Document:

Exhibit 10.1

December 18, 2013

DELIVERED VIA ELECTRONIC MAIL ONLY

Dr. Jerry L. Malis, EVP and CSO

Synergetics USA, Inc.

3600 Horizon Drive, Suite 110

King of Prussia, Pennsylvania  19406

jmalis@synergeticsusa.com

Re:  Retirement Offer

Dear Jerry,

As you are well aware, Synergetics USA, Inc. (“Synergetics” of the “Company”) has made the decision to close its facility in King of Prussia, Pennsylvania, (the “KOP site”) and to relocate the functions now carried out at the KOP site to its facilities in and near O’Fallon, Missouri (the “O’Fallon site”).  The closure of the KOP site will eventually result in the elimination of all jobs now located at the KOP site.  All non-executive employees at the KOP site have been offered and have accepted separation letters, under which Synergetics will provide certain benefits to these employees upon the end of their employment at the KOP site.

Synergetics’ announcement of its intent to close the KOP site has led to your decision to consider retirement from full-time employment with the Company.  In respect of over 30 years of service and your tremendous contributions to the Company during that time, this letter sets forth the terms and conditions of the retirement offer Synergetics extends to you.  Your acceptance of this offer will entitle you to the retirement benefits described below.  In this letter you will be referred to using the terms “you” and “Employee” and the grammatical derivatives thereof (e.g., in the possessive form:  “your” and “Employee’s”).  This letter will also be referred to as the “Agreement”.

TERMS AND CONDITIONS

	1.	Employee Retirement Date.  Employee’s date of retirement from and last day of employment with the Company shall be December 31, 2013 (“Retirement Date”).

	2.	Retirement Payments.  Subject to the terms and conditions of this Agreement, you will be paid an amount (“Retirement Amount”) equal to Two Hundred Eighty-Three Thousand Eight Hundred Thirty-Two and 04/100 Dollars ($283,832.04) minus all required and appropriate tax withholding and other deductions regularly taken from earnings in accordance with the law and Synergetics’ normal payroll practices.  Regardless of when this Agreement is accepted, the Retirement Amount will not vest until January 1, 2014, and shall be paid in twelve (12) equal monthly installments of Twenty-Three Thousand Six Hundred Fifty-Two and 67/100 Dollars ($23,652.67) (each a “Retirement Payment”) to be paid in conjunction with the first payroll generation in Synergetics’ normal payroll cycle for each month of calendar 2014.

	3.	Vacation Pay.  Any vacation time that you have accrued as an employment benefit, but that is also unused as of December 31, 2013, shall be converted to cash at your equivalent daily base pay rate, and paid in a lump sum with Synergetics’ first payroll cycle in January 2014.  Your accrued number of unused vacation days as of December 18, 2013, is thirty (30) days.  If you do not use any further vacation days before December 31, 2013, your gross vacation pay will be Thirty-Two Thousand Seven Hundred Forty-Nine and 85/100 ($32,749.85).  This vacation pay will be subject to all required and appropriate tax withholding and other deductions regularly taken from earnings in accordance with the law and Synergetics’ normal payroll practices.

 

3845 Corporate Centre Drive, O’ Fallon, MO 63368 Phone: (636) 939-5100 Fax: (636) 939-6885

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December 18, 2013

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	4.	Vesting of Equity Compensation.  On January 1, or as soon thereafter as Employee’s acceptance of this Agreement becomes non-revocable (“Vesting Date”), the Company will cause to vest all now unvested shares of Company common stock and stock options previously granted to Employee under the Amended and Restated Synergetics USA, Inc. 2001 Stock Plan (“Plan”) in the form of Restricted Stock Awards and Options, respectively.  That is, for those 17,546 restricted shares and those 27,909 options previously granted but now still unvested, the restrictions on ownership transfer and on exercise, respectively, shall no longer apply thereto as of the Vesting Date.  Thereafter, the share certificates or such other evidence of ownership of those then-vested 17,546 shares shall promptly be provided to Employee upon payment by Employee of the taxes due upon such vesting as described in the Plan, and the then-vested 27,909 options shall be exercisable according to the procedure stated in the Plan.  Also, however, as a revision to the Plan, any and all then-vested Options held by Employee at any time during 2014 shall be exercisable until January 15, 2015.

	5.	Provision for health care.  During calendar year 2014, the Company shall pay health insurance premiums on behalf of Employee.  Employee will have the option beginning January 1, 2014 to elect either (1) continuing health insurance coverage under a Synergetics Plan (a/k/a COBRA coverage), or (2) Medicare, including Parts A, B, and D, and so-called Medigap or Supplementat coverage, and Synergetics will pay the premium on behalf of Employee until December 31, 2014.  While Employee may be eligible for both insurance plans described in this Section (i.e., COBRA and Medicare), Synergetics will pay the premiums for only one or the other coverage.  Employee will be obligated to review coverages, timely elect coverage, and properly notify one or the other insurance plan in order to become covered, and thereafter shall submit the premium invoice to Synergetics for payment (so as to avoid the premium value becoming taxable income to Employee, as would happen if premium payments are made by Employee and are reimbursed by Synergetics).  Employee is reminded that failure to timely notify either plan could result in forfeiture of coverage for a period of time (and possibly forever with regard to COBRA coverage).  Beginning January 1, 2015, Employee will be responsible to pay any and all premiums for health insurance coverage then deemed appropriate by Employee.

	6.	Consulting Services.  During the first twelve months of this Agreement, Employee shall provide consulting services (“Consulting Services”) to Company, as requested by Company without additional compensation therefor, as related to product design and engineering, manufacturing process improvement, supplier and customer relationship management, market evaluation and development, and other matters directly related to the work Employee performed during employment with the Company.  Consulting Services shall be limited to a maximum of thirty (30) workday equivalents, which shall mean a total of two hundred forty (240) hours, and shall not be required outside of normal business hours, and shall be requested with reasonable notice and for reasonable time increments.  Company shall pay for Employee’s reasonable expenses related to providing Consulting Services, which expenses shall be approved in advance by Company.

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December 18, 2013

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	7.	Agreement Acceptance.  You may accept Synergetics’ offer to enter this Agreement by delivering a copy of this Agreement countersigned in the space provided on the last page hereof to either of the Director of Human Resources or the General Counsel of Synergetics by 5:30 PM CST at any time on or before the 45th day after presentation hereof to you.  If you fail to timely so deliver a countersigned Agreement, Synergetics’ offer to enter this Agreement shall immediately expire and be null and void.  Refusal to accept any payment hereunder after validly entering into this Agreement shall not effect a rejection or termination of this Agreement, or a revocation or cancellation of any provision hereof.

