Codman

In the neurosurgical market, the bipolar electrosurgical system manufactured by Valley Forge prior to the merger has been sold for over 30 years through a series of distribution agreements with Codman, an affiliate of Johnson & Johnson.  On April 2, 2009, the Company executed a new, three-year distribution agreement with Codman for the continued distribution by Codman of certain bipolar generators and related disposables and accessories, effective January 1, 2009.  In addition, the Company entered into a new, three-year license agreement, which provides for the continued licensing of the Company’s Malis^® trademark to Codman for use with certain Codman products, including those covered by the distribution agreement.  Both agreements expired on December 31, 2011 and have renewed for three years.  In December 2010, Codman elected to exercise its option of exclusive distribution with respect to the bipolar generators and related disposables and accessories.

On November 16, 2009, the Company announced the signing of an addendum to its three-year agreement with Codman.  Under the terms of the revised agreement, Codman has the exclusive right to market and distribute the Company’s Malis^® branded disposable bipolar forceps produced by Synergetics.  Codman began distribution of the disposable bipolar forceps on December 1, 2009, domestically, and on February 1, 2010, internationally.

Total sales to Codman and its respective percent of the Company’s net sales for the years ended July 31, 2013, 2012 and 2011, including the historical sales of generators, accessories and disposable cord tubing that the Company has supplied in the past, as well as the disposable bipolar forceps sales resulting from the addendum to the existing distribution agreement, were as follows (dollars in thousands):

	Year Ended July 31,
	2013			2012			2011
Net sales	$	14,097		$	11,150		$	10,507
Percent of net sales		22.4	%		18.6	%		18.9	%

Stryker Corporation (“Stryker”)

The Company supplies a multi-channel ablation generator, used for minimally invasive pain treatment, to Stryker pursuant to a supply and distribution agreement dated as of October 25, 2004, as amended.  The agreement expires on June 30, 2015.

On March 31, 2010, the Company entered into a supply agreement with Stryker pursuant to which the Company agreed to supply Stryker with disposable ultrasonic aspirator instrument tips and certain other consumable products used in conjunction with Stryker’s ultrasonic aspirator console and handpieces.  The agreement expires on March 31, 2016.

Total sales to Stryker and its respective percent of the Company’s net sales for the years ended July 31, 2013, 2012 and 2011, including the historical sales of pain control generators, and accessories that the Company has supplied in the past, as well as the disposable ultrasonic aspirator instrument tips sales and certain other consumable products resulting from the new agreements, were as follows (dollars in thousands):

	Year Ended July 31,
	2013			2012			2011
Net sales	$	10,815		$	10,398		$	7,710
Percent of net sales		17.2	%		17.3	%		13.9	%

No other customer comprises more than 10 percent of sales in any given quarter.

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Acquisition of MISS Ophthalmics LTD

12 Months Ended

Jul. 31, 2013

Acquisition of MISS Ophthalmics LTD [Abstract]

Acquisition of MISS Ophthalmics LTD [Text Block]

Note 2.  Acquisition of M.I.S.S. Ophthalmics LTD

On July 8, 2013, the Company acquired M.I.S.S. Ophthalmics Limited (“M.I.S.S.”), a private ophthalmology distribution company incorporated in England and Wales, for net cash consideration of $2.8 million.  M.I.S.S. was the Company’s distributor of ophthalmic products in the United Kingdom, and its wholesale distribution activities contributed approximately $1.1 million in revenue to the Company in fiscal 2013.  M.I.S.S. generated total revenue of approximately $3.2 million during its fiscal year ended March 31, 2013.

The Company has preliminarily allocated the purchase price to the tangible and intangible assets acquired and liabilities assumed based on their estimated fair value at the date of acquisition resulting in the recognition of $0.9 million of intellectual property and $1.5 million of goodwill.  The results of operations for M.I.S.S. have been included in the Consolidated Statements of Income for the period July 8, 2013 through July 31, 2013.

No supplemental pro-forma information is presented for the acquisition due to the immaterial effect of the acquisition on the Company's financial statements. The Company recognized $70,000 of transaction related costs that were expensed in the quarter ended July 31, 2013.

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Quarterly Financial Data (Unaudited) (Tables)

12 Months Ended

Jul. 31, 2013

Quarterly Financial Data (Unaudited) [Abstract]

Summary of quarterly financial information

The following table provides the Company’s quarterly information as presented in the Form 10-Q (dollars in thousands except earnings per share):

Quarters ended:	July 31,  2013*		April 30, 2013		January 31,  2013			October 31, 2012
Net sales	$	17,857	$	16,264	$	14,055		$	14,620
Gross profit		9,676		9,051		5,171	**		8,473
Operating income		2,193		1,721		(2,153	)		1,941
Net income		1,439		1,150		(1,382	)		1,352
Earnings per share - basic
Net income	$	0.06	$	0.05	$	(0.05	)	$	0.05
Earnings per share - diluted
Net income	$	0.06	$	0.05	$	(0.05	)	$	0.05
Basic weighted average common shares outstanding		25,290,882		25,299,131		25,230,142			25,160,757
Diluted weighted average common shares outstanding		25,367,558		25,362,923		25,230,142			25,286,184

Quarters ended:	July 31, 2012		April 30, 2012			January 31,  2012		October 31, 2011
Net sales	$	16,861	$	14,568		$	15,080	$	13,505
Gross profit		9,809		7,822	***		8,972		7,916
Operating income		2,946		1,405			2,618		1,512
Income from continuing operations		1,942		1,006			1,867		1,153
Loss (income) from discontinued operations, net of tax		--		--			--		382
Net income		1,942		1,006			1,867		771
Earnings per share – basic
Income from continuing operations	$	0.08	$	0.04		$	0.07	$	0.05
Loss from discontinued operations		--		--			--		(0.02	)
Net income	$	0.08	$	0.04		$	0.07	$	0.03
Earnings per share – diluted
Income from continuing operations	$	0.08	$	0.04		$	0.07	$	0.05
Loss from discontinued operations		--		--			--		(0.02	)
Net income	$	0.08	$	0.04		$	0.07	$	0.03
Basic weighted average common shares outstanding		25,165,493		25,184,447			25,085,296		24,971,034
Diluted weighted average common shares outstanding		25,293,168		25,363,620			25,280,449		25,136,727

*      The M.I.S.S. acquisition has been reflected in our results of operations from July 8 through July 31, 2013.

**  In the second quarter of fiscal 2013, the Company recorded an inventory write-down of approximately $2.1 million, or approximately $0.06 per share, net of tax.

*** In the third quarter of fiscal 2012, the Company recorded an inventory write-down of approximately $367,000, or approximately $0.01 earnings per share, net of tax.

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Valuation Allowances and Qualifying Accounts

12 Months Ended

Jul. 31, 2013

Valuation Allowances and Qualifying Accounts [Abstract]

Valuation Allowances and Qualifying Accounts

Note 20. Valuation Allowances and Qualifying Accounts

Schedule II — Valuation Allowances and Qualifying Accounts

(dollars in thousands)

Classifications	Balance at Beginning of Year		Charges to Cost and Expenses		Charges to Other Accounts		Deduction from Reserves			Balance at End of Year
Year ended July 31, 2011
Allowance for Doubtful Accounts  & Returned Goods	$	282	$	5	$	--	$	(5	)	$	282
Allowance for Excess and Obsolete Inventory	$	38	$	44	$	--	$	--		$	82
Year ended July 31, 2012
Allowance for Doubtful Accounts & Returned Goods	$	282	$	37	$	--	$	--		$	319
Allowance for Excess and Obsolete Inventory	$	82	$	384	$	--	$	--		$	466
Year ended July 31, 2013
Allowance for Doubtful Accounts & Returned Goods	$	319	$	207	$	--	$	31		$	495
Allowance for Excess and Obsolete Inventory	$	466	$	1,368	$	--	$	--		$	1,834

(1) Adjustments represent write-offs of uncollectible accounts receivable or excess and obsolete inventory.

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OEM Partner Agreements (Tables)

12 Months Ended

Jul. 31, 2013

OEM Partner Agreements [Abstract]

Total sales to marketing partners and their respective percent of the Company's net sales

Codman

Total sales to Codman and its respective percent of the Company’s net sales for the years ended July 31, 2013, 2012 and 2011, including the historical sales of generators, accessories and disposable cord tubing that the Company has supplied in the past, as well as the disposable bipolar forceps sales resulting from the addendum to the existing distribution agreement, were as follows (dollars in thousands):

	Year Ended July 31,
	2013			2012			2011
Net sales	$	14,097		$	11,150		$	10,507
Percent of net sales		22.4	%		18.6	%		18.9	%

Stryker Corporation (“Stryker”)

Total sales to Stryker and its respective percent of the Company’s net sales for the years ended July 31, 2013, 2012 and 2011, including the historical sales of pain control generators, and accessories that the Company has supplied in the past, as well as the disposable ultrasonic aspirator instrument tips sales and certain other consumable products resulting from the new agreements, were as follows (dollars in thousands):

	Year Ended July 31,
	2013			2012			2011
Net sales	$	10,815		$	10,398		$	7,710
Percent of net sales		17.2	%		17.3	%		13.9	%

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Operating Leases (Tables)

12 Months Ended

Jul. 31, 2013

Operating Leases [Abstract]

Approximate minimum rental commitment under non-cancelable operating leases

The approximate minimum rental commitment under non-cancelable operating leases as of July 31, 2013 is due as follows (dollars in thousands):

Year Ending July 31,	Amount
2014	$	388
2015		265
2016		87
2017		--
2018		--
	$	740

Rent expense incurred and charged to cost of sales and selling, general and administrative expenses was approximately $364,000, $353,000 and $358,000 for the years ended July 31, 2013, 2012 and 2011, respectively.

