SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_____________________
FORM 10-K
Annual Report Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934
_____________________
For the fiscal year ended Commission file number
December 28, l996 1-4105
BAUSCH & LOMB INCORPORATED
(Exact name of registrant as specified in its charter)
NEW YORK 16-0345235
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
ONE BAUSCH & LOMB PLACE, ROCHESTER, NEW YORK 14604-2701
(Address of principal executive offices) (Zip Code)
Registrant's telephone no., including area code:(716) 338-6000
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange on
Title of each class which registered
Common Stock, $.40 par value New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
[Cover page 1 of 2 pages]
<PAGE>
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 [ X ] No ___
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. [ X ]
The aggregate market value (based on the consolidated tape
closing price on March 5, 1997) of the voting stock held by non-
affiliates of the registrant was $2,063,214,413. For the sole
purpose of making this calculation, the term "non-affiliate" has
been interpreted to exclude directors and corporate officers.
Such interpretation is not intended to be, and should not be
construed to be, an admission by Bausch & Lomb Incorporated or
such directors or corporate officers that such directors and
corporate officers are "affiliates" of Bausch & Lomb
Incorporated, as that term is defined under the Securities Act of
1933.
The number of shares of Common Stock of the registrant,
outstanding as of March 5, 1997 was 55,457,104, consisting of
54,711,725 shares of Common Stock and 745,379 shares of Class B
Stock, which are identical with respect to dividend and
liquidation rights, and vote together as a single class for all
purposes.
DOCUMENTS INCORPORATED BY REFERENCE
Parts I and II The Bausch & Lomb 1996 Annual Report to
Shareholders for fiscal year ended December 28, 1996 ("Annual
Report"). With the exception of the pages of the Annual Report
specifically incorporated by reference herein, the Annual Report
is not deemed to be filed as a part of this Report on Form 10-K.
Part III Bausch & Lomb Incorporated Proxy Statement, dated
March 21, 1997 ("Proxy Statement"). With the exception of the
pages of the Proxy Statement specifically incorporated by
reference herein, the Proxy Statement is not deemed to be filed
as part of this Report on Form 10-K.
[Cover page 2 of 2 pages]
<PAGE> 1
TABLE OF CONTENTS
PART I PAGE
Item 1. Business ................................ 2
Item 2. Properties .............................. 6
Item 3. Legal Proceedings ....................... 9
Item 4. Submission of Matters to a Vote
of Shareholders ......................... 11
PART II
Item 5. Market for Bausch & Lomb Incorporated's
Common Stock and Related Shareholder
Matters ................................. 11
Item 6. Selected Financial Data ................. 11
Item 7. Management's Discussion and
Analysis of Financial Condition
and Results of Operations................ 11
Item 8. Financial Statements and
Supplementary Data ...................... 11
Item 9. Changes in and Disagreements
with Accountants on Accounting
and Financial Disclosure ................ 11
PART III
Item 10. Directors and Executive Officers
of Bausch & Lomb Incorporated............ 12
Item 11. Executive Compensation .................. 14
Item 12. Security Ownership of Certain
Beneficial Owners and Management ........ 14
Item 13. Certain Relationships and
Related Transactions .................... 14
PART IV
Item 14. Exhibits, Financial Statement
Schedule, and Reports on Form 8-K ..... . 14
Signatures .......................................... 15
Schedules .......................................... S-1
Exhibit Index ...................................... E-1
Exhibits............ (Attached to this Report on Form 10-K)
<PAGE> 2
PART I
ITEM 1. BUSINESS
(a) GENERAL DEVELOPMENT OF BUSINESS
Bausch & Lomb Incorporated is a world leader in the
development, manufacture and marketing of products and services
for the eye care and healthcare fields.
Bausch & Lomb was incorporated in the State of New York in
1908 to carry on a business which was established in 1853. Its
principal executive offices are located in Rochester, New York.
Unless the context indicates otherwise, the terms "Bausch &
Lomb" and "Company" as used herein refer to Bausch & Lomb
Incorporated and its consolidated subsidiaries. Highlights of the
general development of the business of Bausch & Lomb during 1996
are discussed below.
1996 was a challenging year for Bausch & Lomb; however, the
management of the Company remains committed to improving
financial performance and has initiated strategies to reduce
costs and improve financial performance in 1997 and over the
longer term. Reported revenues for 1996 were $1,927 million, a
decrease of $6 million or less than 1% from 1995. Excluding the
oral care and dental implant businesses divested in 1996 and the
sports optics business divested in 1995, revenues from ongoing
businesses reached $1,877 million, an increase of 2% over the
$1,836 million recorded in 1995. Net earnings for 1996 amounted
to $83 million, or $1.47 per share, compared to $112 million or
$1.94 per share, reported in 1995. Excluding restructuring
charges and gains and losses on divestitures of businesses from
both periods, net earnings were $92 million or $1.62 per share in
1996, compared to $109 million or $1.88 per share in 1995.
In February 1996, the Company acquired Arnette Optic
Illusions, Inc., a designer, manufacturer and marketer of high-
performance sunglasses and goggles, which competes in market
segments where the Company was not previously represented.
Also, in February 1996, the Company acquired Award plc, a
Scotland-based company which manufactures and markets a high-
water, daily disposable soft contact lens. The patented cast-mold
manufacturing technology and highly efficient distribution
process used by Award are specifically designed to respond to the
high volumes, short cycle times and low unit costs needed to make
single-use soft contact lens wear practical and affordable for
consumers.
In June 1996, the Company's board of directors approved
plans to restructure portions of the eyewear and vision care
segments, as well as certain corporate administrative functions
and a restructuring charge of $11 million after taxes, or $0.19
per share, was recorded. These actions are part of the Company's
efforts to enhance its competitive position and to reduce the
annual impact of general and administrative, logistics and
distribution costs.
In July 1996, the Company recorded litigation provisions of
$10 million after taxes, or $0.18 per share, in connection with
the proposed settlement of a class action lawsuit. In November
1996, the court gave final approval to the settlement.
In September 1996, the Company completed the sale of its
Oral Care Division to Conair Corporation. The Oral Care Division
marketed the Interplak line of power toothbrushes for plaque
removal. The Company recorded an after-tax loss of $6 million or
$0.11 per share on the sale.
In October 1996, the Company's board of directors approved a
leadership transition plan in which William M. Carpenter, the
Company's president and chief operating officer, became chief
executive officer on January 1, 1997, replacing William H.
Waltrip, who is continuing as chairman.
In November 1996, the Company completed the sale of its
dental implant business to a group of investors sponsored by
Finisterre Capital Partners. The Company recorded an after-tax
gain of $8 million or $0.15 per share on the sale.
In December 1996, the Company's Management Executive
Committee announced plans to adopt a new financial management
system to measure and drive the Company's performance. The
system, called Economic Value Added (EVA), will be implemented
for 1997. EVA is a tool which simply yet effectively combines
earnings and capital management objectives into one index. It
aligns business decisions made by the Company with shareholder
expectations that capital is being utilized effectively.
<PAGE> 3
Also in December 1996, the Company announced its realignment
of businesses into new segments for the purpose of reporting its
financial results. The four new segments, vision care, eyewear,
pharmaceuticals and healthcare, reflect the Company's strategic
emphasis on eye care.
(b) FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENTS
Information concerning sales, business segment earnings and
identifiable assets attributable to each of Bausch & Lomb's
reportable industry segments is set forth on pages 22-26 and 41-
42 of the Annual Report which are incorporated herein by
reference.
(c) NARRATIVE DESCRIPTION OF BUSINESS
Bausch & Lomb's operations have been classified into four
industry segments: vision care, eyewear, pharmaceuticals and
healthcare. Below is a description of each segment and
information to the extent that it is material to an understanding
of the Company's business taken as a whole. In addition, pages 9-
20 of the Annual Report are incorporated herein by reference.
Vision Care
The vision care segment includes contact lenses, lens
materials and lens care products. Vision care products are
marketed through licensed eye care professionals, pharmaceutical
retailers and mass merchandisers by the Company's own sales force
and distributors.
Eyewear
The eyewear segment includes premium-priced sunglasses and
optical thin film coating services. Eyewear products are
distributed worldwide through distributors, wholesalers and
manufacturer's representatives. These products are marketed
through optical stores, sunglass specialty stores, department
stores, catalog showrooms, mass merchandisers, sporting goods
stores and, in the case of optical thin films, to a variety of
industrial customers.