	8.	Employee’s Release.  Employee understands that there are various state, federal and local laws that prohibit employment discrimination on the basis of age, sex, race, color, national origin, religion, disability, veteran status and other protected categories and that these laws are enforced through various federal agencies, including the Equal Employment Opportunity Commission, the U.S. Department of Labor, and various agencies in the Commonwealth of Pennsylvania, including the Pennsylvania Human Relations Commission, and Employee agrees, as of the date of execution hereof and again as of the date of acceptance of each Retirement Payment (each of the dates of execution and acceptance being a “Release Date”), to waive any and all rights Employee may have as against Synergetics under these and any other laws, and to release Synergetics and all its parent companies, subsidiaries, affiliated companies and all trusts and employee benefit plans thereof, and all of their directors, trustees, administrators, shareholders, officers, employees, agents, predecessors, successors, assigns,  (hereinafter referred to jointly and severally as “Releasees”) from Claims under these and any other laws, as follows.

		a.	Employee, on behalf of Employee’s self and Employee’s spouse, heirs, successors, assigns, administrators, and representatives of any kind, completely releases and forever discharges each and all Releasees from any and all claims, demands, liabilities, causes of action, and damages of every kind and nature, known or unknown, arising out of, related to, or based in whole or in part on any conduct, whether an act or omission, by Releasees occurring on or before the Release Date (hereinafter referred to as a “Claim” or “Claims”), and particularly those Claims arising out of or related to Employee’s employment with the Company, including Employee’s retirement from employment with the Company, specifically including but not limited to Claims against Releasees for unpaid wages, bonuses, or other benefits, wrongful discharge, and discrimination.  Released Claims include claims arising out of or related to Employee’s stock and option ownership, including Claims under the Securities Act of 1933, the Exchange Act of 1934, and state blue sky laws, as well as the regulations implementing such securities laws whether enacted by the Securities and Exchange Commission or state agencies.  Released Claims include claims under state corporate law, including the Delaware General Corporations Law.   Released Claims are not limited by the examples of Claims referenced herein, but include all Claims of all legal and equitable bases.  Claims, as defined herein, which are being waived by Employee, include but are not limited to any allegation or right which does or may exist under the Civil Rights Act of 1964, as amended, the Pennsylvania Human Relations Act, the Americans with Disabilities Act, the Age Discrimination in Employment Act, Employee Retirement Income Security Act of 1974, as amended, Executive Order 11246, the Civil Rights Reconstruction Acts, the Workers’ Compensation laws of the Commonwealth of Pennsylvania, the Family and Medical Leave Act of 1993, as amended, and any and all other federal, state and local statutory and common laws, and rules, regulations, orders and ordinances of any kind.  Employee’s release and each such release shall not operate prospectively with regard to any claims, demands, liabilities, causes of action, or damages that may arise from events and circumstances occurring entirely after the Release Date.

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		b.	Employee agrees to defend and indemnify any and all Releasees from and against any and all Claims brought by, on behalf of, or for the benefit of Employee, including any Claim brought before any local, state, or federal civil rights agency, such indemnity to survive the termination or expiration of this Agreement in perpetuity, and further (and not as an elected, sole remedy) to disgorge to the Company the Retirement Amount provided under Section 2 hereof immediately upon the filing of a lawsuit stating a claim released in this Section 4 (including its subsections).

	9.	Company’s Release.  Company completely releases and forever discharges Employee from any and all claims, demands, liabilities, causes of action, and damages of every kind and nature, known or unknown, arising out of or based in whole or in part on any conduct of Employee within the scope of his employment with Company and occurring on or before the effective date hereof.

	10.	Representation and Warranties.  Employee represents and warrants the following as of the date of execution hereof and again as of the date of acceptance of each Retirement Payment.

		a.	No Breach of Prior Agreement.  Employee acknowledges that Employee entered into with Synergetics a written, non-disclosure and non-competition agreement before or during Employee’s employment with Synergetics, and that Employee has not materially breached the obligations therein at any time during employment or thereafter prior to entry into this Agreement.  Furthermore, Employee represents and warrants that Employee has not materially breached any other duty, e.g., under the common law, that Employee owed to Synergetics during the period of Employee’s employment with Synergetics.

		b.	No Pending Claims.  Employee has no pending claim or charge against any Releasees before any local, state or federal agency.  Employee has no pending claim or lawsuit against any Releasees before any state or federal court or tribunal.

		c.	No Claims Accrued.  Employee has not suffered a work-related injury and has not experienced any circumstance giving rise to a claim under the Family and Medical Leave Act, except as has been disclosed to the Company.

		d.	No Unpaid Wages. Employee has been paid in full all wages due and owing to Employee for all work performed for the Company, except for wages due for work between the date hereof and the Retirement Date.

		e.	No Commitment of Company.  Employee has not exercised authority on behalf of the Company so as to commit Company to any obligation, and specifically has not entered into any agreement, written or oral, except as any such exercise of authority has been specifically disclosed to Company senior management.

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		f.	No Separation Benefit Required.  Employee acknowledges that, except as presented in this Agreement (through the voluntary agreement of the Company), Employee is not entitled to receive any monetary payment or other benefit from the Company or any Releasee at the time of or as a result of Employee’s retirement and the consequent end of Employee’s employment relationship with the Company.

		g.	Consideration Period.  Employee states that at the time of signing Employee’s name to this Agreement:  (i) Employee has read this Agreement and understands the terms hereof; (ii) Employee was given at least forty-five (45) days to consider whether or not to enter into this Agreement before the Company’s offer to enter into this Agreement would have been withdrawn; (iii) Employee knows that by entering into this Agreement Employee is waiving significant legal rights; (iv) Employee knows of Employee’s right to consult an attorney before entering into this Agreement and was advised by Company to do so; and (v) Employee enters into this Agreement knowingly and voluntarily.  Further, Employee is provided with seven (7) days after Employee’s signing hereof to revoke this Agreement by delivering a signed writing in person or by mail, tele-facsimile, or electronic mail to the Company’s General Counsel at 3845 Corporate Centre Drive, O’Fallon, Missouri 63368, or (636) 329-0816, or prasche@synergeticsusa.com.

		h.	Scope of Restrictions.  Employee recognizes the scope of the covenants herein (e.g., the scope of the restrictive covenants as to time period, geographic area and type of activities restricted), and expressly acknowledges and agrees that such scope is commercially reasonable and necessary in light of Company's right and desire to protect its legitimate business interests.  Employee’s compliance with the covenants herein will not be an unreasonable hardship on Employee or deprive Employee of earning a livelihood.

	11.	Confidential Agreement.  After entry into this Agreement, in perpetuity or until the information protected under this Section 11 is no longer confidential through no fault of Employee, Employee agrees to keep confidential the terms and existence of this Agreement from all persons or entities other than Employee’s immediate family, tax advisor and legal advisor, to whom Employee may disclose the existence or terms hereof on a need-to-know and confidential basis.  Upon such disclosure, Employee will advise any and each of those persons that they are bound to keep the terms or existence hereof confidential.  If any and each of those persons do not maintain the confidentiality hereof, then Employee shall be deemed to have violated this Agreement, and shall be liable therefore.

	12.	Non-Compete. For a period of two (2) years following the Retirement Date, Employee will not engage in or become in any way or in any capacity materially affiliated with or materially interested in any business that is competitive with Company’s business worldwide.  Without limitation on the prior, more general prohibition of this Section 9, Employee specifically shall not become an owner, employee, partner, joint venturer, consultant or other agent of, and shall not obtain or hold a material financial interest as an owner, member, partner, stockholder, creditor or otherwise in any entity or person that produces, services, assembles, markets, sells or otherwise puts into the steam of commerce within the retinal surgical product or service market or within the intracranial or spinal surgical, or pain control product or service market, a good or service materially similar to, that directly or indirectly competes in the marketplace with, or for which the intended result of the use thereof reasonably could be achieved with, at least one of those goods or services that Company produces, services, assembles, markets, sells or otherwise places into the stream of commerce and used as intended.