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Stockholders' Equity (Details) (USD $)	12 Months Ended
	Jul. 31, 2013	Jul. 31, 2012	Sep. 22, 2005	Sep. 21, 2005
Stockholders' Equity [Abstract]
Common stock, par value (in dollars per share)	$ 0.001	$ 0.001	$ 0.001	$ 0.00667
Common stock, shares authorized (in shares)	50,000,000	50,000,000	50,000,000
Common stock, voting rights	Each share of common stock is entitled to one vote on any matter submitted to the holders

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Pledged Assets, Short and Long-Term Debt (Details) (USD $) In Millions, unless otherwise specified	12 Months Ended
	Jul. 31, 2013
Line of Credit Facility [Line Items]
Minimum fixed charge coverage ratio	1.1
Revolving Credit Facility [Member]
Line of Credit Facility [Line Items]
Maximum borrowing capacity	$ 9.5
Current borrowing capacity	9.5
Description of variable rate basis	The one-, two- or three-month LIBOR
Basis spread on variable rate (in hundredths)	2.00%
Interest rate at period end (in hundredths)	2.27%
Interest charge on unused portion of facility (in hundredths)	0.20%
Borrowings under credit facility	0
Maturity date	Nov. 30, 2013
Number of financial covenants	2
Maximum leverage ratio	3.75
Leverage ratio	0.65
Fixed charge coverage ratio	488.6
Collateral availability under the line	9.5
Equipment Line of Credit [Member]
Line of Credit Facility [Line Items]
Maximum borrowing capacity	1.0
Description of variable rate basis	One-month LIBOR
Basis spread on variable rate (in hundredths)	3.00%
Minimum interest rate (in hundredths)	3.50%
Borrowings under credit facility	$ 0
Maturity date	Nov. 30, 2013

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OEM Partner Agreements (Details) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Jul. 31, 2013 Partner	Jul. 31, 2012	Jul. 31, 2011
Collaborative Arrangements and Non-collaborative Arrangement Transactions [Line Items]
Number of U.S. based national and international marketing partners	2
Net Sales	$ 62,796	$ 60,014	$ 55,657
Reporting threshold (in hundredths)	10.00%
Codman collaborative arrangement [Member]
Collaborative Arrangements and Non-collaborative Arrangement Transactions [Line Items]
Numbers of years a product was sold	30 years
Net Sales	14,097	11,150	10,507
Percent of net sales (in hundredths)	22.40%	18.60%	18.90%
Codman collaborative arrangement [Member] | Bipolar generators and related disposables and accessories [Member]
Collaborative Arrangements and Non-collaborative Arrangement Transactions [Line Items]
Collaborative arrangement time frame	3 years
Collaborative arrangements extension	3 years
Codman collaborative arrangement [Member] | Malis Spetzler Trademark [Member]
Collaborative Arrangements and Non-collaborative Arrangement Transactions [Line Items]
Collaborative arrangement time frame	3 years
Collaborative arrangements extension	3 years
Stryker collaborative arrangement [Member]
Collaborative Arrangements and Non-collaborative Arrangement Transactions [Line Items]
Net Sales	$ 10,815	$ 10,398	$ 7,710
Percent of net sales (in hundredths)	17.20%	17.30%	13.90%

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Consolidated Balance Sheets (Parenthetical) (USD $) In Thousands, except Share data, unless otherwise specified	Jul. 31, 2013	Jul. 31, 2012
Current assets
Accounts receivable, allowance for doubtful accounts	$ 495	$ 319
Stockholders' equity
Common stock, par value (in dollars per share)	$ 0.001	$ 0.001
Common stock, shares authorized (in shares)	50,000,000	50,000,000
Common stock, shares issued (in shares)	25,292,960	25,160,069
Common stock, shares outstanding (in shares)	25,292,960	25,160,069

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Other Intangible Assets

12 Months Ended

Jul. 31, 2013

Other Intangible Assets [Abstract]

Other Intangible Assets

Note 7.  Other Intangible Assets

Information regarding the Company’s other intangible assets is as follows (dollars in thousands):

	Gross Carrying Value		Accumulated Amortization		Net
	July 31, 2013
Proprietary know-how	$	4,057	$	2,286	$	1,771
Trademark		5,938		--		5,938
Licensing agreement		5,834		2,766		3,068
Customer relationships		531		--		531
Other intangibles		407		--		407
Patents		2,270		859		1,411
	$	19,037	$	5,911	$	13,126
	July 31, 2012
Proprietary know-how	$	4,057	$	2,039	$	2,018
Trademark		5,923		--		5,923
Licensing agreement		5,834		2,498		3,336
Patents		1,873		694		1,179
	$	17,687	$	5,231	$	12,456

Goodwill of $1,495,000 and other intangibles of $1,530,000 are a result of the acquisition of M.I.S.S completed on July 8, 2013.  Goodwill of $10,660,000 and proprietary know-how of $4,057,000 are a result of the reverse merger transaction completed on September 21, 2005.  The Company did not incur costs to renew or extend the term of acquired intangible assets during the fiscal year ended July 31, 2013.

Amortization is included in general and administrative expense and was $680,000, $600,000 and $653,000 for the years ended July 31, 2013, 2012 and 2011, respectively.  Amortization for the next five years is expected to approximate $800,000 annually.

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Consolidated Statements of Income and Comprehensive Income (Parenthetical) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Jul. 31, 2013	Jul. 31, 2012	Jul. 31, 2011
Condensed Consolidated Statements of Income and Comprehensive Income (Unaudited) [Abstract]
Loss from discontinued operations, net of income tax benefit	$ 0	$ 193	$ 24

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Commitments and Contingencies (Details) (Change in Control Agreement [Member])	12 Months Ended
	Jul. 31, 2013
Change in Control Agreement [Member]
Change in Control [Line Items]
Time frame for agreement to expire after the change of control	1 year
Time frame to enter into a separation agreement after termination	30 days
Number of years of base salary to be paid per agreement	1 year
Number of monthly equal installments to be paid after termination	12 months
Time frame for all awards to be exercised after termination	1 year

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Consolidated Balance Sheets (USD $) In Thousands, unless otherwise specified	Jul. 31, 2013	Jul. 31, 2012
Current assets
Cash and cash equivalents	$ 12,470	$ 12,680
Accounts receivable, net of allowance for doubtful accounts of $495 and $319, respectively	14,425	11,796
Inventories	14,825	15,679
Income taxes refundable	254	0
Prepaid expenses	996	825
Deferred income taxes	1,827	1,247
Total current assets	44,797	42,227
Property and Equipment, net	8,962	9,239
Intangible and Other Assets
Goodwill	12,155	10,660
Other intangible assets	11,715	11,277
Deferred income taxes	3,557	4,088
Patents, net	1,411	1,179
Cash value of life insurance	96	93
Total assets	82,693	78,763
Current Liabilities
Accounts payable	3,237	2,144
Accrued expenses	3,486	2,844
Income taxes payable	0	191
Deferred revenue	1,288	1,288
Total current liabilities	8,011	6,467
Long-term liabilities
Deferred revenue	14,530	15,818
Total long-term liabilities	14,530	15,818
Total liabilities	22,541	22,285
Commitments and Contingencies (Notes 10 and 17)
Stockholders' equity
Common stock at July 31, 2013 and July 31, 2012, $0.001 par value, 50,000,000 shares authorized; 25,292,960 and 25,160,069 shares issued and outstanding, respectively	25	25
Additional paid-in capital	27,489	26,421
Retained earnings	33,097	30,538
Accumulated other comprehensive loss:
Foreign currency translation adjustment	(459)	(506)
Total stockholders' equity	60,152	56,478
Total liabilities and stockholders' equity	$ 82,693	$ 78,763

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Operating Leases (Details) (USD $)	12 Months Ended
	Jul. 31, 2013	Jul. 31, 2012	Jul. 31, 2011
Approximate minimum rental commitment under non-cancelable operating leases [Abstract]
2014	$ 388,000
2015	265,000
2016	87,000
2017	0
2018	0
Total	740,000
Rent expense	$ 364,000	$ 353,000	$ 358,000

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Nature of Business and Significant Accounting Policies (Policies)

12 Months Ended

Jul. 31, 2013

Nature of Business and Significant Accounting Policies [Abstract]

Use of estimates in the preparation of financial statements

Use of estimates in the preparation of financial statements: The preparation of consolidated financial statements in conformity with U.S. generally accepted accounting principles (“U.S. GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenue and expenses during the reporting period.  Actual results could differ from those estimates.

Principles of consolidation

Principles of consolidation: The consolidated financial statements include the accounts of Synergetics USA and its wholly owned subsidiaries: Synergetics, Synergetics IP, Inc., Synergetics Development Company, LLC and Synergetics Delaware, Inc.  All significant intercompany accounts and transactions have been eliminated.

Cash and cash equivalents

Cash and cash equivalents: For purposes of the consolidated statements of cash flows, the Company considers all highly liquid debt instruments purchased with maturity of three months or less to be cash equivalents.

Accounts receivable

Accounts receivable: During the ordinary course of its business, the Company grants unsecured credit to its domestic and international customers.  Accounts receivable are carried at original invoice amount less an estimate made for doubtful accounts based on a review of all outstanding amounts on a monthly basis.  Collateral is not generally required on the Company’s accounts receivable.  Accounts receivable are generally considered past due based upon their specific terms.  Management determines the allowance for doubtful accounts by regularly evaluating individual customer receivables and considering a customer’s financial condition, credit history and current economic conditions.  Accounts receivable are written off when deemed uncollectible.  Recoveries of accounts receivable previously written off are recorded when received.  The Company generally does not charge interest on past-due amounts in accounts receivable.  The Company has a history of minimal uncollectible accounts.

Concentration of credit risk

Concentration of credit risk: Financial instruments, which potentially subject the Company to concentrations of credit risk, consist principally of cash and cash equivalents and accounts receivable.  The Company’s cash and cash equivalents are primarily held in a money market account in a bank and currently exceed the FDIC insurance limit.  Generally these deposits can be redeemed upon demand and therefore, bear minimal risk.

Inventories

Inventories: Inventories, consisting of purchased materials, direct labor and manufacturing overhead, are stated at the lower of cost, with cost being determined using the first-in, first-out method, or market.  The Company’s inventory is very dynamic and new products are added frequently.  Thus, the Company reviews the valuation of its inventory on a quarterly basis and determines if a valuation allowance is necessary for items that have not had their values updated recently.

In addition, the Company evaluates inventories for excess quantities and identified obsolescence quarterly.  The Company’s evaluation includes an analysis of historical experience and monitoring current inventory activity by product.  As part of this analysis, the Company considers several factors, including the inventory’s length of time on hand, historical sales, product life cycle and product obsolescence.  Estimates are used to determine the necessity of recording these reserves based on periodic detailed analysis using both quantitative and qualitative factors.   If future cost valuations, future demand or market conditions are different from the Company’s projections, a change in recorded inventory valuation reserves may be required and would be reflected in cost of sales in the period the revision is made.  To the extent that the Company determines there are some excess quantities based on its projected levels of sales and other requirements, or obsolete material in inventory, the Company records a valuation reserves against all or a portion of the value of the related parts or products. During the second quarter of fiscal 2013, the Company completed a detailed analysis of its inventory and recorded a reserve for excess inventory of approximately $1,629,000.  In its continuous effort to manage its inventory, the Company had previously conducted an inventory analysis of obsolete inventory and recorded a provision for same in the third quarter of fiscal 2012.   The reserve was necessary to reflect not only the Company’s changing base ophthalmic business but also to reflect the appropriate level and mix identified in accordance with the Company’s lean methodology with respect to its inventory.