Pharmaceuticals
The pharmaceuticals segment manufactures and sells generic
and proprietary prescription pharmaceuticals, with a strategic emphasis in
the ophthalmic field, and over-the-counter (OTC) medications.
These products are distributed through the Company's sales force
and distributors to pharmacies, drug stores, food stores, mass
merchandisers and hospitals.
Healthcare
Included in this segment are businesses which provide
purpose-bred laboratory animals, pathogen-free eggs, biomedical
products and services, skin care products and hearing aids.
Hearing aids are distributed primarily through the Miracle-Ear
franchise system and Company-owned stores. Biomedical products
are sold through the Company's own sales force to the scientific
research community. Skin care products are sold through the
Company's sales force and distributors to drug stores, food
stores and mass merchandisers.
Raw Materials and Parts; Customers
Materials and components in all four of the Company's
industry segments are purchased from a wide variety of suppliers
and the loss of any one supplier would not adversely affect the
Company's business to a significant extent. No material part of
the Company's business taken as a whole is dependent upon a
single or a few customers. However, in the eyewear segment
approximately 15% of segment sales are attributable to Sunglass
Hut International and in the vision care segment approximately
10% of segment sales are attributable to Wal-Mart.
Patents, Trademarks & Licenses
While in the aggregate the Company's patents are of material
importance to its businesses taken as a whole, no single patent
or patent license or group of patent licenses relating to any
particular product or process is material to any industry
segment. The Company actively pursues technology development and
acquisition as a means to enhance its competitive position in its
business segments.
In the vision care segment, Bausch & Lomb has developed
significant consumer and eye care professional recognition of
products sold under the Bausch & Lomb, ReNu, Sensitive Eyes,
SeeQuence,
<PAGE> 4
Medalist, Boston, Optima FW and SofLens66 trademarks.
Ray-Ban, Revo, Wayfarer, Arnette and Killer Loop are trademarks
receiving substantial consumer recognition in the eyewear
segment. Bausch & Lomb and Dr. Mann are trademarks receiving
substantial consumer recognition in the pharmaceuticals segment.
In the healthcare segment, Miracle-Ear, Mirage, Curel, Soft Sense
and Charles River are trademarks receiving significant consumer
and industry professional recognition.
Seasonality and Working Capital
Some seasonality exists for sunglasses in the eyewear
segment. The accumulation of inventories of such products in
advance of expected shipments reflects the seasonal nature of the
products. In general, the working capital practices followed in
each of the Company's industry segments are typical of those
businesses.
Competition
Each industry is highly competitive in both U.S. and non-
U.S. markets. In all of its segments, Bausch & Lomb competes on
the basis of product performance, quality, technology, price,
service, warranty and reliability. In the eyewear segment, the
Company also competes on the basis of style.
Research and Development
Research and development constitutes an important part of
Bausch & Lomb's activities. In 1996, the Company's research and
development expenditures totaled $75 million, as compared to $66
million in 1995 and $60 million in 1994.
Environment
Although Bausch & Lomb is unable to predict what legislation
or regulations may be adopted or enacted in the future with
respect to environmental protection and waste disposal, existing
legislation and regulations have had no material adverse effect
on its capital expenditures, earnings or competitive position.
Capital expenditures for property, plant and equipment for
environmental control facilities were not material during 1996
and are not anticipated to be material for 1997 or 1998.
Number of Employees
Bausch & Lomb employed approximately 13,000 persons as of
December 28, 1996.
(d) FINANCIAL INFORMATION ABOUT FOREIGN AND DOMESTIC OPERATIONS
AND EXPORT SALES
Information as to sales, operating earnings and identifiable
assets attributable to each of Bausch & Lomb's geographic
regions, and the amount of export sales in the aggregate, is set
forth on page 41 of the Annual Report and is incorporated herein
by reference.
<PAGE> 5
ITEM 2. PROPERTIES
The principal manufacturing, distribution and production
facilities and other important physical properties of Bausch &
Lomb at March 1, 1997 are listed hereafter and grouped under the
principal industry segment to which they relate. Certain
properties relate to more than one industry segment. Except
where otherwise indicated by footnote, all properties shown are
held in fee and are not subject to major encumbrances.
EYEWEAR
Manufacturing Plants
Beijing, China(2)
Bhiwadi, India
Waterford, Ireland (2)
Oakland, MD
Rochester, NY (Frame Center)
San Antonio, TX
New Territories, Hong Kong (2)
Nuevo Laredo, Mexico (2)
Distribution Centers
San Clemente, CA (2)
Sunnyvale, CA (2)
San Antonio, TX
Richmond Hill, Ontario, Canada (2)
Guangzhou, China (2)
Hoofdorp, Netherland (2)
HEALTHCARE
Manufacturing Plants
Golden Valley, MN (1)
Kitchener, Ontario, Canada (2)
Distribution Centers
Wilmington, MA (2)
Golden Valley, MN (1)
Reinholds, PA (2)
Production Facilities
Hollister, CA (2)
Lebanon, CT
Preston, CT
Storrs, CT
Voluntown, CT
Summerland Key, FL
Colbert, GA (2)
Benson, IL
Eureka, IL
Secore, IL
Roanoke, IL
Washburn, IL
Windham, ME
Southbridge, MA (2)
West Brookfield, MA (2)
Wilmington, MA
Portage, MI
O'Fallon, MO
Raleigh, NC
Pittsfield, NH
Newfield (Lakeview), NJ
Stone Ridge (Kingston), NY
Charleston, SC (2)
Houston, TX
Oregon, WI
Brussels, Belgium
St. Constant, Canada
Margate, England
West Sussex, England
Lyons, France (2)
St. Aubin-les-Elbeuf, France
St. Germain, France (2)
Extertal, Germany
Kisslegg, Germany
Sulzfeld, Germany
Calco, Italy
Atsugi, Japan
Hino, Japan
Tskuba, Japan (2)
Tuhuacan, Mexico (2)
Someren, Nethlands
(Healthcare Production Facilities continued)
Barcelona, Spain(2)
Uppsala, Sweden (2)
<PAGE> 6
PHARMACEUTICALS
Manufacturing Plants
Tampa, FL
Berlin, Germany
Distribution Centers
Tampa, FL
VISION CARE
Manufacturing Plants
Sarasota, FL (1)
Wilmington, MA (2)
Rochester, NY (Optics Center) (1), (2)
Greenville, SC
Porto Alegre, Brazil
Beijing, China (2)
Bhiwadi, India
Waterford, Ireland (2)
Milan, Italy
Umsong-Gun (Seoul), Korea
Livingston, Scotland (2)
Barcelona, Spain
Hastings, United Kingdom
Distribution Centers
Rochester, NY (Optics Center) (1), (2)
Greenville, SC (2)
Lynchburg, VA (2)
Richmond Hill, Ontario, Canada (2)
Guangzhou, China
Hoofdorp, Netherlands (2)
Livingston, Scotland (2)
CORPORATE FACILITIES
Rochester, NY
One Bausch & Lomb Place (2)
Optics Center (1),(2)
1295 Scottsville Road (2)
[FN]
(1) This facility is financed under a tax-exempt financing
agreement.
(2) This facility is leased.
Bausch & Lomb considers that its facilities are suitable and
adequate for the operations involved. All facilities are being
productively utilized.
<PAGE> 7
ITEM 3. LEGAL PROCEEDINGS
1. In June 1994, five separate shareholder actions against the
Company and its former Chief Executive Officer and Chairman,
Daniel Gill, were filed in the Western and Southern Districts of
New York and an additional action, naming the Company, Mr. Gill
and four other officers was filed in January 1995, alleging that
the Company artificially inflated the value of its stock by
making false and misleading statements about expected financial
results. In September 1995, the parties agreed to consolidate
the actions and plaintiffs have filed a third-amended
consolidated complaint. Plaintiffs seek to represent two
classes, including all persons who purchased stock during a nine-
month period prior to a June 3, 1994 announcement that the
Company was undertaking efforts to rebalance distributor
inventories, and all shareholders who purchased shares between
June 4, 1994 and January 25, 1995. In October 1996, the court
denied in substantial part the Company's and the individual
officers' motions to dismiss. The Company and individual
officers have filed motions for reconsideration of the October
1996 order or, in the alternative, certification of the order
pursuant to 28 U.S.C. Section 1292 (b). Discovery has not yet
commenced in this consolidated action. A motion by plaintiffs to
certify the alleged class is pending. The Company is vigorously
defending itself against these claims.