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	13.	Obligations Regarding Company Property.

		a.	Any and all ideas, processes, know-how, technology, copyrights, works of authorship, derivative works, inventions, patents, trademarks, trade dress, service marks, improvements, confidential information, trade secrets and the like, and all applications for a government grant or registration to protect a legal interest in the same (collectively "Intellectual Property"), that are developed, conceived, created, discovered, learned, produced or otherwise generated by Employee, whether individually or otherwise, during the time that Employee is employed by Company and for one (1) year thereafter, whether or not during working hours, and that are within the scope of Company’s business or that relate to the business or activities of Company, as well as any and all Intellectual Property that was developed, conceived, created, discovered, learned, produced or otherwise generated by Employee , in whole or in part, during regular business hours or using Company's resources, shall be the sole and exclusive property of Company, and no one else’s, and Company shall own any and all right, title, and interest to such Intellectual Property.  Intellectual Property that exists in the public domain prior to being developed, conceived, created, discovered, learned, produced or otherwise generated by Employee as described above in this Subsection 10(a), shall not be covered by the terms of this agreement.

		b.	The Employee hereby assigns to Company any and all right, title and interest in and to any such Intellectual Property described above in Subsection 10(a), which is now existing, agrees to automatically assign to Company at the time of creation, conception, discovery, or development any and all such Intellectual Property created hereafter, and further agrees to execute an assignment instrument assigning such Intellectual Property to Company whenever requested by Company to do so.

		c.	At Company’s reasonable expense, Employee covenants and agrees that, both during and after Employee’s employment, Employee will provide the utmost cooperation in such ways as Company deems desirable or necessary in order to protect its interests in such Intellectual Property, providing that after Employee’s retirement, such cooperation shall be limited to providing to the Company a full disclosure thereof and executing any and all applications, assignments or other legal instruments related thereto.

		c.	Any and all documents (created in any medium, electronic, paper or otherwise), devices, tools, instruments, data, and the like obtained by or provided to Employee, or otherwise made, produced, or compiled by Employee during the course of Employee’s employment with Company, which contain confidential or proprietary information, as well as all such documents (created in any medium, electronic, paper or otherwise), devices, tools, instruments, data, and the like that were purchased or otherwise obtained (including as a creation of Company’s employees) by Company for use by Company are the sole and exclusive property of Company.  Employee covenants and agrees that all such documents (created in any medium, electronic, paper or otherwise), devices, tools, instruments, data, and the like shall be promptly returned to Company upon a demand therefor made at any time by Company, and, without need for demand, upon Employee’s retirement.

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	14.	Non-Disclosure.  After entry into this Agreement, in perpetuity or until the information protected under this Section 14 is no longer confidential or proprietary through no fault of Employee, Employee shall not in any manner, directly or indirectly, personally or via the Internet, telephone, cable, electronic transmission or any other method of communication, use or divulge, disclose or communicate to any person or entity any of Company’s or Releasee’s proprietary or confidential information of any kind, nature or description, including without limitation any technical information; know-how; engineering drawings; prioritization of product importance; prioritization of research projects; methods of manufacture or assembly; non-public information about pending patent applications; intellectual property or patent strategies; the names, buying habits or practices of any of Company’s customers or prospective customers; marketing plans, methods or related data; historical or projected financial information; budgets; the names of any of Company’s vendors or suppliers; the costs, prices, discounts, commissions or rebates Company obtains or has obtained or at which it purchases or has purchased or sells or has sold its supplies, products or services; lists or other business records used in Company’s business, whether written or stored on any other media or device; compensation paid to employees or other terms of employment; or any confidential information of, about or concerning the business of Company; the parties hereto stipulating that as between them, the same are and shall be deemed to be important, material, confidential and proprietary information affecting the successful conduct of the business and goodwill of Company.  This Section 11 shall survive the expiration or termination of this agreement.

	15.	Non-Solicitation.  For a period of two (2) years after the Retirement Date, you agree to the following prohibitions of this Section 15.  The prohibited actions shall not be performed in any manner, directly or indirectly, personally, through an agent or via the Internet, telephone, cable, electronic transmission or any other method of communication, without prior written consent of Synergetics’ CEO:

		a.	Employee agrees not to divert or reduce, or attempt to divert or reduce any business of Company by, directly or indirectly, influencing or attempting to influence a customer or prospective customer of Company.

		b.	Employee agrees not to solicit or recruit or otherwise induce or influence or attempt to induce or influence any person or entity engaged by Company as an employee, agent, independent contractor, supplier, or otherwise (including as a customer or prospective customer) either to terminate such engagement with Company or in any way reduce or alter in a manner detrimental to Company any performance due Company or any expectancy reasonably held by Company as a result of such engagement.

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	16.	No Disparagement.  For a period of two (2) years after the Retirement Date, Employee shall not criticize, denigrate, or disparage any of Releasees or any of any Releasees’ products, services, or practices or suggest to any person, including other employees of Company, that Employee was treated unfairly, unlawfully, immorally or without courtesy by any Releasee.

	17.	No Admission.  Employee and the Company agree that this Agreement shall not be construed as admissions by Releasees of liability or wrongdoing of any nature whatsoever.

	18.	No Application for Employment.  Company shall not be obligated to accept a request or an application for employment from you after the Retirement Date.  Any such request or application for employment with Company may be disregarded or denied by Company without liability to Company.  Employee agrees to defend and indemnify any and all Releasees from and against any and all claims brought by, on behalf of, or for the benefit of Employee, with respect to any act or omission by any Releasee with respect to any such request or application for employment with Company.

	19.	Mediation and Arbitration.  To the extent that a claim or dispute arises out of, or in relation to this agreement, the parties hereby agree that they shall attempt to settle the claim or dispute through mediation occurring in St. Charles county Missouri.  The parties agree that if any claim or dispute cannot be settled by the parties within thirty days of first notice by one party to the other thereof, they shall within thirty days thereafter select a mutually-acceptable, qualified mediator and complete a mediation session in an attempt to settle such claim(s) or dispute(s).  The parties further agree that the costs of the mediation shall be divided equally between them.  The parties hereby agree that any such claim or dispute not settled in mediation shall be settled by binding arbitration under the rules of the American Arbitration Association (“AAA”) applicable to such dispute, and not by a court.  The parties shall select an arbitrator by mutual agreement from among the eligible individuals offered by the AAA within twenty days of notice by one party to the other of the intent to arbitrate, and shall complete the arbitration with due haste, considering all issues relevant to scheduling and conducting the arbitration.  The arbitrator shall base the award on applicable law.  The parties further agree that the costs of the arbitration shall be borne by the party substantially failing to prevail, as adjudged by the arbitrator.

	20.	No Employment or Service Contract.  Nothing in this letter agreement shall confer upon you any right to continue in the employment of the Company for any period of specific duration or interfere with or otherwise restrict in any way the rights of the Company or you, which rights are hereby expressly reserved by each, to terminate your employment at any time for any reason whatsoever, with or without cause.

	21.	Entire Agreement; Amendments.  This Agreement sets forth the entirety of the parties’ agreement regarding all matters involved in Employee’s employment and retirement from employment with the Company, and conduct by Releasees, jointly and individually, all as of the dates of execution of this Agreement by Employee and the dates of acceptance of each Retirement Payment hereunder.  Employee and the Company agree that this Agreement supersedes all prior written or oral agreements relating to Employee’s employment, separation from employment, and any conduct by any Releasees prior to the execution of this Agreement, all of which have been merged into this Agreement.  Any amendment hereof must be made in a writing signed by both parties hereto.  And, any such amendment shall not modify this Agreement, except by specific reference hereto.