Property and equipment

Property and equipment: Property and equipment are depreciated using the straight-line method over their estimated useful lives as follows:

	Useful lives (in years)
Building and improvements	7-39
Machinery and equipment	5-7
Furniture and fixtures	5-7
Software	3-10

Goodwill and other intangibles

Goodwill and other intangibles: Absent any impairment indicators, goodwill is tested for impairment on an annual basis.  The Company performs its goodwill impairment tests during the fourth fiscal quarter.  The Company has adopted the provisions of Accounting Standards Update (“ASU”) No. 2011-08, “Intangibles – Goodwill and Other:  Testing Goodwill for Impairment” and ASU No. 2012-12, “Intangibles – Goodwill and Other:  Testing Indefinite-Lived Intangible Assets for Impairment,” which permits the Company to assess qualitative factors to determine whether the existence of events or circumstances leads to a determination that it is more likely than not that that, goodwill and other intangibles have been impaired.  The Company has determined, based upon as assessment of qualitative factors, that it is more likely than not that goodwill and other intangibles have not been impaired and no further testing was performed.  Other intangible assets, consisting of licensing agreements and proprietary know-how, are amortized to operations under the straight-line method over their estimated useful lives or statutory lives, whichever is shorter.  These periods range from two to seventeen years.  The life of a trademark is inextricably related to the life of the product bearing the mark or the life of the business entity owning the trademark.  The Company intends to use the Malis® trademark indefinitely, and therefore, its useful life is not limited to any specific product. The trademark constitutes an indefinite-lived intangible that will be used in perpetuity.  Proprietary know-how consists of the patented technology which is included in the Company’s core product lines, bipolar electrosurgical generators.  As a proprietary technology is a distinguishing feature of the Company’s products, it represents a valuable intangible asset.

Patents

Patents: Incremental legal and other costs to obtain the patent are capitalized to a patent asset.  Salaries, benefits and other direct costs of product development are expensed as operating expenses in research and development (“R&D”) costs.  Patents are amortized to operations under the straight-line method over the remaining statutory life of the patent.  Total amortization for the years ended July 31, 2013, 2012 and 2011 was $680,000, $600,000 and $653,000, respectively.

Deferred revenue

Deferred revenue:During the second quarter of fiscal 2011, the Company received a payment from Codman & Shurtleff, Inc. (“Codman”), a OEM partner, to establish exclusivity on certain generator products and accessories.  Revenue from the agreement has been deferred and is being amortized over its expected term.  The Company recognized $-, $266,000 and $334,000 in revenue for the fiscal years ended July 31, 2013, 2012 and 2011, respectively, under the terms of the exclusivity agreement.

On April 23, 2010, the Company entered into a Settlement and License Agreement with Alcon, Inc. (“Alcon”)  pursuant to which Alcon paid to the Company $32.0 million. The net proceeds to the Company were $21.4 million after contingency payments to attorneys. The Company recognized a gain from this agreement of $2.4 million in the third quarter of fiscal 2010. The remaining $19.0 million has been accounted for as an up-front license fee under the Confidential Settlement and License Agreement and was deferred and recognized as earned over a period estimated to be 15 years based upon estimated shipments to Alcon under a related Supply Agreement.  On February 13, 2012, Alcon informed the Company that it had decided to cancel the project, orders and forecasts covering the two products to have been supplied under the Supply Agreement. However, the Supply Agreement remains in effect and the Company has continuing performance obligations associated with the Supply Agreement. Therefore, the Company plans on recognizing the remaining deferred revenue associated with the Supply Agreement ratably over the next 13 years which is the remaining life of the patents and associated Supply Agreement.The Company recognized $1.3 million, $1.2 million and $696,000 of this deferred revenue for the fiscal years ended July 31, 2013, 2012 and 2011, respectively.

	July 31, 2013		July 31, 2012
Deferred revenue – Alcon settlement	$	15,818	$	17,106
Less:  Short-term		1,288		1,288
Long-term portion	$	14,530	$	15,818

Impairment of long-lived assets (excluding goodwill and other intangibles)

Impairment of long-lived assets (excluding goodwill and other intangibles): The Company reviews long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.  Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to future undiscounted cash flows expected to be generated by the asset.  Measurement of an impairment loss for long-lived assets and certain identifiable assets that management expects to hold and use is based on the fair value of the asset.  Assets to be sold are reported at the lower of the carrying amount or the fair value less costs to sell.

Product warranty

Product warranty: The Company provides a warranty against manufacturing and workmanship defects. Under the Company’s general terms and conditions of sale, liability during the warranty period (typically three years) is limited to repair or replacement of the defective item. The Company’s warranty cost is not material.

Income taxes

Income taxes: The Company accounts for income taxes under Accounting Standards Codification (“ASC”) Topic 740, “Income Taxes” (“ASC Topic 740”).  Under ASC Topic 740, the deferred tax provision is determined using the liability method whereby deferred tax assets are recognized for deductible temporary differences and operating loss, tax credit carry-forwards and deferred tax liabilities are recognized for taxable temporary differences.  Temporary differences are the differences between the reported amounts of assets and liabilities and their tax bases.  Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized.  Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment.

In addition, under ASC Topic 740, the Company may recognize tax liabilities when, despite the Company’s belief that its tax return positions are supported, the Company believes that certain positions may not be fully sustained upon review by tax authorities.  The Company has identified no uncertain tax positions subsequent to the adoption of this standard on August 1, 2007.

The Company’s policy is to recognize interest and penalties through income tax expense.  As of July 31, 2013, the 2010 to 2012 tax years remain subject to examination by major tax jurisdictions.  There are no federal income tax audits in process as of July 31, 2013. There are one foreign audit and one state audit currently in progress.

Fair value of financial instruments

Fair value of financial instruments: The Company’s financial instruments consist of cash and cash equivalents, accounts receivable, accounts payable, accrued expenses and debt.  As of July 31, 2013, 2012 and 2011, the carrying amounts of financial instruments, including cash and cash equivalents, accounts receivable, accounts payable and accrued expenses approximate fair value due to the short maturity of these instruments.

Non-financial assets such as goodwill, intangible assets and property, plant and equipment are measured at fair value when there is an indicator of impairment and recorded at fair value only when impairment is recognized.  No impairment indicators existed as of July 31, 2013.

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.  The fair value hierarchy distinguishes between (1) market participant assumptions developed based on market data obtained from independent sources (observable inputs) and (2) an entity’s own assumptions about market participant assumptions developed based on the best information available in the circumstances (unobservable inputs).  The fair value hierarchy consists of these broad levels, which gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3).  The Company’s Level 1 financial assets are money market funds, whose fair values are based on quoted market prices.  The Company does not have any Level 2 or Level 3 financial assets.

Foreign currency translation

Foreign currency translation:  All balance sheet accounts have been translated using the exchange rates in effect at the balance sheet date.  Statements of income amounts have been translated using the average exchange rate for the year.  The gains and losses resulting from the changes in exchange rates from year to year have been reported in other comprehensive income (loss).  The foreign currency translation adjustment is the only component of accumulated other comprehensive loss.  Foreign currency translation adjustments exclude income tax expense (benefit) given that the Company’s investments in foreign subsidiaries are deemed to be reinvested for an indefinite period of time.

Revenue recognition

Revenue recognition: The Company primarily records revenue from product sales when the revenue is realized and the product is shipped from its facilities.  This includes satisfying the following criteria: the arrangement with the customer is evident, usually through the receipt of a purchase order; the sales price is fixed and determinable; delivery to the carrier has occurred; and collectability is reasonably ensured. Freight and insurance billed to customers is included in net sales, and the cost of freight and insurance is included in cost of sales.  Sales tax billed to customers is included as a liability as products are shipped.

The terms and conditions of sales to both the Company’s domestic and international distributors do not differ materially from the terms and conditions of sales to its domestic and international end-user customers.

Service revenue substantially relates to repairs of products and is recognized when the service has been completed.  Revenue from royalty fees is recorded as the products bearing the trademark are shipped.

Advertising

Advertising: The Company follows the policy of charging the costs of advertising to expense as incurred. Advertising expense was approximately $146,000, $153,000 and $119,500 for the years ended July 31, 2013, 2012 and 2011, respectively.

Royalties

Royalties: The Company pays royalties to doctors and medical institutions for providing assistance in the design and development of various devices and components.  Royalties are paid quarterly based on the sales of the instrument or components.  Royalty expense was approximately $331,300, $281,600 and $318,000 for the years ended July 31, 2013, 2012 and 2011, respectively.

Stock compensation

Stock compensation: The Company has a stock plan for employees and consultants allowing for incentive and non-qualified stock options, restricted stock and stock awards which have been granted to certain employees and consultants of the Company.  In addition, the Company has a stock option plan for non-employee directors allowing for non-qualified stock options.  Options under this plan have been granted to all non-employee directors.  Stock-based compensation cost is measured at the grant date, based on the fair value of the award, and is recognized over the directors’ and employees’ requisite service period. Compensation expense is calculated using the Black-Scholes option pricing model.  In addition, compensation expense equal to number of shares granted multiplied by the market value on the date of the grant over the restriction period is recognized in net earnings for restricted stock awards.

Earnings per share

Earnings per share: Basic earnings per share (“EPS”) data has been computed on the basis of the weighted average number of common shares outstanding during each period presented.  Diluted EPS data has been computed on the basis of the assumed conversion, exercise or issuance of all potential common stock instruments, unless the effect is to reduce the loss or increase the net income per common share (dollars in thousands, except share and per share data):

	Year Ended July 31,
	2013		2012			2011
Numerator:
Income from continuing operations	$	2,559	$	5,968		$	5,669
Loss from discontinued operations net of income tax		--		382			36
Net income		2,559		5,586			5,633
Denominator:
Weighted average common shares and denominator for basic calculation		25,243,010		25,100,064			24,901,832
Stock options and restricted stock		94,515		156,520			133,263
Denominator for diluted calculation		25,337,525		25,256,584			25,035,095
Earnings per share – basic
Income from continuing operations	$	0.10	$	0.24		$	0.23
Loss from discontinued operations		--		(0.02	)		--
Net income	$	0.10	$	0.22		$	0.23
Earnings per share – diluted
Income from continuing operations	$	0.10	$	0.24		$	0.23
Loss from discontinued operations		--		(0.02	)		--
Net income	$	0.10	$	0.22		$	0.23

Stock option shares excluded from computation of dilutive income per share because the effect would be antidilutive for the years ended July 31, 2013, 2012 and 2011 were 533,079, 215,734 and 60,000, respectively.