2. On December 28, 1994, following an article in Business Week
magazine questioning the Company's accounting treatment of a
fourth quarter 1993 sales program initiated by the Contact Lens
Division, the Company received a request from the Securities and
Exchange Commission (SEC) for information in connection with an
inquiry being conducted by the SEC. Since then, the Company has
received additional requests for information from the SEC staff,
including those with respect to the Company's accounting for
sunglass sales in its Asia-Pacific Division in the period from
late 1992 through early 1994. The Company has provided documents
and Company personnel have testified. The Company is cooperating
with the SEC's continuing investigation and is unable to predict
the outcome of this proceeding. An adverse outcome could result
in the filing of civil proceedings by the SEC against the Company
seeking injunctive relief, or administrative proceedings seeking
a cease and desist order.
3. In November 1994, the United States District Court for the
Northern District of Alabama certified a nationwide class of
purchasers of Optima FW and Medalist lenses during the period
January 1, 1991 through November 1, 1994 to pursue claims
relating to the Company's marketing and sale of the Optima FW,
Medalist and SeeQuence2 contact lens systems. Plaintiffs allege
that the Company misled consumers by packaging the same lens
under three different names for three different prices. On
November 26, 1996, the court gave final approval to a settlement,
under which consumers who purchased Medalist lenses between
January 1, 1991 through December 31, 1995, Optima FW lenses
between November 1, 1990 through December 31, 1995 and Criterion
Ultra FW lenses between November 1, 1990 through April 30, 1996
were eligible to participate. The Company recorded a charge
against third quarter earnings which, in addition to existing
litigation reserves, is deemed adequate to satisfy the costs of
the settlement. Additionally, on May 2, 1996 and October 3,
1996, the Company was served with statements of claim filed in
Ontario and British Columbia, Canada, respectively, naming the
Company and Bausch & Lomb Canada. The plaintiffs seek to
represent a class of Canadian consumers alleging similar claims.
Another action filed in California state court in October 1994
raising substantially similar claims has been resolved. A
working group of state attorneys general, representing the
interests of eighteen states, also requested documents regarding
the Company's pricing, labeling and advertising of these lenses.
The Attorney General for the State of Florida has served a
subpoena seeking documents relating to the marketing and sale of
contact lenses and contact lens solutions. Management continues
to vigorously defend the marketing of these products.
4. In May and June 1995, the Company was served with several
proposed class action complaints in New York, New Jersey,
Pennsylvania and California, alleging that the Company misled
consumers in its marketing and sale of Sensitive Eyes Rewetting
Drops and Saline Solution and Bausch & Lomb Eyewash. The Company
stipulated to certification of a nationwide class of purchasers
of Sensitive Eyes Rewetting Drops, Boston Rewetting Drops, ReNu
Rewetting Drops and Bausch & Lomb Eyewash between May 1, 1989 and
June 30, 1995 in the New York action. In exchange plaintiffs
dismissed their actions in other states. Another action, which
was filed by a separate group of plaintiffs' attorneys in state
court in California, was voluntarily dismissed. Management
vigorously defends the marketing of these products.
5. In June 1994, the Florida Attorney General, acting on behalf
of disposable contact lens consumers in the State of Florida,
filed an antitrust action against the Company and others in the
United States District Court for the Middle District of Florida.
The complaint challenges the Company's long-standing policy of
selling contact lenses only to licensed professionals.
Plaintiffs allege that the policy
<PAGE> 8
was adopted in conspiracy with others to eliminate alternative
channels of trade from the disposable lens market. The Florida
Attorney General seeks treble damages on behalf of all purchasers
of contact lenses, whether from the Company or others, a
$1.0 million penalty and injunctive relief. A number of consumer
class actions have been consolidated in the Middle District of
Florida and actions are pending in California and Tennessee state
courts. The complaints make similar allegations and seek similar
relief on behalf of consumers outside the State of Florida. In
December 1996, the New York State Attorney General, on behalf of
itself and approximately twenty-one other states, filed a substantially
similar action in the United States District Court for the
Eastern District of New York and has sought consolidation with
the pending action. The Company defends its policy as a lawfully
adopted means of insuring effective distribution of its products
and safeguarding consumers' health.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE
OF SHAREHOLDERS
Inapplicable.
PART II
ITEM 5. MARKET FOR BAUSCH & LOMB INCORPORATED'S COMMON
STOCK AND RELATED SHAREHOLDER MATTERS
The sections entitled "Dividends" and "Quarterly Stock
Prices" and table entitled "Selected Financial Data" on pages 31,
34 and 58, respectively, of the Annual Report are incorporated
herein by reference.
ITEM 6. SELECTED FINANCIAL DATA
The table entitled "Selected Financial Data" on pages 58 of
the Annual Report is incorporated herein by reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The section entitled "Financial Review" on pages 22-34 of
the Annual Report is incorporated herein by reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The financial statements, including the notes thereto,
together with the sections entitled "Report of Independent
Accountants" and "Quarterly Results" of the Annual Report
included on pages 35-57 and 34, respectively, are incorporated
herein by reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH
ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
Inapplicable.
<PAGE> 9
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF
BAUSCH & LOMB INCORPORATED
Information with respect to non-officer directors is
included in the Proxy Statement on pages 3-7 and such information
is incorporated herein by reference. Set forth below are the
names, ages (as of March 1, 1997), positions and offices held by,
and a brief account of the business experience during the past
five years of, each executive officer.
Name and Age Position
William H. Waltrip (59) Chairman since January 1997; Chairman
and Chief Executive Officer (1996); Chairman of Technology
Solutions Company since 1993; Chief Executive Officer, Technology
Solutions Company (1993-1995); Chairman and Chief Executive
Officer of Biggers Brothers, Inc. (1991-1993).
William M. Carpenter (44) Chief Executive Officer since January
1997; President and Chief Operating Officer (1995-1996);
Executive Vice President, Global Business Manager, Eyewear (1995-
July 1996); President and Chief Executive Officer, Reckitt &
Colman, Inc. (1994-1995); President and Chief Operating Officer,
Reckitt and Colman, Inc. (1992-1994); President, Household
Products Division, Reckitt and Colman, Inc. (1991-1992).
Daryl M. Dickson (45) Senior Vice President, Human Resources
since November 1996; Vice President Human Resources
(snacks/cereal group), Quaker Oats Company (1993-1996); Sector
Director Management and Organization Development, Allied Signal
Aerospace Division, Allied Signal Inc. (1991-1993).
James C. Foster (46) Senior Vice President since December
1994 and President and Chief Executive Officer of Charles River
Laboratories, Inc., a subsidiary of the Company, since 1991; Vice
President (1991-1994).
Michael T. Gillen (38) Vice President and President, U.S.
Eyewear since June 1996; President and Chief Executive Officer of
Dahlberg/Miracle Ear, a subsidiary of the Company (1994-June
1996); Vice President and General Manager, ADVO, Inc. (1990-
1994).
Dwain L. Hahs (44) Senior Vice President, International
Operations since September 1996; Vice President and President
Europe, Middle East and Africa Division (1994-1996); Vice
President Field Operations Europe, Middle East and Africa
Division (1992-1994); Vice President Marketing International
Division (1989-1992).
<PAGE> 10
Stephen A. Hellrung (49) Senior Vice President since March
1995; Secretary since December 1994; Vice President and General
Counsel (1985-1994).
James E. Kanaley (55) (Retirement Date June 30, 1997.)
Senior Vice President since 1985 and President North American
Vision Care since June 1996; Global Business Manager, Lens Care
Products (1994-1996); President, Personal Products Division
(1987-1996).
Stephen C. McCluski (44) Senior Vice President, Finance since
February 1995; Vice President and Controller (1994); President,
Outlook Eyewear Company (1992-1994); Vice President, Controller,
Eyewear Division (1989-1992).
W. Jeff Pontius (40) Vice President and Global Business
Manager, Eyewear since July 1996; Vice President and President,
Eyewear (1996); President, U.S. Ray Ban Eyewear (1995-1996); Vice
President Marketing, Reckitt & Colman, Inc., (1993-1995); Vice
President, Brand Management, Reckitt & Colman, Inc. (1993);
Category Director, Hard Surface, Reckitt & Colman, Inc. (1992-
1993); Plant Manager, Royston, Georgia, Johnson & Johnson (1989-
1992).