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December 18, 2013

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	22.	Miscellaneous.

		a.	Choice of Law.  This Agreement shall be interpreted and construed under the laws of the State of Missouri without regard to choice or conflict of laws principles.

		b.	Legal Construction.  Company and Employee agree that the covenants contained in this Agreement shall be deemed to be a series of separate and independent covenants.  If any competent court or tribunal shall determine that any of the covenants or any part thereof is invalid or unenforceable, the remainder of the covenants shall not thereby be affected and shall be given full effect, without regard to invalid portions.  Whenever possible, each provision of this Agreement shall be interpreted in such manner as to be effective and valid under applicable law, and if necessary, shall be reformed, construed and enforced in such manner as to be valid and effective under applicable law.  Specifically, but without limiting the prior, more general statement in this Subsection 19(b), if the scope of any of the covenants herein should ever be found by a competent court to be more extensive (whether as to time period, geographic area, scope of business, occupational limitations or otherwise) than is determined to be permitted under applicable law, it is expressly understood and agreed between the parties hereto that such covenant shall not be void, but that the restriction contained therein (whether as to time period, geographic area, scope of business, occupational limitations or otherwise) shall be and hereby is reformed to the maximum time period, geographic area, scope of business or occupational limitation permitted by law

		c.	Remedies.  The parties hereto shall be allowed all legal and equitable remedies available under the law in addition to any other remedy provided for herein.  The parties hereto agree that any breach of any covenant herein is and shall be deemed to be material to this Agreement, and that upon a material beach either party may obtain an order for the specific performance of this Agreement.   Prior to proceeding to arbitration, either party may also obtain from any competent court preliminary injunctive relief to stop or prohibit any act which would violate any of the covenants herein.  Should a party hereto bring a proceeding for preliminary injunctive relief, the prevailing party in any such proceeding shall be entitled to recover from the non-prevailing party the costs and reasonable attorneys’ fees incurred by such prevailing party in bringing and prosecuting such proceeding.

		d.	Successors and Assigns.  This letter agreement is intended to bind and inure to the benefit of and be enforceable by you and the Company and any other person who is a successor to the Company by merger, acquisition, consolidation or otherwise, and their respective successors, assigns, heirs, executors and administrators, without regard to whether or not such person actively assumes any rights or duties hereunder; provided, however, that you may not assign any rights hereunder without the written consent of the Company.

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Please indicate your acceptance of the foregoing terms and conditions of this Agreement by signing one copy of this Agreement and returning it to the Company.  This Agreement shall be effective as of the first date written above.  Your signature delivered to the Company electronically, as by tele-facsimile or via electronic mail, shall be binding just as if delivered in person as an original signature.

Sincerely,

/s/ Robert H. Dick                                                                                                                                

Robert H. Dick

Chairman, Board of Directors

ACCEPTED AND AGREED TO

by Jerry L. Malis

Signature:   /s/ Jerry L. Malis                                                                                                                                                                  

Date:                  December 21, 2013                                             

 

 

Page | 41EXHIBIT 10.43

 

CONFIDENTIAL TREATMENT HAS BEEN REQUESTED AS TO CERTAIN PORTIONS OF THIS DOCUMENT.  EACH SUCH PORTION, WHICH HAS BEEN OMITTED HEREIN AND REPLACED WITH AN ASTERISK ***, HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION

Execution Version

November 18, 2013

AstraZeneca AB

SE-431 83

Mölndal

Sweden

Attn: President

POZEN Inc.

1414 Raleigh Road, Suite 400

Chapel Hill, North Carolina 27517

U.S.A

Attn:  President and Chief Executive Officer

Re: Acknowledgements and agreements regarding rights and responsibilities of the parties in relation to the License Agreements

Ladies and Gentlemen:

As you are aware, AstraZeneca AB, a corporation organized under the laws of Sweden (“AstraZeneca”) and Horizon Pharma U.S.A, Inc., a corporation organized under the laws of Delaware (“Horizon”) have, on the date of this letter agreement, executed that certain Asset Purchase Agreement by and between AstraZeneca and Horizon (the “APA”) pursuant to which AstraZeneca has agreed, subject to the terms and conditions of the APA, to transfer, assign and license to Horizon all rights of AstraZeneca and its affiliates to Vimovo® and other pharmaceutical products that contain gastroprotective agents in a single fixed combination oral solid dosage form with non-steroidal anti-inflammatory drugs in the United States and its territories and possessions (the “U.S.”), including, without limitation, all licenses and other rights granted to AstraZeneca by POZEN, Inc. (“POZEN”) with respect to such products in the U.S. (the “Divestiture”).

The parties acknowledge that, as of the date of this letter agreement, AstraZeneca and POZEN are parties to that certain Collaboration and License Agreement, dated August 1, 2006, by and between AstraZeneca and POZEN, as amended prior to the date of this letter agreement (the “Original License Agreement”).  In order to facilitate the transactions contemplated by the APA, AstraZeneca and POZEN have, on the date of this letter agreement, amended and restated the Original License Agreement in two separate agreements, each of which shall become effective on the closing of the APA:  (i) that certain Amended and Restated Collaboration and License Agreement for the United States, by and between AstraZeneca and POZEN (as may be amended in accordance with its terms, the “U.S. License Agreement”), which sets forth all rights and obligations as between AstraZeneca and POZEN with respect to Products (as defined below) in the U.S., and (ii) that certain Amended and Restated Collaboration and License Agreement, by and between AstraZeneca and POZEN (as may be amended in accordance with its terms, the “ROW License Agreement”), which sets forth all rights and obligations as between AstraZeneca and POZEN with respect to Products (as defined below) outside the U.S.  Pursuant to the APA, AstraZeneca has agreed, among other things, to assign to Horizon, and Horizon has agreed to assume, the U.S. License Agreement effective on the closing of the transactions contemplated under the APA.  The date on which such closing occurs is referred to as the “Transfer Date.”    The parties are executing this letter agreement to (i) facilitate the transactions contemplated by the APA with respect to the assignment by AstraZeneca, and assumption by Horizon, of the U.S. License Agreement, and (ii) acknowledge and agree to certain matters relating to the rights, obligations and liabilities of the parties in relation to the Original License Agreement, the U.S. License Agreement and the ROW License Agreement.

 

520 Lake Cook Road, Suite 520, Deerfield, IL  60015

1

CONFIDENTIAL TREATMENT HAS BEEN REQUESTED AS TO CERTAIN PORTIONS OF THIS DOCUMENT.  EACH SUCH PORTION, WHICH HAS BEEN OMITTED HEREIN AND REPLACED WITH AN ASTERISK ***, HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION

 

In consideration of the foregoing, the parties acknowledge and agree to the following:

 

1.            Definitions.  For purposes of this letter agreement, the following terms are defined as indicated:

“Affiliate” means a legal entity that, directly or indirectly, through one or more intermediaries, controls, is controlled by, or is under common control with an entity.  For purposes of this definition only, “control” and, with correlative meanings, the terms “controlled by” and “under common control with” means (a) the possession, directly or indirectly, of the power to direct the management or policies of a legal entity, whether through the ownership of voting securities or by contract relating to voting rights or corporate governance, or (b) the ownership, directly or indirectly, of more than 50% of the voting securities or other ownership interest of a legal entity; provided, that if local law restricts foreign ownership, control will be established by direct or indirect ownership of the maximum ownership percentage that may, under such local law, be owned by foreign interests.

“AstraZeneca Territory” means worldwide, excluding the Horizon Territory and Japan.

“AstraZeneca Net Sales” means Net Sales as defined in the ROW License Agreement.

“Calendar Quarter” means the respective periods of three (3) consecutive calendar months ending on March 31, June 30, September 30 and December 31.

“Esomeprazole” means that certain pharmaceutical compound with the name (5-methoxy-2-{(S)-[(4-methoxy-3,5-dimethylpyridin-2-yl)methyl]sulfinyl}-1H-benzimidazole), including any ***.

“Field of Use” means the treatment of human diseases and conditions by means of a pharmaceutical product.

“Horizon Territory” means the United States and its territories and possessions.

“Horizon Net Sales” means Net Sales as defined in the U.S. License Agreement.

2

CONFIDENTIAL TREATMENT HAS BEEN REQUESTED AS TO CERTAIN PORTIONS OF THIS DOCUMENT.  EACH SUCH PORTION, WHICH HAS BEEN OMITTED HEREIN AND REPLACED WITH AN ASTERISK ***, HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION

 

“Licensed Technology” has the meaning set forth in (a) for purposes of paragraph 7(a) below, the U.S. License Agreement and (b) for purposes of paragraph 7(d) below, the ROW License Agreement.