Segment reporting

Segment reporting: Operating segments are defined as components of an enterprise about which separate financial information is available that is evaluated regularly by the chief decision maker or group in deciding how to allocate resources and in assessing performance.  The Company’s chief decision maker reviews the results of operations and requests for capital expenditures based on one industry segment: producing and selling products and procedures for surgery, primarily for vitreoretinal surgery and neurosurgery.  The Company’s entire revenue is generated through this segment.  Revenues are attributed to countries based upon the location of end-user customers or distributors.

Reclassifications

Reclassifications: Certain reclassifications have been made to the prior year financial statements to conform to the current year’s presentation.

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Enterprise-wide Sales Information

12 Months Ended

Jul. 31, 2013

Enterprise-wide Sales Information [Abstract]

Enterprise-wide Sales Information

Note 16. Enterprise-wide Sales Information

Enterprise-wide sales information as of July 31, 2013, 2012 and 2011 consisted of the following (dollars in thousands):

	Fiscal Year Ended July 31,
	2013		2012		2011
Net Sales
Ophthalmic	$	35,446	$	35,240	$	34,547
OEM (1)		26,469		23,973		19,456
Other (2)		881		801		1,654
Total	$	62,796	$	60,014	$	55,657
	Fiscal Year Ended July 31,
		2013		2012		2011
Net Sales
Domestic	$	46,489	$	44,047	$	38,997
International		16,307		15,967		16,660
Total	$	62,796	$	60,014	$	55,657

(1) Net sales from OEM represent sales of electrosurgery generators, disposable bipolar forceps and related accessories and royalties from Codman, multi-channel generators, disposable ultrasonic tips and related accessories to Stryker, sales of certain disposable products to Mobius along with sales of certain laser probes to Iridex in the comparable 2012 period. In addition, recognition of deferred revenues of $1.3 million from Alcon is included in this category for the fiscal year ended July 31, 2013.  Recognition of deferred revenues of $266,000 and $1.2 million from Codman and Alcon, respectively, are included in this category for the fiscal year ended July 31, 2012.

(2) Net sales from Other represent direct neurosurgery revenues and other miscellaneous revenues.

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Discontinued Operations (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended					12 Months Ended
	Jul. 31, 2012		Apr. 30, 2012	Jan. 31, 2012	Oct. 31, 2011	Jul. 31, 2013	Jul. 31, 2012	Jul. 31, 2011
Discontinued Operations [Abstract]
Net Sales						$ 0	$ 23	$ 188
Operating costs						0	(191)	(248)
Impairment, restructuring and other charges						0	(253)	0
Write-off of goodwill						0	(29)	0
Loss on sale of fixed assets						0	(125)	0
Loss from discontinued operations before benefit for income taxes						0	(575)	(60)
Income tax benefit						0	193	24
Loss from discontinued operations	$ 0	[1]	$ 0	$ 0	$ 382	$ 0	$ (382)	$ (36)

[1] The M.I.S.S. acquisition has been reflected in our results of operations from July 8 through July 31, 2013.

XML

Stock-Based Compensation Plans (Details) (USD $)	12 Months Ended													3 Months Ended	12 Months Ended						3 Months Ended	12 Months Ended												12 Months Ended					12 Months Ended
	Jul. 31, 2013	Jul. 31, 2012	Jul. 31, 2011	Jul. 31, 2013 Less than 2.00 [Member]	Jul. 31, 2013 2.01 to 3.00 [Member]	Jul. 31, 2013 3.01 to 4.00 [Member]	Jul. 31, 2013 4.01 to 5.00 [Member]	Jul. 31, 2013 5.01 to 6.21 [Member]	Jul. 31, 2013 Stock Options [Member]	Jul. 31, 2012 Stock Options [Member]	Jul. 31, 2011 Stock Options [Member]	Jul. 31, 2013 Stock Options [Member] Minimum [Member]	Jul. 31, 2013 Stock Options [Member] Maximum [Member]	Jan. 31, 2013 Stock Options [Member] Directors [Member]	Jul. 31, 2013 Stock Options [Member] Directors [Member]	Jul. 31, 2012 Stock Options [Member] Directors [Member]	Jul. 31, 2011 Stock Options [Member] Directors [Member]	Jul. 31, 2013 Stock Options [Member] Employees [Member]	Jul. 31, 2012 Stock Options [Member] Employees [Member]	Jul. 31, 2011 Stock Options [Member] Employees [Member]	Jan. 31, 2013 Stock Options [Member] Officers [Member]	Jul. 31, 2013 Stock Options [Member] Officers [Member]	Jul. 31, 2013 Restricted Stock [Member]	Jul. 31, 2012 Restricted Stock [Member]	Jul. 31, 2011 Restricted Stock [Member]	Jul. 31, 2013 Restricted Stock [Member] Advisors [Member]	Jul. 31, 2012 Restricted Stock [Member] Advisors [Member]	Jul. 31, 2011 Restricted Stock [Member] Advisors [Member]	Jul. 31, 2013 Restricted Stock [Member] Employees [Member]	Jul. 31, 2012 Restricted Stock [Member] Employees [Member]	Jul. 31, 2011 Restricted Stock [Member] Employees [Member]	Jul. 31, 2013 2001 Stock Plan [Member] Plan	Sep. 19, 2005 2001 Stock Plan [Member]	Jul. 31, 2013 2001 Stock Plan [Member] Stock Options [Member]	Jul. 31, 2013 2001 Stock Plan [Member] Restricted Stock [Member]	Jul. 31, 2013 2001 Stock Plan [Member] Restricted Stock [Member] Advisors [Member]	Jul. 31, 2013 2005 Non-Employee Directors' Plan [Member]	Sep. 19, 2005 2005 Non-Employee Directors' Plan [Member]	Jul. 31, 2013 2005 Non-Employee Directors' Plan [Member] Stock Options [Member] Directors [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Number of existing active option plans prior to merger																																2
Number of terminated option plans prior to merger																																2
Shares authorized (in shares)																																	1,345,000					700,000
Aggregate number of available for future grant (in shares)																																53,632					345,000
Term									10 years
Vesting period												3 years	5 years		12 months
Options, number of shares [Roll Forward]
Options outstanding, beginning of period (in shares)									679,745	517,029	576,695
Granted (in shares)									142,227	235,734	108,751			60,000							82,227
Forfeited (in shares)									(15,000)	(56,133)	(27,000)
Exercised (in shares)									(59,310)	(16,885)	(141,417)
Options outstanding, end of period (in shares)									747,662	679,745	517,029
Options exercisable, end of period (in shares)									514,451
Options, weighted average exercise price [Roll Forward]
Options outstanding, beginning of period (in dollars per share)									$ 3.80	$ 2.68	$ 2.08
Granted (in dollars per share)									$ 4.52	$ 6.21	$ 4.43
Forfeited (in dollars per share)									$ 4.54	$ 4.11	$ 3.21
Exercised (in dollars per share)									$ 1.10	$ 2.07	$ 1.49
Options outstanding, end of period (in dollars per share)									$ 3.23	$ 3.80	$ 2.68
Options exercisable, end of period (in dollars per share)									$ 2.92
Options, weighted average fair value [Roll Forward]
Options outstanding, beginning of period (in dollars per share)									$ 2.98	$ 2.16	$ 1.71
Granted (in dollars per share)									$ 3.42	$ 4.75	$ 3.56
Forfeited (in dollars per share)									$ 3.66	$ 3.22	$ 2.71
Exercised (in dollars per share)									$ 0.95	$ 1.99	$ 1.29
Options outstanding, end of period (in dollars per share)									$ 4.17	$ 2.98	$ 2.16
Options exercisable, end of period (in dollars per share)									$ 3.84
Unvested options, number of shares [Roll Forward]
Unvested options, beginning of period (in shares)									230,646
Granted (in shares)									142,227	235,734	108,751			60,000							82,227
Vested (in shares)									(134,662)
Forfeited (in shares)									(5,000)
Unvested options, period end (in shares)									233,211	230,646
Unvested options, weighted average grant date value [Roll Forward]
Unvested options, beginning of period (in dollars per share)									$ 5.24
Granted (in dollars per share)									$ 4.52
Vested (in dollars per share)									$ 4.89
Forfeited (in dollars per share)									$ 4.52
Unvested options, period end (in dollars per share)									$ 5.20	$ 5.24
Proceeds, related tax benefits and intrinsic value of options exercised [Abstract]
Proceeds of options exercised									$ 65,000	$ 35,000	$ 210,000
Related tax benefit recognized									72,000	24,000	125,000
Intrinsic value of options exercised									56,000	34,000	183,000
Additional information about options outstanding [Abstract]
Number (in shares)									747,662	679,745	517,029
Weighted average exercise price (in dollars per share)									$ 3.23	$ 3.80	$ 2.68
Aggregate intrinsic value									2,414,000
Weighted average contractual term									7 years
Additional information about exercisable options [Abstract]
Number (in shares)									514,451
Weighted average exercise price (in dollars per share)									$ 2.92
Aggregate intrinsic value									1,501,000
Weighted average contractual term									6 years 3 months 18 days
Options issued (in shares)																																							10,000
Compensation expense related to current year															117,000							41,000
Compensation expense for stock options related to previous year															113,000							192,000
Weighted average fair value of options granted and the assumptions used [Abstract]
Expected average risk-free interest rate (in hundredths)									1.72%	1.92%	3.30%
Expected average life									10 years	10 years	10 years
Expected volatility (in hundredths)									70.50%	71.40%	75.40%
Expected dividend yield (in hundredths)									0.00%	0.00%	0.00%
Term of U.S. Treasury yield curve used to estimate average risk-free interest rate	10 years
Future compensation cost expected to be recognized [Abstract]
Fiscal 2014	333,000
Fiscal 2015	254,000
Fiscal 2016	226,000
Fiscal 2017	88,000
Unrecognized compensation cost related to non-vested share-based compensation arrangements granted																																			1,100,000
Weighted average period for recognition of unrecognized compensation cost																																			4 years
Compensation expenses																																		55,000
Restricted stock grants, number of shares [Roll Forward]
Restricted stock awards, beginning of period (in shares)																							431,778	310,707	278,841
Granted (in shares)																							70,307	202,072	43,846											15,309
Vested (in shares)																							(86,677)	(41,617)	(11,980)
Forfeited (in shares)																							(10,160)	(39,384)
End of period (in shares)																							405,248	431,778	310,707
Weighted Average Grant Date Fair Value [Roll Forward]
Restricted stock awards, beginning of period (in dollars per share)																							$ 3.82	$ 2.38	$ 2.03
Granted (in dollars per share)																							$ 4.52	$ 6.37	$ 4.43
Vested (in dollars per share)																							$ 4.57	$ 3.47	$ 1.75
Forfeited (in dollars per share)																							$ 3.47	$ 5.88
End of period (in dollars per share)																							$ 3.79	$ 3.82	$ 2.38
Compensation expense associated with stock-based compensation plans [Abstract]
Compensation Expense	931,000	764,000	358,000						463,000	371,000	160,000				230,000	217,000	100,000	233,000	154,000	60,000			468,000	393,000	198,000	55,000	36,000	44,000	413,000	357,000	154,000
Income Tax benefits from Share-based Compensation	$ 285,000	$ 225,000	$ 108,000
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range [Line Items]
Exercise price range, lower range limit (in dollars per share)					$ 2.01	$ 3.01	$ 4.01	$ 5.01
Exercise price range, upper range limit (in dollars per share)				$ 2.00	$ 3.00	$ 4.00	$ 5.00	$ 6.21
Number of outstanding options (in shares)	747,662			174,583	40,000	40,000	257,345	235,734
Options outstanding, weighted average remaining contractual life	7 years			5 years 9 months 18 days	4 years 6 months	3 years 6 months	8 years	8 years
Number of exercisable options (in shares)	514,451			154,750	40,000	40,000	150,385	129,316
Exercisable options, weighted average remaining contractual life	6 years 3 months 18 days			5 years 8 months 12 days	4 years 6 months	3 years 6 months	7 years 2 months 12 days	7 years 6 months