Thomas M. Riedhammer (48) Senior Vice President, Worldwide
Pharmaceutical, Surgical, and Hearing Care Products since
December 1994; Vice President (1993-1994); President, Worldwide
Pharmaceuticals (1994); President, Pharmaceutical Division (1992-
1993); Vice President, Research and Development, Pharmaceutical
Division (1991-1992).
Carl E. Sassano (47) Executive Vice President and President,
Bausch & Lomb Vision Care since January 1997; Senior Vice
President and Global Business Manager, Vision Care (1996); Global
Business Manager, Contact Lens Products (1994-1996); Senior Vice
President and President Contact Lens Division (1994-1996); Senior
Vice President and President of Polymer Technology Corporation, a
subsidiary of the Company (1992-1994); Vice President and
President of Polymer Technology Corporation (1986-1992).
Jurij Z. Kushner (46) Vice President and Controller since
February 1995; Vice President, Operations, Personal Products
Division (1994-1995); Vice President and Controller, Personal
Products Division (1992-1994); Staff Vice President, Financial
Planning and Analysis (1986-1992).
All officers serve on a year-to-year basis through the day
of the annual meeting of shareholders of the Company, and there
is no arrangement or understanding among any of the officers of
the Company and any other persons pursuant to which such officer
was selected as an officer.
<PAGE> 11
ITEM 11. EXECUTIVE COMPENSATION
The portions of the "Executive Compensation" section
entitled "Report of the Committee on Management", "Compensation
Tables" and "Defined Benefit Retirement Plans", the second and
third paragraphs of the section entitled "Board of Directors",
the graph entitled "Comparison of Five Year Cumulative Total
Shareholder Return" and the second paragraph of the section
entitled "Related Transactions, Employment Contracts and
Termination of Employment and Change in Control Arrangements"
included in the Proxy Statement on pages 10-13, 14-15, 17-18, 1,
16 and 18, respectively, are incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The section entitled "Security Ownership of Certain
Beneficial Owners and Management" in the Proxy Statement on page
8 is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND
RELATED TRANSACTIONS
The first paragraph of the section entitled "Related
Transactions, Employment Contracts and Termination of Employment
and Change of Control Arrangements" on page 18 of the Proxy
Statement is incorporated herein by reference.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES,
AND REPORTS ON FORM 8-K
The following documents or the portions thereof indicated
are filed as a part of this report.
(a) INDEX TO FINANCIAL STATEMENTS AND FINANCIAL STATEMENT
SCHEDULES COVERED BY REPORTS OF INDEPENDENT ACCOUNTANTS.
1. Data incorporated by reference in Page in
Item 8 from the Annual Report Annual Report
Report of Independent Accountants 57
Balance Sheet at December 28, 1996
and December 31, 1994 36
For the years ended December 28, 1996,
December 30, 1995 and December 31, 1994:
Statement of Earnings 35
Statement of Cash Flows 37
Notes to Financial Statements 38-57
2. Filed herewith
Report of Independent Accountants
on Financial Statement Schedules Exhibit (24)
For the years ended December 28, 1996,
December 30, 1995 and December 31, 1994:
SCHEDULE II- Valuation and Qualifying Page S-1
Accounts
All other schedules have been omitted because the required
information is not present or not present in amounts sufficient
to require submission of the schedule, or because the information
required is included in the consolidated financial statements or
the notes thereto.
<PAGE> 12
(b) REPORTS ON FORM 8-K
Inapplicable.
(c) ITEM 601 EXHIBITS
Those exhibits required to be filed by Item 601 of
Regulation S-K are listed in the Exhibit Index immediately
preceding the exhibits filed herewith and such listing is
incorporated herein by reference. Each of Exhibits (10)-a
through (10)-gg is a management contract or compensatory plan or
arrangement required to be filed as an exhibit to this form
pursuant to Item 14(c) of this report.
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.
BAUSCH & LOMB INCORPORATED
Date: March 27, 1997 By:/s/William M. Carpenter
William M. Carpenter
Chairman and
Chief Executive 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.
Principal Executive Officer
Date: March 27, 1997 By:/s/William M. Carpenter
William M. Carpenter
Chief Executive Officer
Principal Financial Officer
Date: March 27, 1997 By:/s/ Stephen C. McCluski
Stephen C. McCluski
Senior Vice President,
Finance
Controller
Date: March 27, 1997 By:/s/ Jurij Z. Kushner
Jurij Z. Kushner,
Vice President and Controller
Directors
Franklin E. Agnew
William Balderston III
William M. Carpenter
Domenico De Sole
Jonathan S. Linen
Ruth R. McMullin
John R. Purcell
Linda Johnson Rice
Alvin W. Trivelpiece
William H. Waltrip
Kenneth L. Wolfe
Date: March 27, 1997 By:/s/Stephen A. Hellrung
Stephen A. Hellrung
Attorney-in-Fact
<PAGE> S-1
<TABLE>
Bausch & Lomb Incorporated
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
<CAPTION>
Reserves for
Doubtful Accounts
(Dollar amounts December 28, December 30, December 31,
in thousands) 1996 1995 1994<F2>
_____________________________________________________________
<S> <C> <C> <C>
Balance at $ 11,232 $ 16,830 $ 13,753
beginning of year
Activity for the year:
Provision charged 8,556 8,253 8,007
to income
(Reductions)/ (399) (821) 1,769
additions resulting
from (divestiture)/
acquisition activity
Accounts written (6,899) (10,194) (7,696)
off
Recoveries on 788 634 997
accounts previ-
ously written
off
Reclassifi- -- (3,470) --
cations<F1>
Balance at end $ 13,278 $ 11,232 $ 16,830
of year
<FN>
<F1> Represents reserves related to trade receivables which have
been reclassified to Notes Receivable.
<F2> Results have been restated as more fully described in Note 2
- - - "Restatement of Financial Information".
</FN>
</TABLE>
<PAGE> E-1
EXHIBIT INDEX
S-K Item 601 No. Document
(3)-a Certificate of Incorporation of Bausch & Lomb
Incorporated (filed as Exhibit (3)-a to the Company's Annual
Report on Form 10-K for the fiscal year ended December 29, 1985,
File No. 1-4105, and incorporated herein by reference).
(3)-b Certificate of Amendment of Bausch & Lomb
Incorporated (filed as Exhibit (3)-b to the Company's Annual
Report on Form 10-K for the fiscal year ended December 31, 1988,
File No. 1-4105, and incorporated herein by reference).
(3)-c Certificate of Amendment of Bausch & Lomb
Incorporated (filed as Exhibit (3)-c to the Company's Annual
Report on Form 10-K for the fiscal year ended December 26, 1992,
File No. 1-4105, and incorporated herein by reference).
(3)-d By-Laws of Bausch & Lomb Incorporated, as
amended, effective October 28, 1986 (filed as Exhibit (3)-b to
the Company's Annual Report on Form 10-K for the fiscal year
ended December 28, 1986, File No. 1-4105, and incorporated herein
by reference).
(4)-a Certificate of Incorporation of Bausch & Lomb
Incorporated (filed as Exhibit (4)-a to the Company's Annual
Report on Form 10-K for the fiscal year ended December 29, 1985,
File No. 1-4105, and incorporated herein by reference).
(4)-b Certificate of Amendment of Bausch & Lomb
Incorporated (filed as Exhibit (4)-b to the Company's Annual
Report on Form 10-K for the fiscal year ended December 31, 1988,
File No. 1-4105, and incorporated herein by reference).
(4)-c Certificate of Amendment of Bausch & Lomb
Incorporated (filed as Exhibit (4)-c to the Company's Annual
Report on Form 10-K for the fiscal year ended December 26, 1992,
File No. 1-4105, and incorporated herein by reference).
(4)-d Form of Indenture, dated as of September 1,
1991, between the Company and Citibank, N.A., as Trustee, with
respect to the Company's Medium-Term Notes (filed as Exhibit 4-
(a) to the Company's Registration Statement on Form S-3, File No.
33-42858, and incorporated herein by reference).
(4)-e Rights Agreement between the Company and The
First National Bank of Boston, as successor to Chase Lincoln
First Bank, N.A. (filed as Exhibit 1 to the Company's Current
Report on Form 8-K dated July 25, 1988, File No. 1-4105, and
incorporated herein by reference).