“Milestone Event” means an event set forth in the table in paragraph 5 below.

“Milestone Payment” means a payment set forth in the table in paragraph 5 below.

“Milestone Share” means (a) with respect to AstraZeneca, (i) the applicable Milestone Payment multiplied by (ii) a fraction, the numerator of which is the AstraZeneca Net Sales for the applicable calendar year, and the denominator of which is the sum of (A) the AstraZeneca Net Sales for such calendar year and (B) the Horizon Net Sales for such calendar year; and (b) with respect to Horizon, (i) the applicable Milestone Payment multiplied by (ii) a fraction, the numerator of which is the Horizon Net Sales for the applicable calendar year, and the denominator of which is the sum of (A) the Horizon Net Sales for such calendar year and (B) the AstraZeneca Net Sales for such calendar year.

“Nexium” means AstraZeneca AB’s and its Affiliates’ products containing Esomeprazole as the sole active ingredient in any presentation form.

“Nexium Business” means AstraZeneca AB’s and its Affiliates’ development and commercialization activities pertaining to Esomeprazole and Esomeprazole based products.

“ROW Licensed Patents” means Licensed Patents as defined in the ROW License Agreement.

“Products” has the meaning set forth in (a) with respect to references in this letter agreement to development, manufacture, commercialization or other exploitation of Products in the AstraZeneca Territory, the ROW License Agreement and (b) with respect to references in this letter agreement to development, manufacture, commercialization or other exploitation of Products in the Horizon Territory, the U.S. License Agreement.

“Sublicensees” has the meaning set forth in (a) for purposes of paragraph 7(a) below, except as otherwise expressly provided in paragraph 7(a) below, the ROW License Agreement and (b) for purposes of paragraph 7(d) below, except as otherwise expressly provided in paragraph 7(d) below, the U.S. License Agreement.

“Supply Agreement” means that certain supply agreement to be entered into by Horizon and AstraZeneca LP in connection with the Divestiture pursuant to which AstraZeneca LP will supply Horizon with Vimovo® until December 31, 2014.

“US Licensed Patents” means Licensed Patents as defined in the U.S. License Agreement.

3

CONFIDENTIAL TREATMENT HAS BEEN REQUESTED AS TO CERTAIN PORTIONS OF THIS DOCUMENT.  EACH SUCH PORTION, WHICH HAS BEEN OMITTED HEREIN AND REPLACED WITH AN ASTERISK ***, HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION

 

2.            Consent to Assignment of U.S. License Agreement, Joint Inventions and Joint Patents.  POZEN hereby consents to the assignment by AstraZeneca, and assumption by Horizon, of the U.S. License Agreement and all of AstraZeneca’s and its Affiliates’ right, title and interest in and to the Joint Inventions (as defined in the Original License Agreement) and Joint Patents (as defined in the Original License Agreement) in the Horizon Territory conceived under the Original Agreement, in each case, effective as of the Transfer Date.  Each of POZEN and AstraZeneca hereby represents and warrants to Horizon as of the date hereof that the Original License Agreement is in full force and effect.

 

3.            Assumption of Transferred Rights and Obligations.  Pursuant to the APA, effective as of the Transfer Date, Horizon will assume and accept all rights, liabilities and obligations of AstraZeneca under the U.S. License Agreement arising on or after the Transfer Date.  All rights, liabilities and obligations of AstraZeneca with respect to POZEN other than those transferred to Horizon in connection with the Divestiture, will remain rights, liabilities and obligations of AstraZeneca.  The foregoing does not modify the agreements as between AstraZeneca and POZEN set forth in the side letter agreement between AstraZeneca and POZEN dated September 16, 2013.

 

4.            Release of Liabilities.  The parties hereby agree that Horizon will not be responsible for, and POZEN, on behalf of itself and its Affiliates and its and their respective successors and assigns, officers, employees and directors and any third parties claiming through POZEN (collectively, the “Releasors”), hereby releases and forever discharges Horizon, its Affiliates and its and their respective successors and assigns, and the shareholders, officers, directors, employees, agents, trustees and beneficiaries of each of the foregoing (each individually, a “Horizon Party”) of and from, any and all claims, suits, acts, damages, demands, liabilities, rights of action and causes of action, both in law and equity, whether known or unknown, foreseen or unforeseen, matured or contingent, that the Releasors ever had, now have, or in the future may have against any Horizon Party arising out of or directly related to the Original License Agreement, including matters arising after the Transfer Date that arise out of or directly relate to the Original License Agreement (the “Claims”).  Furthermore, POZEN, on behalf of itself and its respective Releasors, agrees not to sue, or otherwise institute or cause to be instituted, or in any way voluntarily participate in, assist in (financially or otherwise) or authorize the prosecution of any Claim against any Horizon Party in any federal, state, local or other court, or in any other forum.

5.            Sales Milestones.

a.            If any Milestone Event is achieved during the term of either the U.S. License Agreement or ROW License Agreement, each of AstraZeneca and Horizon shall pay to POZEN directly its Milestone Share (if any) with respect to the applicable Milestone Event within *** (***) *** following the achievement of such Milestone Event.  AstraZeneca shall not be liable for Horizon’s failure to pay Horizon’s Milestone Share to POZEN, and Horizon shall not be liable for AstraZeneca’s failure to pay AstraZeneca’s Milestone Share to POZEN.

4

CONFIDENTIAL TREATMENT HAS BEEN REQUESTED AS TO CERTAIN PORTIONS OF THIS DOCUMENT.  EACH SUCH PORTION, WHICH HAS BEEN OMITTED HEREIN AND REPLACED WITH AN ASTERISK ***, HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION

 

	  	
 

Milestone Event

 

	
Milestone Payment

	1.	
End of first calendar year during which aggregate annual Horizon Net Sales and AstraZeneca Net Sales were at least $550,000,000

	
$***

	2. 	
End of first calendar year during which aggregate annual Horizon Net Sales and AstraZeneca Net Sales were at least $***

	
$***

	3. 	
End of first calendar year during which aggregate annual Horizon Net Sales and AstraZeneca Net Sales were at least $***

	
$***

	4. 	
End of first calendar year during which aggregate annual Horizon Net Sales and AstraZeneca Net Sales were at least $1,250,000,000

	
$***

Each Milestone Payment shall be payable only once, and not for each time that the applicable Milestone Event is achieved.

b.            Until each Milestone Event has been achieved, AstraZeneca shall provide Horizon a copy of each report AstraZeneca provides to POZEN under Section 8.3.1 of the ROW License Agreement.  AstraZeneca shall provide such copies to Horizon within *** (***) *** after the end of the applicable Calendar Quarter with respect to the first (1st) three (3) Calendar Quarters of a calendar year and within *** (***) *** after the end of the fourth Calendar Quarter of the applicable calendar year.

c.            Until each Milestone Event has been achieved, Horizon shall provide AstraZeneca a copy of each report Horizon provides to POZEN under Section 8.2.1 of the U.S. License Agreement.  Horizon shall provide such copies to AstraZeneca within *** (***) *** after the end of the applicable Calendar Quarter with respect to the first (1st) three (3) Calendar Quarters of a calendar year and within *** (***) *** after the end of the fourth Calendar Quarter of the applicable calendar year.

d.            Until each Milestone Event has been achieved, promptly after receipt by each of Horizon and AstraZeneca of the reports described in the immediately preceding two paragraphs, and in any event no later than *** (***) *** after the end of the fourth Calendar Quarter of the applicable calendar year, AstraZeneca and Horizon shall confer regarding whether a Milestone Event has been achieved during the preceding calendar year and, if so, the Milestone Share payable by each of Horizon and AstraZeneca for the achievement of any such Milestone Event.  ***and***of ***and ***to ***in an ***and***of ***and in the ***.  For clarity, this paragraph shall not limit either AstraZeneca’s or Horizon’s obligation to pay its respective Milestone Share when due.

e.            AstraZeneca shall not be responsible for failure to pay its Milestone Share for achievement of a Milestone Event when due, and such failure shall not be deemed a breach of this letter agreement by AstraZeneca, to the extent such failure is the result of Horizon failing to timely report Horizon Net Sales to AstraZeneca in accordance with this letter agreement.  Horizon shall not be responsible for failure to pay its Milestone Share for achievement of a Milestone Event when due, and such failure shall not be deemed a breach of this letter agreement by Horizon, to the extent such failure is the result of AstraZeneca failing to timely report AstraZeneca Net Sales to Horizon in accordance with this letter agreement.