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Stock-Based Compensation Plans (Tables)

12 Months Ended

Jul. 31, 2013

Stock-Based Compensation [Abstract]

Stock options activity

A summary of the status of the fixed awards at July 31, 2013, 2012 and 2011 and changes during the years ended on those dates is as follows:

	Shares			Weighted Average Exercise Price		Weighted Average Fair Value
Options outstanding, July 31, 2010		576,695		$	2.08	$	1.71
For the period from August 1, 2010 through July 31, 2011:
Granted		108,751		$	4.43	$	3.56
Forfeited		(27,000	)	$	3.21	$	2.71
Exercised		(141,417	)	$	1.49	$	1.29
Options outstanding, July 31, 2011		517,029		$	2.68	$	2.16
For the period from August 1, 2011 through July 31, 2012
Granted		235,734		$	6.21	$	4.75
Forfeited		(56,133	)	$	4.11	$	3.22
Exercised		(16,885	)	$	2.07	$	1.99
Options outstanding, July 31, 2012		679,745		$	3.80	$	2.98
For the period from August 1, 2012 through July 31, 2013
Granted		142,227		$	4.52	$	3.42
Forfeited		(15,000	)	$	4.54	$	3.66
Exercised		(59,310	)	$	1.10	$	0.95
Options outstanding, July 31, 2013		747,662		$	3.23	$	4.17
Options exercisable, July 31, 2013		514,451		$	2.92	$	3.84

A further summary about awards outstanding at July 31, 2013 is as follows:

	Shares			Weighted Average Grant Date Value
Unvested options, beginning of period		230,646		$	5.24
Granted		142,227		$	4.52
Vested		(134,662	)	$	4.89
Forfeited		(5,000	)	$	4.52
Unvested options, period end		233,211		$	5.20

Proceeds, related tax benefits realized from options exercised and intrinsic value of options exercised

Proceeds, related tax benefits realized from options exercised and intrinsic value of options exercised were as follows (dollars in thousands), except exercise price:

	Fiscal Year Ended
	July 31, 2013		July 31, 2012		July 31, 2011
Proceeds of options exercised	$	65	$	35	$	210
Related tax benefit recognized		72		24		125
Intrinsic value of options exercised		56		34		183

Weighted average remaining life for options outstanding and weighted average exercise price per share for exercisable options

The following table provides information about options outstanding and exercisable options at July 31, 2013 (dollars in thousands):

	Options Outstanding		Exercisable Options
Number		747,662		514,451
Weighted average exercise price	$	3.23	$	2.92
Aggregate intrinsic value	$	2,414	$	1,501
Weighted average contractual term	7.0 years		6.3 years

The weighted average remaining life for options outstanding and weighted average exercise price per share for exercisable options at July 31, 2013 were as follows:

		Options Outstanding			Exercisable Options
		Shares		Weighted Average Remaining Contractual Life (in years)	Shares		Weighted Average Remaining Contractual Life (in years)
<$ 2.00			174,583	5.8 years		154,750	5.7 years
$	2.01 to $3.00		40,000	4.5 years		40,000	4.5 years
$	3.01 to $4.00		40,000	3.5 years		40,000	3.5 years
$	4.01 to $5.00		257,345	8.0 years		150,385	7.2 years
$	5.01 to $6.21		235,734	8.0 years		129,316	7.5 years
Total			747,662	7.0 years		514,451	6.3 years

Weighted average fair value of options granted and the assumptions used

The following table provides the weighted average fair value of options granted and the assumptions used in the Black-Scholes model:

	Fiscal Year Ended July 31,
	2013			2012			2011
Expected average risk-free interest rate		1.72	%		1.92	%		3.30	%
Expected average life (in years)		10			10			10
Expected volatility		70.5	%		71.4	%		75.4	%
Expected dividend yield		0.0	%		0.0	%		0.0	%

Information about restricted stock grants

The following table provides information about restricted stock grants during the fiscal year ended July 31, 2013, 2012 and 2011:

	Number of Shares			Weighted Average Grant Date Fair Value
Balance as of August 1, 2010		278,841		$	2.03
Granted		43,846		$	4.43
Vested		(11,980	)	$	1.75
Balance as of July 31, 2011		310,707		$	2.38
Granted		202,072		$	6.37
Forfeited		(39,384	)	$	5.88
Vested		(41,617	)	$	3.47
Balance as of July 31, 2012		431,778		$	3.82
Granted		70,307		$	4.52
Forfeited		(10,160	)	$	3.47
Vested		(86,677	)	$	4.57
Balance as of July 31, 2013		405,248		$	3.79

Schedule of Employee Service Share-based Compensation, Allocation of Recognized Period Costs

Compensation expense associated with stock-based compensation plans as of July 31, 2013, 2012 and 2011 was as follows (dollars in thousands):

	July 31, 2013		July 31, 2012		July 31, 2011
Stock Options:
Directors	$	230	$	217	$	100
Employees		233		154		60
Total	$	463	$	371	$	160
Restricted Stock
Employees	$	413	$	357	$	154
Advisors		55		36		44
Total		468		393		198
Total Compensation Expense	$	931	$	764	$	358
Income Tax benefits from Share-based Compensation	$	285	$	225	$	108

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Other Intangible Assets (Tables)

12 Months Ended

Jul. 31, 2013

Other Intangible Assets [Abstract]

Information regarding other intangible assets

Information regarding the Company’s other intangible assets is as follows (dollars in thousands):

	Gross Carrying Value		Accumulated Amortization		Net
	July 31, 2013
Proprietary know-how	$	4,057	$	2,286	$	1,771
Trademark		5,938		--		5,938
Licensing agreement		5,834		2,766		3,068
Customer relationships		531		--		531
Other intangibles		407		--		407
Patents		2,270		859		1,411
	$	19,037	$	5,911	$	13,126
	July 31, 2012
Proprietary know-how	$	4,057	$	2,039	$	2,018
Trademark		5,923		--		5,923
Licensing agreement		5,834		2,498		3,336
Patents		1,873		694		1,179
	$	17,687	$	5,231	$	12,456

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Accrued Expenses (Tables)

12 Months Ended

Jul. 31, 2013

Accrued Expenses [Abstract]

Accrued expenses

Accrued expenses as of July 31, 2013 and 2012 consisted of the following (dollars in thousands):

	2013		2012
Payroll, commissions and employee benefits	$	1,131	$	786
Royalties		147		62
Warranty		15		15
Other		2,193		1,981
	$	3,486	$	2,844

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Property and Equipment

12 Months Ended

Jul. 31, 2013

Property and equipment [Abstract]

Property and Equipment

Note 6.  Property and Equipment

Property and equipment as of July 31, 2013 and 2012 were as follows (dollars in thousands):

	2013		2012
Land	$	730	$	730
Building and improvements		6,365		5,896
Machinery and equipment		8,665		7,974
Furniture and fixtures		1,058		1,222
Software		1,107		1,014
Construction in progress		177		287
		18,102		17,123
Less accumulated depreciation		9,140		7,884
	$	8,962	$	9,239

Depreciation expense is included in both cost of sales, selling and general and administrative expenses.  There are minimal long-lived assets outside of the United States.  Depreciation expense for the years ended July 31, 2013, 2012 and 2011 was approximately $1,123,000, $1,093,000 and $972,000, respectively.

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Nature of Business and Significant Accounting Policies (Tables)

12 Months Ended

Jul. 31, 2013

Nature of Business and Significant Accounting Policies [Abstract]

Estimated useful lives of property and equipment

Property and equipment as of July 31, 2013 and 2012 were as follows (dollars in thousands):

	2013		2012
Land	$	730	$	730
Building and improvements		6,365		5,896
Machinery and equipment		8,665		7,974
Furniture and fixtures		1,058		1,222
Software		1,107		1,014
Construction in progress		177		287
		18,102		17,123
Less accumulated depreciation		9,140		7,884
	$	8,962	$	9,239

Deferred revenue

The Company recognized $1.3 million, $1.2 million and $696,000 of this deferred revenue for the fiscal years ended July 31, 2013, 2012 and 2011, respectively.