(4)-f Amendment to the Rights Agreement between the
Company and The First National Bank of Boston, as successor to
Chase Lincoln First Bank, N.A. (filed as Exhibit 1 to the
Company's Current Report on Form 8-K dated July 31, 1990, File
No. 1-4105, and incorporated herein by reference).
(10)-a Change of Control Employment Agreement with
certain executive officers of the Company (filed as Exhibit (10)-
a to the Company's Annual Report on Form 10-K for the fiscal year
ended December 29, 1990, File No. 1-4105, and incorporated herein
by reference).
(10)-b Change of Control Employment Agreement with
certain officers of the Company (filed herewith).
(10)-c The Bausch & Lomb Incorporated Executive
Incentive Compensation Plan (filed as Exhibit (10)-b to the
Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1994, File No. 1-4105, and incorporated herein by
reference).
(10)-d Amendment to the Bausch & Lomb Incorporated
Executive Incentive Compensation Plan (filed as Exhibit (10)-c to
the Company's Annual Report on Form 10-K for the fiscal year
ended December 30, 1996, File No. 1-4105 and incorporated herein
by reference).
<PAGE> E-2
(10)-e Amendment to the Bausch & Lomb Incorporated
Executive Incentive Compensation Plan (filed herewith).
(10)-f The Bausch & Lomb Supplemental Retirement
Income Plan I, as restated (filed as Exhibit (10)-e to the
Company's Annual Report on Form 10-K for the fiscal year ended
December 29, 1990, File No. 1-4105, and incorporated herein by
reference).
(10)-g The Bausch & Lomb Supplemental Retirement
Income Plan II, as restated (filed as Exhibit (10)-f to the
Company's Annual Report on Form 10-K for the fiscal year ended
December 29, 1990, File No. 1-4105, and incorporated herein by
reference).
(10)-h The Bausch & Lomb Supplemental Retirement
Income Plan III (filed as Exhibit (10)-g to the Company's Annual
Report on Form 10-K for the fiscal year ended December 26, 1992,
File No. 1-4105, and incorporated herein by reference).
(10)-i The Bausch & Lomb Incorporated Long Term
Incentive Program, as restated (filed as Exhibit (10)-g to the
Company's Annual Report on Form 10-K for the fiscal year ended
December 29, 1985, File No. 1-4105, and incorporated herein by
reference).
(10)-j Amendment to the Bausch & Lomb Incorporated
Long Term Incentive Program (filed as Exhibit (10)-i to the
Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1988, File No. 1-4105, and incorporated herein by
reference).
(10)-k The Bausch & Lomb Incorporated Management
Executive Incentive Plan (filed as Exhibit (10)-h to the
Company's Annual Report on Form 10-K for fiscal year ended
December 31, 1994, File No. 1-4105, and incorporated herein by
reference).
(10)-l Amendment to the Bausch & Lomb Incorporated
Management Executive Incentive Plan (filed as Exhibit (10)-l to
the Company's Annual Report on Form 10-K for fiscal year ended
December 30, 1995.
(10)-m Amendment to the Bausch & Lomb Incorporated
Management Executive Incentive Plan (filed herewith).
(10)-n The Bausch & Lomb Supplemental Management
Executive Incentive Plan (filed as Exhibit (10)-i to the
Company's Annual Report on Form 10-K for fiscal year ended
December 31, 1994, File No. 1-4105, and incorporated herein by
reference).
(10)-o Amendment to the Bausch & Lomb Supplemental
Management Executive Incentive Plan (filed as Exhibit (10)-l to
the Company's Annual Report on Form 10-K for fiscal year ended
December 30, 1995, File No. 1-4105, and incorporated herein by
reference).
(10)-p The Bausch & Lomb Incorporated Long Term
Performance Stock Plan I (filed as Exhibit (10)-j to the
Company's Annual Report on Form 10-K for fiscal year ended
December 31, 1994, File No. 1-4105, and incorporated herein by
reference).
(10)-q Bausch & Lomb Incorporated Long Term
Performance Stock Plan II, as amended (filed as Exhibit (10)-i to
the Company's Annual Report on Form 10-K for fiscal year ended
December 25, 1993, File No. 1-4105 and incorporated herein by
reference).
(10)-r The 1982 Stock Incentive Plan of Bausch &
Lomb Incorporated (filed as Exhibit III-F to the Company's Annual
Report on Form 10-K for the fiscal year ended December 26, 1982,
File No. 1-4105, and incorporated herein by reference).
(10)-s Amendment to the 1982 Stock Incentive Plan of
Bausch & Lomb Incorporated (filed as Exhibit (10)-l to the
Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1988, File No. 1-4105, and incorporated herein by
reference).
(10)-t Amendment to the 1982 Stock Incentive Plan of
Bausch & Lomb Incorporated (filed as Exhibit (10)-k to the
Company's Annual Report on Form 10-K for the fiscal year ended
December 29, 1990, File No. 1-4105, and incorporated herein by
reference).
(10)-u The 1987 Stock Incentive Plan of Bausch &
Lomb Incorporated (filed as Exhibit I.B to the Company's
Registration Statement on Form S-8, File No. 33-15439, and
incorporated herein by reference).
<PAGE> E-3
(10)-v Amendment to the 1987 Stock Incentive Plan of
Bausch & Lomb Incorporated (filed as Exhibit (10)-n to the
Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1988, File No. 1-4105, and incorporated herein by
reference).
(10)-w Amendment to the 1987 Stock Incentive Plan of
Bausch & Lomb Incorporated (filed as Exhibit (10)-n to the
Company's Annual Report on Form 10-K for the fiscal year ended
December 29, 1990, File No. 1-4105, and incorporated herein by
reference).
(10)-x The 1990 Stock Incentive Plan of Bausch &
Lomb Incorporated, as amended (filed as Exhibit (10)-o to the
Company's Annual Report on Form 10-K for the fiscal year ended
December 29, 1990, File No. 1-4105, and incorporated herein by
reference).
(10)-y The 1990 Stock Incentive Plan of Bausch &
Lomb Incorporated, as amended (filed herewith).
(10)-z The Bausch & Lomb Incorporated Director
Deferred Compensation Plan, as restated (filed as Exhibit (10)-p
to the Company's Annual Report on Form 10-K for the fiscal year
ended December 28, 1991, File No. 1-4105, and incorporated herein
by reference).
(10)-aa The Bausch & Lomb Incorporated Executive
Deferred Compensation Plan, as restated (filed as Exhibit (10)-q
to the Company's Annual Report on Form 10-K for the fiscal year
ended December 28, 1991, File No. 1-4105, and incorporated herein
by reference).
(10)-bb The Bausch & Lomb Incorporated Director
Deferred Compensation Plan, as restated (filed herewith).
(10)-cc The Bausch & Lomb Incorporated Executive
Deferred Compensation Plan, as restated (filed herewith).
(10)-dd Annual Retainer Stock Plan for Non-Employee
Directors (filed herewith).
(10)-ee The Bausch & Lomb Incorporated Executive
Benefit Plan, as amended (filed as Exhibit (10)-t to the
Company's Annual Report on Form 10-K for the fiscal year ended
December 29, 1990, File No. 1-4105, and incorporated herein by
reference).
(10)-ff The Bausch & Lomb Incorporated Executive
Security Program (filed as Exhibit (10)-s to the Company's Annual
Report on Form 10-K for the fiscal year ended December 30, 1989,
File No. 1-4105, and incorporated herein by reference).
(10)-gg The Bausch & Lomb Retirement Benefit
Restoration Plan (filed as Exhibit (10)-t to the Company's Annual
Report on Form 10-K for the fiscal year ended December 28, 1991,
File No. 1-4105, and incorporated herein by reference).
(11) Statement Regarding Computation of Per Share
Earnings (filed herewith).
(12) Statement Regarding Computation of Ratio of
Earnings to Fixed Charges (filed herewith).
(13) The Bausch & Lomb 1996 Annual Report to
Shareholders for the fiscal year ended December 28, 1996 (filed
herewith). With the exception of the pages of the Annual Report
specifically incorporated by reference herein, the Annual Report
is not deemed to be filed as a part of this Report on Form 10-K.
(21) Subsidiaries (filed herewith).
(23) Report of Independent Accountants on
Financial Statement Schedules and Consent of Independent
Accountants (filed herewith).
(24) Power of attorney with respect to the
signatures of directors in this Report on Form 10-K (filed
herewith).
(27) Financial Data Schedule (filed herewith).