5

CONFIDENTIAL TREATMENT HAS BEEN REQUESTED AS TO CERTAIN PORTIONS OF THIS DOCUMENT.  EACH SUCH PORTION, WHICH HAS BEEN OMITTED HEREIN AND REPLACED WITH AN ASTERISK ***, HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION

 

f.            The terms and conditions of Section 8.3.3, Section 8.3.4, Section 8.3.5 and Section 8.5 of the ROW License Agreement shall apply with respect to any Milestone Share of AstraZeneca and the terms and conditions of Section 8.2.3, Section 8.2.4, Section 8.2.5 and Section 8.4 of the U.S. License Agreement shall apply with respect to any Milestone Share of Horizon.

g.            For clarity, in the event the ROW Agreement or U.S. Agreement is terminated, AstraZeneca or Horizon, respectively, will (i) continue to provide reports to the other party as described above with respect to AstraZeneca Net Sales and Horizon Net Sales, respectively, to the extent any AstraZeneca Net Sales and Horizon Net Sales, respectively, are achieved after such termination, and (ii) be obligated to pay its Milestone Share with respect to any Milestone Event achieved during an applicable calendar year following such termination based on AstraZeneca Net Sales and Horizon Net Sales achieved during such calendar year.

6.            Transition Payments; ***.  Beginning on the Transfer Date, and continuing for a period ending on the later of (i) *** (***) *** thereafter, and (ii) the date on which ***, AstraZeneca acknowledges and agrees to the following:

a.            As part of its reporting obligations under Section 8.3.1 of the ROW Agreement, AstraZeneca will include in its report provided to POZEN within *** *** (***) of the end of the fourth (4th) Calendar Quarter of each year a summary profit and loss statement relating to VIMOVO ***, which will include ***.

b.            AstraZeneca will pay to POZEN, or credit against royalties otherwise payable by AstraZeneca to POZEN under the ROW License Agreement, ***% of any ***; provided, that if for any reason there are no longer royalties payable by AstraZeneca under the ROW License Agreement, then POZEN will pay to AstraZeneca any amount that would otherwise be credited against such royalties.

c.            AstraZeneca will make any royalty payments to POZEN or take any credit due under this paragraph 6 in accordance with Article 8 of the ROW License Agreement.

7.            Ex-Territory Sublicenses Under U.S. and ROW License Agreements; Supply Agreement Sublicense.

a.            Horizon hereby grants to AstraZeneca, effective as of the Transfer Date, a non-exclusive, royalty-free sublicense, with the right to grant sublicenses through multiple tiers solely to Sublicensees, under the Licensed Technology to develop, make and have made (but not market, sell or otherwise commercialize) Products in the Field of Use in the Horizon Territory solely in support of the development, commercialization or other exploitation of the Products in the Field of Use in the AstraZeneca Territory.  If the U.S. License Agreement is terminated or otherwise ceases to be in effect for any reason other than expiration thereof pursuant to its terms, then POZEN shall and does hereby automatically and without any additional consideration grant to AstraZeneca, with effect from the effective date of the termination of the U.S. License Agreement, a direct non-exclusive, royalty-free license, with the right to grant sublicenses pursuant to Section 7.3 of the ROW License Agreement, under the Licensed Technology to develop, make and have made (but not market, sell or otherwise commercialize) Products in the Field of Use in the Horizon Territory solely in support of the development, commercialization or other exploitation of the Products  in the Field of Use in the AstraZeneca Territory, and such direct license shall continue in effect for the duration of the ROW License Agreement.

6

CONFIDENTIAL TREATMENT HAS BEEN REQUESTED AS TO CERTAIN PORTIONS OF THIS DOCUMENT.  EACH SUCH PORTION, WHICH HAS BEEN OMITTED HEREIN AND REPLACED WITH AN ASTERISK ***, HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION

 

b.            Each of AstraZeneca and Horizon represents and warrants to POZEN as of the date hereof that under the Supply Agreement Horizon grants AstraZeneca LP a non-exclusive, royalty-free, non-transferable (except in connection with a permitted assignment of the Supply Agreement pursuant to its terms) license under the Licensed Technology, with the right to grant further sublicenses, to the extent necessary for AstraZeneca and its Affiliates to perform their obligations under the Supply Agreement.

c.            POZEN hereby consents to the sublicense granted by Horizon to AstraZeneca under paragraph 7(a) and the sublicense granted by Horizon to AstraZeneca LP under the Supply Agreement as described in paragraph 7(b) and acknowledges and agrees that the provisions of Section 7.3 of the U.S. License Agreement shall not apply with respect to either sublicense (including any obligation to guarantee performance of AstraZeneca or AstraZeneca LP as a sublicensee), neither AstraZeneca nor AstraZeneca LP shall be deemed to be a Sublicensee (as defined in the U.S. License Agreement) under the U.S. License Agreement and Horizon shall not be responsible to POZEN for compliance by AstraZeneca or AstraZeneca LP with the terms of the U.S. License Agreement with respect to AstraZeneca’s exercise of the sublicense granted herein or AstraZeneca LP’s exercise of the sublicense granted under the Supply Agreement, as applicable.

d.            AstraZeneca hereby grants to Horizon, effective as of the Transfer Date, a non-exclusive, royalty-free sublicense, with the right to grant sublicenses through multiple tiers solely to Sublicensees, under the Licensed Technology to develop, make and have made (but not market, sell or otherwise commercialize) Products in the Field of Use in the AstraZeneca Territory solely in support of the development, commercialization or other exploitation of the Products in the Field of Use in the Horizon Territory.  POZEN hereby consents to such sublicense and acknowledges and agrees that the provisions of Section 7.3 of the ROW License Agreement shall not apply with respect to such sublicense (including any obligation to guarantee performance of Horizon as a sublicensee), Horizon shall not be deemed to be a Sublicensee (as defined in the ROW License Agreement) under the ROW License Agreement and AstraZeneca shall not be responsible to POZEN for compliance by Horizon with the terms of the ROW License Agreement with respect to Horizon’s exercise of the sublicense granted herein. If the ROW License Agreement is terminated or otherwise ceases to be in effect for any reason other than expiration thereof pursuant to its terms, then POZEN shall and does hereby automatically and without any additional consideration grant to Horizon, with effect from the effective date of the termination of the ROW License Agreement, a direct non-exclusive, royalty-free license, with the right to grant sublicenses pursuant to Section 7.3 of the U.S. License Agreement, under the Licensed Technology to develop, make and have made (but not market, sell or otherwise commercialize) Products in the Field of Use in the AstraZeneca Territory solely in support of the development, commercialization or other exploitation of the Products in the Field of Use in the Horizon Territory, and such direct license shall continue in effect for the duration of the U.S. License Agreement.