	July 31, 2013		July 31, 2012
Deferred revenue – Alcon settlement	$	15,818	$	17,106
Less:  Short-term		1,288		1,288
Long-term portion	$	14,530	$	15,818

Calculation of numerator and denominator in earnings per share

Basic earnings per share (“EPS”) data has been computed on the basis of the weighted average number of common shares outstanding during each period presented.  Diluted EPS data has been computed on the basis of the assumed conversion, exercise or issuance of all potential common stock instruments, unless the effect is to reduce the loss or increase the net income per common share (dollars in thousands, except share and per share data):

	Year Ended July 31,
	2013		2012			2011
Numerator:
Income from continuing operations	$	2,559	$	5,968		$	5,669
Loss from discontinued operations net of income tax		--		382			36
Net income		2,559		5,586			5,633
Denominator:
Weighted average common shares and denominator for basic calculation		25,243,010		25,100,064			24,901,832
Stock options and restricted stock		94,515		156,520			133,263
Denominator for diluted calculation		25,337,525		25,256,584			25,035,095
Earnings per share – basic
Income from continuing operations	$	0.10	$	0.24		$	0.23
Loss from discontinued operations		0.00		(0.02	)		0.00
Net income	$	0.10	$	0.22		$	0.23
Earnings per share – diluted
Income from continuing operations	$	0.10	$	0.24		$	0.23
Loss from discontinued operations		0.00		(0.02	)		0.00
Net income	$	0.10	$	0.22		$	0.23

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Nature of Business and Significant Accounting Policies (Details) (USD $)	3 Months Ended										12 Months Ended			3 Months Ended	12 Months Ended
	Jul. 31, 2013		Apr. 30, 2013	Jan. 31, 2013	Oct. 31, 2012	Jul. 31, 2012		Apr. 30, 2012	Jan. 31, 2012	Oct. 31, 2011	Jul. 31, 2013 Segment	Jul. 31, 2012	Jul. 31, 2011	Apr. 30, 2010 Alcon Settlement [Member]	Jul. 31, 2013 Alcon Settlement [Member] Product	Jul. 31, 2012 Alcon Settlement [Member]	Jul. 31, 2011 Alcon Settlement [Member]	Jul. 31, 2010 Alcon Settlement [Member]	Jul. 31, 2013 Codman Exclusivity [Member]	Jul. 31, 2012 Codman Exclusivity [Member]	Jul. 31, 2011 Codman Exclusivity [Member]	Jul. 31, 2013 Patents [Member]	Jul. 31, 2012 Patents [Member]	Jul. 31, 2011 Patents [Member]	Jul. 31, 2013 Building and improvements [Member] Minimum [Member]	Jul. 31, 2013 Building and improvements [Member] Maximum [Member]	Jul. 31, 2013 Machinery and equipment [Member] Minimum [Member]	Jul. 31, 2013 Machinery and equipment [Member] Maximum [Member]	Jul. 31, 2013 Furniture and fixtures [Member] Minimum [Member]	Jul. 31, 2013 Furniture and fixtures [Member] Maximum [Member]	Jul. 31, 2013 Software [Member] Minimum [Member]	Jul. 31, 2013 Software [Member] Maximum [Member]	Jul. 31, 2013 Other Intangible Assets [Member] Minimum [Member]	Jul. 31, 2013 Other Intangible Assets [Member] Maximum [Member]
Inventory [Abstract]
Inventory reserves				$ 1,629,000
Property, Plant and Equipment [Line Items]
Useful life																									7 years	39 years	5 years	7 years	5 years	7 years	3 years	10 years	2 years	17 years
Finite-Lived Intangible Assets [Line Items]
Amortization of patents																						680,000	600,000	653,000
Deferred Revenue Arrangement [Line Items]
Useful life														15 years	13 years
Deferred revenue															15,818,000	17,106,000
Less: Short-term portion	1,288,000					1,288,000					1,288,000	1,288,000
Long-term portion	14,530,000					15,818,000					14,530,000	15,818,000
Revenue recognized											1,300,000				1,300,000	1,200,000	696,000		0	266,000	334,000
Proceeds from Confidential Settlement and License Agreement																		32,000,000
Proceeds from Confidential Settlement and License Agreement, net																		21,400,000
Gain on agreement																		2,400,000
Up-front license fee	11,715,000					11,277,000					11,715,000	11,277,000		19,000,000
Number of products cancelled															2
Estimated earning period														15 years	13 years
Standard Product Warranty Disclosure [Abstract]
Typical warranty period (in years)											3
Marketing and Advertising Expense [Abstract]
Advertising Expense											146,000	153,000	119,500
Operating Costs and Expenses [Abstract]
Royalty expense											331,300	281,600	318,000
Numerator:
Income from continuing operations						1,942,000	[1]	1,006,000	1,867,000	1,153,000	2,559,000	5,968,000	5,669,000
Plus: Loss from discontinued operations - net of tax						0	[1]	0	0	(382,000)	0	382,000	36,000
Net income	$ 1,439,000	[1]	$ 1,150,000	$ (1,382,000)	$ 1,352,000	$ 1,942,000	[1]	$ 1,006,000	$ 1,867,000	$ 771,000	$ 2,559,000	$ 5,586,000	$ 5,633,000
Denominator:
Weighted average common shares and denominator for basic calculation (in shares)	25,290,882	[1]	25,299,131	25,230,142	25,160,757	25,165,493	[1]	25,184,447	25,085,296	24,971,034	25,243,010	25,100,064	24,901,832
Stock options and restricted stock (in shares)											94,515	156,520	133,263
Denominator for diluted calculation (in shares)	25,367,558	[1]	25,362,923	25,230,142	25,286,184	25,293,168	[1]	25,363,620	25,280,449	25,136,727	25,337,525	25,256,584	25,035,095
Antidilutive securities excluded from computation of earnings per share (in shares)											533,079	215,734	60,000
Earnings per share - basic
Income from continuing operations (in dollars per share)						$ 0.08	[1]	$ 0.04	$ 0.07	$ 0.05	$ 0.10	$ 0.24	$ 0.23
Loss from discontinued operations (in dollars per share)						$ 0	[1]	$ 0	$ 0	$ (0.02)	$ 0	$ (0.02)	$ 0
Net income (in dollars per share)	$ 0.06	[1]	$ 0.05	$ (0.05)	$ 0.05	$ 0.08	[1]	$ 0.04	$ 0.07	$ 0.03	$ 0.10	$ 0.22	$ 0.23
Earnings per share - diluted
Income from continuing operations (in dollars per share)						$ 0.08	[1]	$ 0.04	$ 0.07	$ 0.05	$ 0.10	$ 0.24	$ 0.23
Loss from discontinued operations (in dollars per share)						$ 0	[1]	$ 0	$ 0	$ (0.02)	$ 0	$ (0.02)	$ 0
Net income (in dollars per share)	$ 0.06	[1]	$ 0.05	$ (0.05)	$ 0.05	$ 0.08	[1]	$ 0.04	$ 0.07	$ 0.03	$ 0.10	$ 0.22	$ 0.23
Segment Reporting [Abstract]
Number of operating segments											1

[1] The M.I.S.S. acquisition has been reflected in our results of operations from July 8 through July 31, 2013.

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Pledged Assets, Short and Long-Term Debt

12 Months Ended

Jul. 31, 2013

Pledged Assets, Short and Long-Term Debt [Abstract]

Pledged Assets, Short and Long-Term Debt

Note 9.  Pledged Assets, Short and Long-Term Debt

Revolving Credit Facility: The Company has a credit facility with a bank which allows for borrowings of up to $9.5 million (collateral available on July 31, 2013 permits borrowings up to $9.5 million) with an interest rate based on either the one-, two- or three-month LIBOR plus 2.0 percent and adjusting each quarter based upon the Company’s leverage ratio. As of July 31, 2013, interest under the facility is charged at 2.27 percent. The unused portion of the facility is charged at a rate of 0.20 percent. There were no borrowings under this facility at July 31, 2013. Outstanding amounts are collateralized by the Company’s domestic receivables and inventory. This credit facility was amended on September 30, 2013, to extend the termination date through September 30, 2016.

The facility has two financial covenants: a maximum leverage ratio of 3.75 times and a minimum fixed charge coverage ratio of 1.1 times. As of July 31, 2013, the leverage ratio was 0.65 times and the minimum fixed charge coverage ratio was 488.6 times. Collateral availability under the line as of July 31, 2013, was approximately $9.5 million. The facility restricts the payment of dividends if, following the distribution, the fixed charge coverage ratio would fall below the required minimum.

Equipment Line of Credit: Under this credit facility, the Company may borrow up to $1.0 million, with interest at one-month LIBOR plus 3.0 percent.  Pursuant to the terms of the equipment line of credit, under no circumstances shall the rate be less than 3.5 percent per annum.  The unused portion of the facility is not charged a fee. There were no borrowings under this facility at July 31, 2013. The equipment line of credit was amended on September 30, 2013, to extend the maturity date to September 30, 2016.

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Inventories

12 Months Ended

Jul. 31, 2013

Inventories [Abstract]

Inventories

Note 5. Inventories

Inventories as of July 31, 2013 and 2012 were as follows (dollars in thousands):

	2013		2012
Raw material and component parts	$	7,418	$	8,670
Work in progress		1,133		1,663
Finished goods		6,274		5,346
	$	14,825	$	15,679