Exhibit (10)-b
CHANGE OF CONTROL EMPLOYMENT AGREEMENT
AGREEMENT by and between Bausch & Lomb Incorporated, a New
York corporation (the "Company"), and _________________ (the
"Executive"), dated as of _________________.
The Board of Directors of the Company (the "Board") has
determined that it is in the best interests of the Company
and its shareholders to assure that the Company will have
the continued dedication of the Executive, notwithstanding
the possibility, threat or occurrence of a Change of Control
(as defined in Section 2) of the Company. The Board
believes it is imperative to diminish the inevitable
distraction of the Executive by virtue of the personal
uncertainties and risks created by a pending or threatened
Change of Control and to encourage the Executive's full
attention and dedication to the Company currently and in the
event of any threatened or pending Change of Control, and to
provide the Executive with compensation and benefits
arrangements upon a Change of Control which ensure that the
compensation and benefits expectations of the Executive will
be satisfied and which are competitive with those of other
corporations. Therefore, in order to accomplish these
objectives, the Board has caused the Company to enter into
this Agreement.
NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS:
1. Certain Definitions. (a) The "Effective Date" shall
mean the first date during the Change of Control Period (as
defined in Section 1(b)) on which a Change of Control
occurs. Anything in this Agreement to the contrary
notwithstanding, if a Change of Control occurs and if the
Executive's employment with the Company is terminated prior
to the date on which the Change of Control occurs, and if it
is reasonably demonstrated by the Executive that such
termination of employment (i) was at the request of a third
party who has taken steps reasonably calculated to effect
the Change of Control or (ii) otherwise arose in connection
with or anticipation of the Change of Control, then for all
purposes of this Agreement the "Effective Date" shall mean
the date immediately prior to the date of such termination
of employment.
(b) The "Change of Control Period" shall mean the period
commencing on the date hereof and ending on the second
anniversary of such date; provided, however, that commencing
on the date one year after the date hereof, and on each
annual anniversary of such date (such date and each annual
anniversary thereof shall be hereinafter referred to as the
"Renewal Date"), the Change of Control Period shall be
automatically extended so as to terminate two years from
such Renewal Date, unless at least 60 days prior to the
Renewal Date the Company shall give notice to the Executive
that the Change of Control Period shall not be so extended.
2. Change of Control. For the purpose of this Agreement,
a "Change of Control" shall mean:
(a) The acquisition by any individual, entity or group
(within the meaning of Section 13(d)(3) or 14(d)(2) of the
Securities Exchange Act of 1934, as amended (the "Exchange
Act")) (a "Person") of beneficial ownership (within the
meaning of Rule 13d-3 promulgated under the Exchange Act) of
20% or more of either (i) the then outstanding shares of
common stock of the Company (the "Outstanding Company Common
Stock") or (ii) the combined voting power of the election of
directors (the "Outstanding Company Voting Securities");
provided, however, that the following acquisitions shall not
constitute a Change of Control: (i) any acquisition
directly from the Company (excluding an acquisition by
virtue of the exercise of a conversion privilege unless the
security being so converted was itself acquired directly
from the Company), (ii) any acquisition by the Company,
(iii) any acquisition by any employee benefit plan (or
related trust) sponsored or maintained by the Company or any
corporation controlled by the Company or (iv) any
acquisition by any corporation pursuant to a reorganization,
merger or consolidation, if, following such reorganization,
merger or consolidation, the conditions described in clauses
(i), (ii) and (iii) of subsection (c) of this Section 2 are
satisfied; or
(b) Individuals who, as of the date hereof, constitute
the Board (the "Incumbent Board") cease for any reason to
constitute at least a majority of the Board; provided,
however, that any individual becoming a director subsequent
to the date hereof whose election, or nomination for
election by the Company's shareholders, was approved by a
vote of at least a majority of the directors then comprising
the Incumbent Board shall be considered as though such
individual were a member of the Incumbent Board, but
excluding, for this purpose, any such individual whose
initial assumption of office occurs as a result of either an
actual or threatened election contest (as such terms are
used in Rule 14a-11 of Regulation 14A promulgated under the
Exchange Act) or other actual or threatened solicitation of
proxies or consents by or on behalf of a Person other than
the Board; or
(c) Approval by the shareholders of the Company of a
reorganization, merger, binding share exchange or
consolidation, in each case, unless, following such
reorganization, merger, binding share exchange or
consolidation, (i) more than 60% of, respectively, the then
outstanding shares of common stock of the corporation
resulting from such reorganization, merger, binding share
exchange or consolidation and the combined voting power of
the then outstanding voting securities of such corporation
entitled to vote generally in the election of directors is
then beneficially owned, directly or indirectly, by all or
substantially all of the individuals and entities who were
the beneficial owners, respectively, of the Outstanding
Company Common Stock and Outstanding Company Voting
Securities immediately prior to such reorganization, merger,
binding share exchange or consolidation in substantially the
same proportions as their ownership, immediately prior to
such reorganization, merger, binding share exchange or
consolidation, of the Outstanding Company Common Stock and
Outstanding Company Voting Securities, as the case may be,
(ii) no Person (excluding the Company, any employee benefit
plan (or related trust) of the Company or such corporation
resulting from such reorganization, merger, binding share
exchange or consolidation and any Person beneficially
owning, immediately prior to such reorganization, merger,
binding share exchange or consolidation, directly or
indirectly, 20% or more of the Outstanding Company Common
Stock or Outstanding Voting Securities, as the case may be)
beneficially owns, directly or indirectly, 20% or more of,
respectively, the then outstanding shares of common stock of
the corporation resulting from such reorganization, merger,
binding share exchange or consolidation or the combined
voting power of the then outstanding voting securities of
such corporation entitled to vote generally in the election
of directors and (iii) at least a majority of the members of
the board of directors of the corporation resulting from
such reorganization, merger, binding share exchange or
consolidation were members of the Incumbent Board at the
time of the execution of the initial agreement providing for
such reorganization, merger, binding share exchange or
consolidation; or
(d) Approval by the shareholders of the Company of (i)
a complete liquidation or dissolution of the Company or (ii)
the sale or other disposition of all or substantially all of
the assets of the Company, other than to a corporation, with
respect to which following such sale or other disposition,
(A) more than 60% of, respectively, the then outstanding
shares of common stock of such corporation and the combined
voting power of the then outstanding voting securities of
such corporation entitled to vote generally in the election
of directors is then beneficially owned, directly or
indirectly, by all or substantially all of the individuals
and entities who were the beneficial owners, respectively,
of the Outstanding Company Common Stock and Outstanding
Company Voting Securities immediately prior to such sale or
other disposition in substantially the same proportion as
their ownership, immediately prior to such sale or other
disposition, of the Outstanding Company Common Stock and
Outstanding Company Voting Securities, as the case may be,
(B) no Person (excluding the Company and any employee
benefit plan (or related trust) of the Company or such
corporation and any Person beneficially owning, immediately
prior to such sale or other disposition, directly or
indirectly, 20% or more of the Outstanding Company Common
Stock or Outstanding Company Voting Securities, as the case
may be) beneficially owns, directly or indirectly, 20% or
more of, respectively, the then outstanding shares of common
stock of such corporation and the combined voting power of
the then outstanding voting securities of such corporation
entitled to vote generally in the election of directors and
(C) at least a majority of the members of the board of
directors of such corporation were members of the Incumbent
Board at the time of the execution of the initial agreement
or action of the Board providing for such sale or other
disposition of assets of the Company.
3. Employment Period. The Company hereby agrees to
continue the Executive in its employ, and the Executive
hereby agrees to remain in the employ of the Company, in
accordance with the terms and provisions of this Agreement,
for the period commencing on the Effective Date and ending
on the second anniversary of such date (the "Employment
Period").
4. Terms of Employment. (a) Position and Duties. (i)
During the Employment Period, (A) the Executive's position
(including status, offices, titles and reporting
requirements), authority, duties and responsibilities shall
be at least commensurate in all material respects with the
most significant of those held, exercised and assigned at
any time during the 90-day period immediately preceding the
Effective Date and (B) the Executive's services shall be
performed at the location where the Executive was employed
immediately preceding the Effective Date or any office which
is less than 35 miles from such location; provided that, if
the Executive was employed at the headquarters of the
Company immediately preceding the Effective Date, such
office shall be the headquarters of the Company.