7

CONFIDENTIAL TREATMENT HAS BEEN REQUESTED AS TO CERTAIN PORTIONS OF THIS DOCUMENT.  EACH SUCH PORTION, WHICH HAS BEEN OMITTED HEREIN AND REPLACED WITH AN ASTERISK ***, HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION

 

8.            Patent Prosecution Information.

a.            The parties acknowledge and agree that (i) in connection with the prosecution and maintenance of the US Licensed Patents pursuant to the U.S. License Agreement it may be necessary or useful for the prosecuting and maintaining party to access the prosecution histories of the ROW Licensed Patents and any other information with respect to the prosecution of the ROW Licensed Patents that is necessary or useful for the prosecution or maintenance of the US Licensed Patents pursuant to the U.S. License Agreement, (ii) notwithstanding any provision in the ROW License Agreement to the contrary, such prosecuting and maintaining party shall have the right, at its sole expense, to obtain copies of such prosecution histories and other information solely for use in connection with the prosecution and maintenance of the US Licensed Patents under the U.S. License Agreement and (iii) any information disclosed under this paragraph 8(a) shall be deemed Confidential Information (as defined in the U.S. License Agreement) of POZEN and subject to the provisions of Article 11 of the U.S. License Agreement, provided that such prosecuting and maintaining party may disclose such Confidential Information to any patent authorities in the Horizon Territory to the extent such disclosure is made in connection with the performance of the U.S. License Agreement.

b.            The parties acknowledge and agree that (i) in connection with the prosecution and maintenance of the ROW Licensed Patents pursuant to the ROW License Agreement it may be necessary or useful for the prosecuting and maintaining party to access the prosecution histories of the US Licensed Patents and any other information with respect to the prosecution of the US Licensed Patents that is necessary or useful for the prosecution or maintenance of the ROW Licensed Patents pursuant to the ROW License Agreement, (ii) notwithstanding any provision in the U.S. License Agreement to the contrary, such prosecuting and maintaining party shall have the right, at its sole expense, to obtain copies of such prosecution histories and other information solely for use in connection with the prosecution and maintenance of the ROW Licensed Patents under the ROW License Agreement and (iii) any information disclosed under this paragraph 8(b) shall be deemed Confidential Information (as defined in the ROW License Agreement) of POZEN and subject to the provisions of Article 11 of the ROW License Agreement, provided that such prosecuting and maintaining party may disclose such Confidential Information to any patent authorities in the AstraZeneca Territory to the extent such disclosure is made in connection with the performance of the ROW License Agreement.

9.            ***.

a.            Capitalized terms used in this paragraph 9 but not defined in this letter agreement shall have the meaning set forth in the U.S. License Agreement.

8

CONFIDENTIAL TREATMENT HAS BEEN REQUESTED AS TO CERTAIN PORTIONS OF THIS DOCUMENT.  EACH SUCH PORTION, WHICH HAS BEEN OMITTED HEREIN AND REPLACED WITH AN ASTERISK ***, HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION

 

b.            If POZEN is required by Applicable Law to provide to a Regulatory Authority in the *** any communication that relates to ***and***as it ***that***to***.

c.            Except as otherwise set forth in the U.S. License Agreement or ROW License Agreement or to comply with Applicable Law, ***or***the ***.

d.            If POZEN is required by Applicable Law to make any statements in an AE or SAE report in the *** pertaining to ***of ***and***the***to***.

e.            POZEN is not by the U.S. License Agreement, by implication or otherwise, granted any license or other right relating to ***to ***or ***to ***or ***.

f.            Notwithstanding anything to the contrary in the U.S. License Agreement, ***of***or***of its ***or ***of the ***.

g.            Except as provided in paragraphs 9(b) or 9(d) above, without *** prior written consent, *** will not make, and will prohibit its Affiliates, third party contractors, and agents from ***or***.

h.            ***in the ***that is ***and***the ***the***that***in the ***to be ***.

i.            ***to the ***.

10.         Payment of U.S. Royalties During Transition Period.  POZEN acknowledges and agrees that notwithstanding the assignment of the U.S. License Agreement by AstraZeneca to Horizon as of the Transfer Date, AstraZeneca shall continue to be responsible for paying POZEN any royalties that are payable under the U.S. License Agreement with respect to any Net Sales (as defined in the U.S. License Agreement) of any Product in the Horizon Territory during the period that begins on the Transfer Date and ends on December 31, 2013 and providing POZEN the corresponding sales reports required under the U.S. License Agreement with respect to such period, and POZEN shall accept such amounts from AstraZeneca in satisfaction of Horizon’s obligations with respect thereto under the U.S. License Agreement.

11.         Assignment.

a.            AstraZeneca shall not sell, transfer, assign, delegate, pledge or otherwise dispose of, whether voluntarily, involuntarily, by operation of law or otherwise, this letter agreement or any of its rights or duties hereunder other than in connection with a permitted assignment of the ROW License Agreement or any of its rights or duties thereunder pursuant to the terms thereof (an “AstraZeneca Permitted Assignment”).  In the event of an AstraZeneca Permitted Assignment, this letter agreement, and AstraZeneca’s rights and obligations hereunder, shall be automatically assigned to the assignee of AstraZeneca’s rights and duties under the ROW License Agreement.

9

CONFIDENTIAL TREATMENT HAS BEEN REQUESTED AS TO CERTAIN PORTIONS OF THIS DOCUMENT.  EACH SUCH PORTION, WHICH HAS BEEN OMITTED HEREIN AND REPLACED WITH AN ASTERISK ***, HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION

 

b.            Horizon shall not sell, transfer, assign, delegate, pledge or otherwise dispose of, whether voluntarily, involuntarily, by operation of law or otherwise, this letter agreement or any of its rights or duties hereunder other than in connection with a permitted assignment of the U.S. License Agreement or any of its rights or duties thereunder pursuant to the terms thereof (a “Horizon Permitted Assignment”).  In the event of a Horizon Permitted Assignment, this letter agreement, and Horizon’s rights and obligations hereunder, shall be automatically assigned to the assignee of Horizon’s rights and duties under the U.S. License Agreement.

c.            POZEN shall not sell, transfer, assign, delegate, pledge or otherwise dispose of, whether voluntarily, involuntarily, by operation of law or otherwise, this letter agreement or (i) its rights or duties hereunder with respect to AstraZeneca’s Milestone Share (paragraph 5) or Horizon’s sublicense to AstraZeneca (paragraph 7(a)), (ii) its duties hereunder with respect to patent prosecution information for the ROW Licensed Patent (paragraph 8(a)) and (iii) its rights hereunder with respect to patent prosecution information for the US Licensed Patents (paragraph 8(b)) (collectively, the “POZEN ROW Provisions”) other than in connection with a permitted assignment of the ROW License Agreement or any of its rights or duties thereunder pursuant to Section 15.1 thereof (a “POZEN Permitted ROW Assignment”).  In the event of a POZEN Permitted ROW Assignment, this letter agreement and POZEN’s rights and obligations under the POZEN ROW Provisions shall be automatically assigned to the assignee of POZEN’s rights and duties under the ROW License Agreement.

d.            POZEN shall not sell, transfer, assign, delegate, pledge or otherwise dispose of, whether voluntarily, involuntarily, by operation of law or otherwise, this letter agreement or (i) its rights or duties under paragraph 2 or paragraph 4, (ii) its rights or duties hereunder with respect to Horizon’s Milestone Share (paragraph 5), AstraZeneca’s sublicense to Horizon (paragraph 7(d)), or the Nexium-related restrictions (paragraph 9), (iii) its rights hereunder with respect to patent prosecution information for the ROW Licensed Patent (paragraph 8(a)) and (iv) its duties hereunder with respect to patent prosecution information for the US Licensed Patents (paragraph 8(b)) (collectively, the “POZEN US Provisions”) other than in connection with a permitted assignment of the U.S. License Agreement or any of its rights or duties thereunder pursuant to Section 15.1 thereof (a “POZEN Permitted US Assignment”).  In the event of a POZEN Permitted US Assignment, this letter agreement and POZEN’s rights and obligations under the POZEN US Provisions shall be automatically assigned to the assignee of POZEN’s rights and duties under the U.S. License Agreement.  For clarity, in no event will any sale, transfer, assignment, delegation, pledge or other disposal of the POZEN US Provisions relieve POZEN of its agreements and duties under paragraph 4.