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Consolidated Statements of Cash Flows (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Jul. 31, 2013	Jul. 31, 2012	Jul. 31, 2011
Cash flows from operating activities
Net income	$ 2,559	$ 5,586	$ 5,633
Plus: Loss from discontinued operations - net of tax	0	382	36
Income from continuing operations	2,559	5,968	5,669
Adjustments to reconcile net income to net cash provided by (used in) operating activities
Depreciation	1,123	1,093	972
Amortization	680	600	653
Provision for doubtful accounts receivable	207	50	(9)
Stock-based compensation	931	764	358
Deferred income taxes	(49)	153	(6,388)
Loss on sale of equipment	35	0	50
Loss on sale of product line	0	0	99
(Increases) decreases in:
Accounts receivable	(2,553)	(843)	(2,095)
Inventories	1,191	(3,695)	(291)
Prepaid expenses	(130)	93	(150)
Income taxes refundable	(254)	219	0
Increases (decreases) in:
Accounts payable	845	615	(253)
Accrued expenses	603	(183)	427
Deferred revenue	(1,288)	(1,494)	(430)
Income taxes payable	(235)	(5,848)	6,243
Net cash provided by (used in) operating activities	3,665	(2,508)	4,855
Net cash provided by (used in) discontinued operations	0	59	(68)
Net cash provided by (used in) operating activities	3,665	(2,449)	4,787
Cash flows from investing activities
Proceeds on the sale of equipment	55	0	11
Purchase of property and equipment	(550)	(1,809)	(1,687)
Acquisition of patents and other intangibles	(412)	(214)	(273)
Acquisitions, less cash acquired	(2,848)	0	0
Increase in cash value of life insurance	(3)	(11)	(10)
Net cash used in continuing investing activities	(3,758)	(2,034)	(1,959)
Net cash used in discontinued operations	0	0	(382)
Net cash used in investing activities	(3,758)	(2,034)	(2,341)
Cash flows from financing activities
Principal payments on revenue bonds payable	0	0	(1,728)
Payment on debt incurred for acquisition of trademark	0	(313)	(598)
Principal payments on long-term debt	0	(740)	(685)
Tax benefit associated with the exercise of non-qualified stock options	72	24	125
Proceeds from the issuance of common stock	65	35	210
Net cash provided by (used in) financing activities	137	(994)	(2,676)
Foreign exchange rate effect on cash and cash equivalents	(254)	(242)	(40)
Net decrease in cash and cash equivalents	(210)	(5,719)	(270)
Cash and cash equivalents
Beginning	12,680	18,399	18,669
Ending	12,470	12,680	18,399
Cash paid for:
Interest	9	63	223
Income taxes paid	1,568	7,950	2,488
Supplemental Schedule of Non-cash Investing and Financing Activity
Purchase of equipment included in accounts payable	$ 120	$ 0	$ 14

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Income Tax Matters (Details) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Jul. 31, 2013	Jul. 31, 2012	Jul. 31, 2011
Deferred tax assets:
Accounts receivable	$ 119	$ 85
Inventories	847	185
Accrued liabilities	186	165
Deferred revenue	5,940	6,423
Other	133	813
Loss on foreign subsidiaries	2,080	1,949
Deferred tax assets	9,305	9,620
Deferred tax liability
Property and equipment	1,561	1,362
Other intangible assets	2,360	2,923
Deferred tax liability	3,921	4,285
Deferred tax assets (liability), net	5,384	5,335
Deferred tax amounts classified on consolidated balance sheets
Current assets	1,827	1,247
Long-term asset	3,557	4,088
Deferred tax amounts	5,384	5,335
Provision for income taxes [Abstract]
Current payable	1,179	2,153	8,831
Deferred income taxes	(49)	153	(6,388)
Provision for income taxes	$ 1,130	$ 2,306	$ 2,443
Reconciliation of income tax at statutory rate to effective rate [Abstract]
Computed at the statutory rate (in hundredths)	34.00%	34.00%	35.00%
State taxes, net of federal tax benefit (in hundredths)	2.50%	2.40%	2.30%
Production deduction for domestic manufacturers (in hundredths)	(4.30%)	(2.90%)	(2.90%)
Research and experimentation (in hundredths)	(5.30%)	(0.80%)	(3.50%)
Other (in hundredths)	3.70%	(3.20%)	(0.60%)
Effective income tax rate (in hundredths)	30.60%	29.50%	30.30%

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Property and Equipment (Details) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Jul. 31, 2013	Jul. 31, 2012	Jul. 31, 2011
Property, Plant and Equipment [Line Items]
Property and equipment, gross	$ 18,102	$ 17,123
Less accumulated depreciation	9,140	7,884
Property and equipment, net	8,962	9,239
Depreciation expense	1,123	1,093	972
Land [Member]
Property, Plant and Equipment [Line Items]
Property and equipment, gross	730	730
Building and improvements [Member]
Property, Plant and Equipment [Line Items]
Property and equipment, gross	6,365	5,896
Machinery and equipment [Member]
Property, Plant and Equipment [Line Items]
Property and equipment, gross	8,665	7,974
Furniture and fixtures [Member]
Property, Plant and Equipment [Line Items]
Property and equipment, gross	1,058	1,222
Software [Member]
Property, Plant and Equipment [Line Items]
Property and equipment, gross	1,107	1,014
Construction in progress [Member]
Property, Plant and Equipment [Line Items]
Property and equipment, gross	$ 177	$ 287

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Inventories (Tables)

12 Months Ended

Jul. 31, 2013

Inventories [Abstract]

Inventories

Inventories as of July 31, 2013 and 2012 were as follows (dollars in thousands):

	2013		2012
Raw material and component parts	$	7,418	$	8,670
Work in progress		1,133		1,663
Finished goods		6,274		5,346
	$	14,825	$	15,679

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Quarterly Financial Data (Unaudited) (Details) (USD $)	3 Months Ended												12 Months Ended
	Jul. 31, 2013		Apr. 30, 2013	Jan. 31, 2013		Oct. 31, 2012	Jul. 31, 2012		Apr. 30, 2012		Jan. 31, 2012	Oct. 31, 2011	Jul. 31, 2013	Jul. 31, 2012	Jul. 31, 2011
Quarterly Financial Data (Unaudited) [Abstract]
Net sales	$ 17,857,000	[1]	$ 16,264,000	$ 14,055,000		$ 14,620,000	$ 16,861,000	[1]	$ 14,568,000		$ 15,080,000	$ 13,505,000
Gross Profit	9,676,000	[1]	9,051,000	5,171,000	[2]	8,473,000	9,809,000	[1]	7,822,000	[3]	8,972,000	7,916,000	32,371,000	34,519,000	32,781,000
Operating Income	2,193,000	[1]	1,721,000	(2,153,000)		1,941,000	2,946,000	[1]	1,405,000		2,618,000	1,512,000	3,702,000	8,481,000	8,349,000
Income from continuing operations							1,942,000	[1]	1,006,000		1,867,000	1,153,000	2,559,000	5,968,000	5,669,000
Loss from discontinued operations							0	[1]	0		0	382,000	0	(382,000)	(36,000)
Net income	1,439,000	[1]	1,150,000	(1,382,000)		1,352,000	1,942,000	[1]	1,006,000		1,867,000	771,000	2,559,000	5,586,000	5,633,000
Earnings per share - basic
Income from continuing operations (in dollars per share)							$ 0.08	[1]	$ 0.04		$ 0.07	$ 0.05	$ 0.10	$ 0.24	$ 0.23
Loss from discontinued operations (in dollars per share)							$ 0	[1]	$ 0		$ 0	$ (0.02)	$ 0	$ (0.02)	$ 0
Net income (in dollars per share)	$ 0.06	[1]	$ 0.05	$ (0.05)		$ 0.05	$ 0.08	[1]	$ 0.04		$ 0.07	$ 0.03	$ 0.10	$ 0.22	$ 0.23
Earnings per share - diluted
Income from continuing operations (in dollars per share)							$ 0.08	[1]	$ 0.04		$ 0.07	$ 0.05	$ 0.10	$ 0.24	$ 0.23
Loss from discontinued operations (in dollars per share)							$ 0	[1]	$ 0		$ 0	$ (0.02)	$ 0	$ (0.02)	$ 0
Net income (in dollars per share)	$ 0.06	[1]	$ 0.05	$ (0.05)		$ 0.05	$ 0.08	[1]	$ 0.04		$ 0.07	$ 0.03	$ 0.10	$ 0.22	$ 0.23
Basic weighted average common shares outstanding (in share)	25,290,882	[1]	25,299,131	25,230,142		25,160,757	25,165,493	[1]	25,184,447		25,085,296	24,971,034	25,243,010	25,100,064	24,901,832
Diluted weighted average common shares outstanding (in share)	25,367,558	[1]	25,362,923	25,230,142		25,286,184	25,293,168	[1]	25,363,620		25,280,449	25,136,727	25,337,525	25,256,584	25,035,095
Inventory Write-down				$ 2,100,000					$ 367,000
Earnings per share (in dollars per share)				$ 0.06					$ 0.01

[1] The M.I.S.S. acquisition has been reflected in our results of operations from July 8 through July 31, 2013.

[2] In the second quarter of fiscal 2013, the Company recorded an inventory write-down of approximately $2.0 million, or approximately $0.06 per share, net of tax.

[3] In the third quarter of fiscal 2012, the Company recorded an inventory write-down of approximately $367,000, or approximately $0.01 earnings per share, net of tax.

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Employee Benefit Plan

12 Months Ended

Jul. 31, 2013

Employee Benefit Plan [Abstract]

Employee Benefit Plan

Note 12. Employee Benefit Plan

The Company has a 401(k) savings plan, which covers employees who have attained the age of 18 and who have been credited with at least one year of service.  Company contributions are made at the discretion of the Board of Directors.  The Company contributed $203,000, $79,000 and $51,000 to the plan for the years ended July 31, 2013, 2012 and 2011.

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Accrued Expenses

12 Months Ended

Jul. 31, 2013

Accrued Expenses [Abstract]

Accrued Expenses

Note 8. Accrued Expenses

Accrued expenses as of July 31, 2013 and 2012 consisted of the following (dollars in thousands):

	2013		2012
Payroll, commissions and employee benefits	$	1,131	$	786
Royalties		147		62
Warranty		15		15
Other		2,193		1,981
	$	3,486	$	2,844

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Research and Development Costs

12 Months Ended

Jul. 31, 2013

Research and Development Costs [Abstract]

Research and Development Costs

Note 15. Research and Development Costs

R&D costs related to both future and present products are charged to operations as incurred.  The Company incurred approximately $3,643,000, $3,642,000 and $3,713,000 of R&D costs during the years ended July 31, 2013, 2012 and 2011, respectively.

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Stock-Based Compensation

12 Months Ended

Jul. 31, 2013

Stock-Based Compensation [Abstract]

Stock-Based Compensation

Note 13. Stock-Based Compensation Plans

Stock Option Plans

In addition to the historical options outstanding for Synergetics prior to the merger, the Company has options outstanding under two existing active option plans and two terminated plans of Valley Forge.  The first active plan, the Amended and Restated Synergetics USA, Inc. (the “2001 Plan”) was adopted by Valley Forge on January 16, 2001 pursuant to which 1,345,000 shares of common stock are authorized for issuance to employees, officers and consultants of the Company.  There were 53,632 options and restricted shares not yet awarded at July 31, 2013 under the 2001 Plan.  On September 19, 2005, the stockholders of Valley Forge voted to adopt the Valley Forge Scientific Corp. 2005 Non-Employee Directors’ Stock Option Plan (the “Non-Employee Directors’ Plan”) pursuant to which 700,000 shares of common stock are authorized for issuance to non-employee directors.  There were 345,000 options available for future grants at July 31, 2013 under the Non-Employee Directors’ Plan.  Generally, options were granted with an exercise price equal to fair market value at the date of grant and expire ten years from the date of the grant.  Generally, stock options granted under these plans vest over a three to five-year period, with the exception of the non-employee director options, which vest over a 12-month period.