(ii) During the Employment Period, and excluding any
periods of vacation and sick leave to which the Executive is
entitled, the Executive agrees to devote reasonable
attention and time during normal business hours to the
business and affairs of the Company and, to the extent
necessary to discharge the responsibilities assigned to the
Executive hereunder, to use the Executive's reasonable
efforts to perform faithfully and efficiently such
responsibilities. During the Employment Period it shall not
be a violation of this Agreement for the Executive to (A)
serve on corporate, civic or charitable boards or
committees, (B) deliver lectures, fulfill speaking
engagements or teach at educational institutions and (C)
manage personal investments, so long as such activities do
not significantly interfere with the performance of the
Executive's responsibilities as an employee of the Company
in accordance with this Agreement. It is expressly
understood and agreed that to the extent that any such
activities have been conducted by the Executive prior to the
Effective Date, the continued conduct of such activities (or
the conduct of activities similar in nature and scope
thereto) subsequent to the Effective Date shall not
thereafter be deemed to interfere with the performance of
the Executive's responsibilities to the Company.
(b) Compensation. (i) Base Salary. During the Employment
Period, the Executive shall receive an annual base salary
("Annual Base Salary"), which shall be paid in equal
installments on a monthly basis, at least equal to twelve
times the highest monthly base salary paid or payable to the
Executive by the Company and its affiliated companies in
respect of the twelve-month period immediately preceding the
month in which the Effective Date occurs. During the
Employment Period, the Annual Base Salary shall be reviewed
at least annually and shall be increased at any time and
from time to time as shall be substantially consistent with
increases in base salary generally awarded in the ordinary
course of business to other peer executives of the Company
and its affiliated companies. Any increase in Annual Base
Salary shall not serve to limit or reduce any other
obligation to the Executive under this Agreement. Annual
Base Salary shall not be reduced after any such increase and
the term Annual Base Salary as utilized in this Agreement
shall refer to Annual Base Salary as so increased. As used
in this Agreement, the term "affiliated companies" shall
include any company controlled by, controlling or under
common control with the Company.
(ii) Annual Bonus. (A) In addition to Annual Base
Salary, the Executive shall be paid, for each fiscal year
ending during the Employment Period, a regular annual bonus
(the "Annual Bonus") in cash at least equal to the average
annualized (for any fiscal year consisting of less than
twelve full months or with respect to which the Executive
has been employed by the Company for less than twelve full
months) bonus paid or payable, including by reason of any
deferral, to the Executive by the Company under the
Company's Executive Incentive Compensation Plan (or any
predecessor or successor plan thereto) in respect of the
three fiscal years immediately preceding the fiscal year in
which the Effective Date occurs (the "Recent Average Bonus";
the highest such annualized bonus paid or payable to the
Executive in respect of such three fiscal years shall be
hereinafter referred to as the "Highest Recent Bonus").
Each such Annual Bonus shall be paid no later than the end
of the third month of the fiscal year next following the
fiscal year for which the Annual Bonus is awarded, unless
the Executive shall elect to defer the receipt of such
Annual Bonus.
(B) In addition to Annual Base Salary and the Annual
Bonus, the Executive shall be paid, for each performance
cycle ending during the Employment Period, a long-term bonus
(the "Long-Term Bonus") in cash at least equal to the
average long-term incentive bonus (the "Recent Long-Term
Bonus"), if any, paid or payable in cash or shares of stock
of the Company to the Executive by the Company under the
Company's Long-Term Incentive Program (or any predecessor or
successor plan thereto) (the "LTIP") in respect of the last
three completed performance cycles ending with the
performance cycle ending in the fiscal year preceding the
fiscal year in which the Change of Control Date occurs (or,
if less, in respect of the number of completed performance
cycles for which the Executive has received a long-term
bonus). If the Executive was not a participant in the LTIP
in one or more of such completed cycles, but is, at the
Change of Control Date, a participant in the LTIP, the
Recent Long-Term Bonus shall be equal to (1) the sum of the
Standard Award(s) (as defined in the LTIP) for each cycle in
which the Executive is participating at the Change of
Control Date, assuming a Salary Midpoint for the Third Year
of Award Cycle (as such term is used in the LTIP) equal to
the Annual Base Salary at the Change of Control Date,
divided by (2) the number of performance cycles in which the
Executive was participating at such time. Each such Long-
Term Bonus shall be paid pursuant to a plan which has three-
year performance cycles following those of the LTIP and is
otherwise substantially similar to the LTIP and shall be
paid no later than the end of the third month of the fiscal
year next following the fiscal year for which the Long-Term
Bonus is awarded, unless the Executive shall elect to defer
the receipt of such Long-Term Bonus.
(iii) Incentive, Savings and Retirement Plans. During
the Employment Period, the Executive shall be entitled to
participate in all incentive, savings and retirement plans,
practices, policies and programs applicable generally to
other peer executives of the Company and its affiliated
companies, but in no event shall such plans, practices,
policies and programs provide the Executive with incentive
opportunities (measured with respect to both regular and
special incentive opportunities, to the extent, if any, that
such distinction is applicable), savings opportunities and
retirement benefit opportunities, in each case, less
favorable, in the aggregate, than the most favorable of
those provided by the Company and its affiliated companies
for the Executive under such plans, practices, policies and
programs as in effect at any time during the 90-day period
immediately preceding the Effective Date or if more
favorable to the Executive, those provided generally at any
time after the Effective Date to other peer executives of
the Company and its affiliated companies.
(iv) Welfare Benefit Plans. During the Employment
Period, the Executive and/or the Executive's family, as the
case may be, shall be eligible for participation in and
shall receive all benefits under welfare benefit plans,
practices, policies and programs provided by the Company and
its affiliated companies (including, without limitation,
medical, prescription, dental, disability, salary
continuance, employee life, group life, accidental death and
travel accident insurance plans and programs) to the extent
applicable generally to other peer executives of the Company
and its affiliated companies, but in no event shall such
plans, practices, policies and programs provide the
Executive with benefits which are less favorable, in the
aggregate, than the most favorable of such plans, practices,
policies and programs in effect for the Executive at any
time during the 90-day period immediately preceding the
Effective Date or, if more favorable to the Executive, those
provided generally at any time after the Effective Date to
other peer executives of the Company and its affiliated
companies.
(v) Expenses. During the Employment Period, the
Executive shall be entitled to receive prompt reimbursement
for all reasonable employment expenses incurred by the
Executive in accordance with the most favorable policies,
practices and procedures of the Company and its affiliated
companies in effect for the Executive at any time during the
90-day period immediately preceding the Effective Date or,
if more favorable to the Executive, as in effect generally
at any time thereafter with respect to other peer executives
of the Company and its affiliated companies.
(vi) Fringe Benefits and Perquisites. During the
Employment Period, the Executive shall be entitled to fringe
benefits and perquisites in accordance with the most
favorable plans, practices, programs and policies of the
Company and its affiliated companies in effect for the
Executive at any time during the 90-day period immediately
preceding the Effective Date or, if more favorable to the
Executive, as in effect generally at any time thereafter
with respect to other peer executives of the Company and its
affiliated companies.
(vii) Office and Support Staff. During the Employment
Period, the Executive shall be entitled to an office or
offices of a size and with furnishings and other
appointments, and to exclusive personal secretarial and
other assistance, at least equal to the most favorable of
the foregoing provided to the Executive by the Company and
its affiliated companies at any time during the 90-day
period immediately preceding the Effective Date or, if more
favorable to the Executive, as provided generally at any
time thereafter with respect to other peer executives of the
Company and its affiliated companies.
(viii) Vacation. During the Employment Period, the
Executive shall be entitled to paid vacation in accordance
with the most favorable plans, policies, programs and
practices of the Company and its affiliated companies as in
effect for the Executive at any time during the 90-day
period immediately preceding the Effective Date or, if more
favorable to the Executive, as in effect generally at any
time thereafter with respect to other peer executives of the
Company and its affiliated companies.
5. Termination of Employment. (a) Death or Disability.
The Executive's employment shall terminate automatically
upon the Executive's death during the Employment Period. If
the Company determines in good faith that the Disability of
the Executive has occurred during the Employment Period
(pursuant to the definition of Disability set forth below),
it may give to the Executive written notice in accordance
with Section 12(b) of its intention to terminate the
Executive's employment. In such event, the Executive's
employment with the Company shall terminate effective on the
30th day after receipt of such notice by the Executive (the
"Disability Effective Date"), provided that, within the 30
days after such receipt, the Executive shall not have
returned to full-time performance of the Executive's duties.