12.         Representation of AstraZeneca.  AstraZeneca represents and warrants to POZEN as of the date hereof that pursuant to the APA AstraZeneca provides Horizon the representation and warranty set forth on Attachment A, and such representation and warranty is true and accurate in all material respects as of the date hereof.

10

CONFIDENTIAL TREATMENT HAS BEEN REQUESTED AS TO CERTAIN PORTIONS OF THIS DOCUMENT.  EACH SUCH PORTION, WHICH HAS BEEN OMITTED HEREIN AND REPLACED WITH AN ASTERISK ***, HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION

 

13.         Miscellaneous.

a.             With respect to the rights and obligations of AstraZeneca and POZEN with respect to the POZEN ROW Provisions, this letter agreement is subject to Articles 11 through 14 of the ROW License Agreement.  With respect to the rights and obligations of Horizon and POZEN with respect to the POZEN US Provisions, this letter agreement is subject to Articles 11 through 14 of the U.S. License Agreement.  Any breach of this letter agreement by AstraZeneca or POZEN with respect to the POZEN ROW Provisions shall be deemed a breach of the ROW License Agreement by such party and subject to such parties’ respective rights and remedies (and any applicable limitations) thereunder.  Any breach of this letter agreement by Horizon or POZEN with respect to the POZEN US Provisions shall be deemed a breach of the U.S. License Agreement by such party and subject to such parties’ respective rights and remedies (and any applicable limitations) thereunder.  This letter agreement automatically shall terminate with respect to AstraZeneca and POZEN with respect to the POZEN ROW Provisions upon the termination of the ROW License Agreement (subject to Sections 12.10 thereof).  This letter agreement automatically shall terminate with respect to Horizon and POZEN with respect to the POZEN US Provisions upon the termination of the U.S. License Agreement (subject to Sections 12.9 thereof).  For clarity, the consent under paragraph 2, and the release and other agreements of POZEN under paragraph 4, will survive any expiration or termination of this letter agreement.

b.            Each of AstraZeneca, POZEN and Horizon acknowledges and agrees that the terms of this letter agreement shall not become effective until the Transfer Date.

c.            The agreements set forth in this letter agreement are being relied upon by each of AstraZeneca and Horizon in connection with its determination to execute the APA.  The parties hereto agree that irreparable damage would occur in the event that any of the provisions of this letter agreement were not performed in accordance with their specific terms or were otherwise breached.  It is accordingly agreed that the parties hereto shall be entitled to an injunction or injunctions to prevent breaches of this letter agreement and to enforce specifically the terms and provisions of this letter agreement in any court of the U.S. or any state having jurisdiction, this being in addition to any other remedy to which they are entitled at law or in equity.  Each party hereto hereby waives (i) any requirement that the other party post a bond or other security as a condition for obtaining any such relief, and (ii) any defenses in any action for specific performance, including the defense that a remedy at law would be adequate.

d.            This letter agreement shall be governed by and construed in accordance with the laws of the State of New York applicable to contracts executed and performed in such state, without giving effect to the conflicts of laws principles thereof to the extent such principles would require or permit the application of the laws of another state.  This letter agreement may be executed in multiple counterparts, all of which taken together shall constitute a single instrument.  Delivery of an executed counterpart of a signature page of this letter agreement by facsimile or other electronic transmission shall be effective as delivery of a manually executed original counterpart of this letter agreement.  No amendment or modification of this letter agreement will be binding upon the parties unless in writing and duly executed by authorized representatives of AstraZeneca, Horizon and POZEN.

-Signature page to follow-

11

CONFIDENTIAL TREATMENT HAS BEEN REQUESTED AS TO CERTAIN PORTIONS OF THIS DOCUMENT.  EACH SUCH PORTION, WHICH HAS BEEN OMITTED HEREIN AND REPLACED WITH AN ASTERISK ***, HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION

 

Please confirm the agreement of AstraZeneca and POZEN with the terms of this letter agreement by countersigning in the space provided below.  This letter agreement, once fully executed by AstraZeneca and POZEN, shall be deemed to have been executed as of the date first above written.

	
Sincerely,

	
 

	
 

	
 

	
Horizon Pharma U.S.A, Inc.

	
 

	
 

	
 

	
By:

	/s/ Timothy P. Walbert	
 

	
 

	
 

	
Name:  Timothy P. Walbert

	
 

	
 

	
 

	
Title:  President and Chief Executive Officer

	
 

	
 

	
 

	
Acknowledged and Agreed:

	
 

	
 

	
 

	
AstraZeneca AB

	
 

	
 

	
 

	
By:

	/s/ Jan-Olof Jacke	
 

	
 

	
 

	
Name:  Jan-Olof Jacke

	
 

	
 

	
 

	
Title:  President

	
 

	
 

	
 

	
POZEN, Inc.

	
 

	
 

	
 

	
By:

	/s/ John R. Plachetka	
 

	
 

	
 

	
Name: John R. Plachetka

	
 

	
 

	
 

	
Title:  Chairman, President & CEO

	
 

12

CONFIDENTIAL TREATMENT HAS BEEN REQUESTED AS TO CERTAIN PORTIONS OF THIS DOCUMENT.  EACH SUCH PORTION, WHICH HAS BEEN OMITTED HEREIN AND REPLACED WITH AN ASTERISK ***, HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION

 

Attachment A

The Purchased Assets, together with the Merck Covenant and rights granted to Horizon under the License Agreement, the Licensed Regulatory Documentation, the APA Manufacturing Technology and any software or other ordinary course and immaterial Third Party licenses that are commercially available (excluding, for clarity, any license of any Patent Rights), constitute all of the intellectual property, Regulatory Approvals and Regulatory Documentation necessary to (i) operate the Product Business, (ii) Manufacture or have Manufactured the Product in the Horizon Territory, and (iii) Manufacture, have Manufactured, research and develop the Product in the AstraZeneca Territory solely for exportation and use of the Product in connection with the Exploitation of Product in the Horizon Territory, in each case ((i) - (iii)) in the same manner that AstraZeneca and its Affiliates are operating the Product Business, Manufacturing or having Manufactured the Product in the Horizon Territory, and Manufacturing, having Manufactured, researching and developing the Product in the AstraZeneca Territory for exportation and use of the Product in connection with the Exploitation of Product in the Horizon Territory, as applicable, as of the Execution Date and as of the Closing.  In the event this Section 3.1.6(b) is breached because AstraZeneca has failed to convey any Purchased Assets or to identify and either transfer to Horizon, or grant Horizon a license to or right of reference and use with respect to, as applicable, any intellectual property, Regulatory Approvals or Regulatory Documentation necessary for the representation and warranty in this Section 3.1.6(b) to be true and correct in all respects, such breach shall be deemed cured as of the date AstraZeneca or any of its Affiliates specifically performs its obligation under this Agreement or any Ancillary Agreement to convey title to all Purchased Assets to Horizon or to transfer to Horizon, or grant Horizon a license to or right of reference and use with respect to, as applicable, such intellectual property, Regulatory Approvals or Regulatory Documentation at no additional cost or expense to Horizon; provided that such breach shall not be deemed cured with respect to any Losses incurred by any Horizon Indemnitee prior to such transfer or grant.

 

 

13

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