A summary of the status of the fixed awards at July 31, 2013, 2012 and 2011 and changes during the years ended on those dates is as follows:

	Shares			Weighted Average Exercise Price		Weighted Average Fair Value
Options outstanding, July 31, 2010		576,695		$	2.08	$	1.71
For the period from August 1, 2010 through July 31, 2011:
Granted		108,751		$	4.43	$	3.56
Forfeited		(27,000	)	$	3.21	$	2.71
Exercised		(141,417	)	$	1.49	$	1.29
Options outstanding, July 31, 2011		517,029		$	2.68	$	2.16
For the period from August 1, 2011 through July 31, 2012
Granted		235,734		$	6.21	$	4.75
Forfeited		(56,133	)	$	4.11	$	3.22
Exercised		(16,885	)	$	2.07	$	1.99
Options outstanding, July 31, 2012		679,745		$	3.80	$	2.98
For the period from August 1, 2012 through July 31, 2013
Granted		142,227		$	4.52	$	3.42
Forfeited		(15,000	)	$	4.54	$	3.66
Exercised		(59,310	)	$	1.10	$	0.95
Options outstanding, July 31, 2013		747,662		$	3.23	$	4.17
Options exercisable, July 31, 2013		514,451		$	2.92	$	3.84

A further summary about awards outstanding at July 31, 2013 is as follows:

	Shares			Weighted Average Grant Date Value
Unvested options, beginning of period		230,646		$	5.24
Granted		142,227		$	4.52
Vested		(134,662	)	$	4.89
Forfeited		(5,000	)	$	4.52
Unvested options, period end		233,211		$	5.20

Proceeds, related tax benefits realized from options exercised and intrinsic value of options exercised were as follows (dollars in thousands), except exercise price:

	Fiscal Year Ended
	July 31, 2013		July 31, 2012		July 31, 2011
Proceeds of options exercised	$	65	$	35	$	210
Related tax benefit recognized		72		24		125
Intrinsic value of options exercised		56		34		183

The following table provides information about options outstanding and exercisable options at July 31, 2013 (dollars in thousands):

	Options Outstanding		Exercisable Options
Number		747,662		514,451
Weighted average exercise price	$	3.23	$	2.92
Aggregate intrinsic value	$	2,414	$	1,501
Weighted average contractual term	7.0 years		6.3 years

The weighted average remaining life for options outstanding and weighted average exercise price per share for exercisable options at July 31, 2013 were as follows:

		Options Outstanding			Exercisable Options
		Shares		Weighted Average Remaining Contractual Life (in years)	Shares		Weighted Average Remaining Contractual Life (in years)
<$ 2.00			174,583	5.8 years		154,750	5.7 years
$	2.01 to $3.00		40,000	4.5 years		40,000	4.5 years
$	3.01 to $4.00		40,000	3.5 years		40,000	3.5 years
$	4.01 to $5.00		257,345	8.0 years		150,385	7.2 years
$	5.01 to $6.21		235,734	8.0 years		129,316	7.5 years
Total			747,662	7.0 years		514,451	6.3 years

During the second quarter of fiscal 2013, there were options to purchase 60,000 shares of common stock granted to the Company’s independent directors, which vest pro-ratably on a quarterly basis over the next year of service.  Each independent director receives an option to purchase 10,000 shares of the Company’s common stock each year in which he or she is elected, appointed, or re-elected to serve as a director pursuant to the Amended and Restated 2005 Non-Employee Directors’ Stock Option Plan. These options vest pro-ratably on a quarterly basis over the next year of service on the Board.  The Company recorded $117,000 of compensation expense for the fiscal year ended July 31, 2013, with respect to these options.  The Company recorded $113,000 of compensation expense for the fiscal year ended July 31, 2013 for previously granted options.

During the second quarter of fiscal 2013, there were options to purchase 82,227 shares of common stock granted to the officers of the Company.  These options were granted in conjunction with the Company’s annual review of compensation as of August 1, 2012 and vest on a quarterly basis over the next five years of service. The Company recorded $41,000 of compensation expense for the fiscal year ended July 31, 2013, related to these options.  In addition, the Company recorded $192,000 of compensation expense for the fiscal year ended July 31, 2013 for previously granted options.

The Company expects to issue new shares as options are exercised. As of July 31, 2013, the future compensation cost expected to be recognized for currently outstanding stock options is approximately $333,000 in fiscal 2014, $254,000 in fiscal 2015, $226,000 in fiscal 2016 and $88,000 in fiscal 2017.

The following table provides the weighted average fair value of options granted and the assumptions used in the Black-Scholes model:

	Fiscal Year Ended July 31,
	2013			2012			2011
Expected average risk-free interest rate		1.72	%		1.92	%		3.30	%
Expected average life (in years)		10			10			10
Expected volatility		70.5	%		71.4	%		75.4	%
Expected dividend yield		0.0	%		0.0	%		0.0	%

The expected average risk-free rate is based on 10-year U.S. treasury yield curve in December of 2012.  The expected average life represents the period of time that options granted are expected to be outstanding giving consideration to vesting schedules, historical exercise and forfeiture patterns.  Expected volatility is based on historical volatilities of Synergetics USA, Inc.’s common stock.  The expected dividend yield is based on historical information and management’s plan.

Restricted Stock Plans

Under the Company’s 2001 Plan, the Company’s common stock may be granted at no cost to certain employees and consultants of the Company.  Certain plan participants are entitled to cash dividends and voting rights for their respective shares.  Restrictions limit the sale or transfer of these shares during a vesting period whereby the restrictions lapse either pro-ratably over a three-year or five-year vesting period or at the end of the third or fifth year.  These shares also vest upon a change of control event.  Upon issuance of stock under the 2001 Plan, unearned compensation equivalent to the market value at the date of the grant is charged to stockholders’ equity and subsequently amortized to expense over the applicable restriction period.  As of July 31, 2013, there was approximately $1.1 million of total unrecognized compensation cost related to non-vested share-based compensation arrangements granted under the Company’s 2001 Plan.  The cost is expected to be recognized over a weighted average period of four years which is generally the vesting period.

In addition, during the fiscal year ended July 31, 2013, 15,309 shares were granted to advisory consultants under the 2001 Plan.  Compensation expense related to these shares was $55,000 for the fiscal year ended July 31, 2013.

The following table provides information about restricted stock grants during the fiscal year ended July 31, 2013, 2012 and 2011:

	Number of Shares			Weighted Average Grant Date Fair Value
Balance as of August 1, 2010		278,841		$	2.03
Granted		43,846		$	4.43
Vested		(11,980	)	$	1.75
Balance as of July 31, 2011		310,707		$	2.38
Granted		202,072		$	6.37
Forfeited		(39,384	)	$	5.88
Vested		(41,617	)	$	3.47
Balance as of July 31, 2012		431,778		$	3.82
Granted		70,307		$	4.52
Forfeited		(10,160	)	$	3.47
Vested		(86,677	)	$	4.57
Balance as of July 31, 2013		405,248		$	3.79

Compensation expense associated with stock-based compensation plans as of July 31, 2013, 2012 and 2011 was as follows (dollars in thousands):

	July 31, 2013		July 31, 2012		July 31, 2011
Stock Options:
Directors	$	230	$	217	$	100
Employees		233		154		60
Total	$	463	$	371	$	160
Restricted Stock
Employees	$	413	$	357	$	154
Advisors		55		36		44
Total		468		393		198
Total Compensation Expense	$	931	$	764	$	358
Income Tax benefits from Share-based Compensation	$	285	$	225	$	108

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Document and Entity Information (USD $)	12 Months Ended
	Jul. 31, 2013	Sep. 25, 2013	Jan. 31, 2013
Document and Entity Information [Abstract]
Entity Registrant Name	SYNERGETICS USA INC
Entity Central Index Key	0000836429
Current Fiscal Year End Date	--07-31
Entity Well-known Seasoned Issuer	No
Entity Voluntary Filers	No
Entity Current Reporting Status	Yes
Entity Filer Category	Accelerated Filer
Entity Common Stock, Shares Outstanding		25,292,960
Document Fiscal Year Focus	2013
Document Fiscal Period Focus	FY
Document Type	10-K
Amendment Flag	false
Document Period End Date	Jul. 31, 2013
Entity Public Float			$ 109,256,524

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Stockholders' Equity

12 Months Ended

Jul. 31, 2013

Stockholders' Equity [Abstract]

Stockholders' Equity

Note 14.  Stockholders’ Equity

Upon completion of the reverse merger between Valley Forge and Synergetics on September 22, 2005, the Company reincorporated in Delaware, decreased the par value of common stock from $0.01 2/3 to $0.001, increased the authorized common shares to 50,000,000 and eliminated the outstanding treasury shares.

The holders of common stock have no preemptive rights and the common stock has no redemption, sinking fund or conversion provisions.  Each share of common stock is entitled to one vote on any matter submitted to the holders and to equal rights in the assets of the Company upon liquidation.  All of the outstanding shares of common stock are fully paid and nonassessable.

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Valuation Allowances and Qualifying Accounts (Details) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Jul. 31, 2013	Jul. 31, 2012	Jul. 31, 2011
Allowance for Doubtful Accounts & Returned Goods [Member]
Valuation and Qualifying Accounts Disclosure [Line Items]
Balance at Beginning of Year	$ 319	$ 282	$ 282
Charges to Cost and Expenses	207	37	5
Charges to Other Accounts	0	0	0
Deduction from Reserves	31	0	(5)
Balance at End of Year	495	319	282
Allowance for Excess and Obsolete Inventory [Member]
Valuation and Qualifying Accounts Disclosure [Line Items]
Balance at Beginning of Year	466	82	38
Charges to Cost and Expenses	1,368	384	44
Charges to Other Accounts	0	0	0
Deduction from Reserves	0	0	0
Balance at End of Year	$ 1,834	$ 466	$ 82

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Subsequent Events (Details) (USD $)	0 Months Ended
	Oct. 01, 2013
Subsequent Event [Line Items]
Closure cost	$ 900,000
Time to complete closure	14 months
Estimated reduction in operating expenses	$ 1,000,000