For purposes of this Agreement, "Disability" shall mean the
absence of the Executive from the Executive's duties with
the Company on a full-time basis for 180 consecutive
business days as a result of incapacity due to mental or
physical illness which is determined to be total and
permanent by a physician selected by the Company or its
insurers and acceptable to the Executive or the Executive's
legal representative (such agreement as to acceptability not
to be withheld unreasonably).
(b) Cause. The Company may terminate the Executive's
employment during the Employment Period for Cause. For
purposes of this Agreement, "Cause" shall mean (i) a
material breach by the Executive of the Executive's
obligations under Section 4(a) (other than as a result of
incapacity due to physical or mental illness) which is
demonstrably willful and deliberate on the Executive's part,
which is committed in bad faith or without reasonable belief
that such breach is in the best interests of the Company and
which is not remedied in a reasonable period of time after
receipt of written notice from the Company specifying such
breach or (ii) the conviction of the Executive of a felony
involving moral turpitude.
(c) Good Reason; Window Period. The Executive's
employment may be terminated (i) during the Employment
Period by the Executive for Good Reason or (ii) during the
Window Period by the Executive without any reason. For
purposes of this Agreement, the "Window Period" shall mean
the 30-day period immediately following the first
anniversary of the Effective Date. For purposes of this
Agreement, "Good Reason" shall mean
(i) the assignment to the Executive of any duties
inconsistent in any respect with the Executive's position
(including status, offices, titles and reporting
requirements), authority, duties or responsibilities as
contemplated by Section 4(a) or any other action by the
Company which results in a diminution in such position,
authority, duties or responsibilities, excluding for this
purpose an isolated, insubstantial and inadvertent action
not taken in bad faith and which is remedied by the Company
promptly after receipt of notice thereof given by the
Executive;
(ii) any failure by the Company to comply with any of
the provisions of Section 4(b), other than an isolated,
insubstantial and inadvertent failure not occurring in bad
faith and which is remedied by the Company promptly after
receipt of notice thereof given by the Executive;
(iii) the Company's requiring the Executive to be
based at any office or location other than that described in
Section 4(a)(i)(B);
(iv) any purported termination by the Company of the
Executive's employment otherwise than as expressly
permitted by this Agreement; or
(v) any failure by the Company to comply with and
satisfy Section 11(c), provided that such successor has
received at least ten days prior written notice from the
Company or the Executive of the requirements of Section
11(c).
For purposes of this Section 5(c), any good faith
determination of "Good Reason" made by the Executive shall
be conclusive.
(d) Notice of Termination. Any termination by the
Company for Cause, or by the Executive without any reason
during the Window Period or for Good Reason, shall be
communicated by Notice of Termination to the other party
hereto given in accordance with Section 12(b). For purposes
of this Agreement, a "Notice of Termination" means a written
notice which (i) indicates the specific termination
provision in this Agreement relied upon, (ii) to the extent
applicable, sets forth in reasonable detail the facts and
circumstances claimed to provide a basis for termination of
the Executive's employment under the provision so indicated
and (iii) if the Date of Termination (as defined below) is
other than the date of receipt of such notice, specifies the
termination date (which date shall be not more than 15 days
after the giving of such notice). The failure by the
Executive or the Company to set forth in the Notice of
Termination any fact or circumstance which contributes to a
showing of Good Reason or Cause shall not waive any right of
the Executive or the Company hereunder or preclude the
Executive or the Company from asserting such fact or
circumstance in enforcing the Executive's or the Company's
rights hereunder.
(e) Date of Termination. "Date of Termination" means
(i) if the Executive's employment is terminated by the
Company for Cause, or by the Executive during the Window
Period or for Good Reason, the date of receipt of the Notice
of Termination or any later date specified therein, as the
case may be, (ii) if the Executive's employment is
terminated by the Company other than for Cause or
Disability, the Date of Termination shall be the date on
which the Company notifies the Executive of such termination
and (iii) if the Executive's employment is terminated by
reason of death or Disability, the Date of Termination shall
be the date of death of the Executive or the Disability
Effective Date, as the case may be.
6. Obligations of the Company upon Termination. (a)
Good Reason or during the Window Period; Other Than for
Cause, Death or Disability. If, during the Employment
Period, the Company shall terminate the Executive's
employment other than for Cause or Disability or the
Executive shall terminate employment either for Good Reason
or without any reason during the Window Period, in lieu of
the obligations of the Company under Section 4 for the
remainder of the Employment Period:
(i) the Company shall pay to the Executive in a lump
sum in cash within 30 days after the Date of Termination the
aggregate of the following amounts:
A. the sum of (1) any amounts required to be paid
under Section 4 through the Date of Termination not
theretofore paid, including, without limitation, the
Executive's Annual Base Salary through the Date of
Termination, (2) the product of (x) the greater of (I) the
Annual Bonus paid or payable, including by reason of any
deferral, to the Executive (and annualized for any fiscal
year consisting of less than twelve full months or for which
the Executive has been employed for less than twelve full
months) for the most recently completed fiscal year during
the Employment Period, if any, (the "Current Bonus"), and
(II) the Recent Average Bonus and (y) a fraction, the
numerator of which is the number of days in the current
fiscal year through the Date of Termination, and the
denominator of which is 365, such product to be reduced by
any amount paid to the Executive following the Effective
Date pursuant to Section 7.0 of the Company's Executive
Incentive Compensation Plan (or any successor plan) as a
result of the termination of the Executive's employment, and
(3) any compensation previously deferred by the Executive
(together with any accrued interest or earnings thereon) and
any accrued vacation pay, in each case to the extent not
theretofore paid (the sum of the amounts described in
clauses (1), (2) and (3) shall be hereinafter referred to as
the "Accrued Obligations"); and
B. the amount (such amount shall be hereinafter
referred to as the "Severance Amount") equal to the product
of (1) two and (2) the sum of (x) the Executive's Annual
Base Salary and (y) the greater of the Highest Recent Bonus
and the Current Bonus; provided, however, that such amount
shall be reduced by the present value (determined as
provided in Section 280G(d)(4) of the Internal Revenue Code
of 1986, as amended (the "Code")) of any other amount of
severance relating to salary or bonus continuation to be
received by the Executive upon termination of employment of
the Executive under any severance plan, policy or
arrangement of the Company; and
C. a separate lump-sum supplemental retirement benefit
(the amount of such benefit shall be hereinafter referred to
as the "Supplemental Retirement Amount") equal to the
difference between (1) the actuarial equivalent (utilizing
for this purpose the actuarial assumptions utilized with
respect to the Bausch & Lomb Retirement Benefits Plan (or
any successor plan thereto) (the "Retirement Plan") during
the 90-day period immediately preceding the Effective Date)
of the benefit payable under the Retirement Plan and any
supplemental and/or excess retirement plan of the Company
and its affiliated companies providing benefits for the
Executive (a "SERP") which the Executive would receive if
the Executive's employment continued at the compensation
level provided for in Sections 4(b)(i) and 4(b)(ii) for two
years following the Date of Termination, assuming for this
purpose that all accrued benefits are fully vested and that
benefit accrual formulas are no less advantageous to the
Executive than those in effect during the 90-day period
immediately preceding the Effective Date, and (2) the
actuarial equivalent (utilizing for this purpose the
actuarial assumptions utilized with respect to the
Retirement Plan during the 90-day period immediately
preceding the Effective Date) of the Executive's actual
benefit (paid or payable), if any, under the Retirement Plan
and the SERP; provided, however, that if all or a portion of
such Supplemental Retirement Amount, to the extent relating
to a SERP, is funded through a trust of which the Executive
is a beneficiary, the Supplemental Retirement Amount to such
extent shall be paid from such trust; and
D. a separate lump-sum supplemental retirement benefit
(the amount of such benefit shall be hereinafter referred to
as the "SERP Payment") in discharge of the Company's
obligations under the SERP equal to the actuarial equivalent
(utilizing for this purpose the actuarial assumptions
utilized with respect to the Retirement Plan during the 90-
day period immediately preceding the Effective Date) of the
Executive's benefit accrued through the Date of Termination
under the SERP; provided, however, that to the extent such
amount is funded through a trust of which the Executive is a
beneficiary, such amount to the extent so funded shall be
paid from such trust; and
(ii) for two years following the Date of Termination,
or such longer period as any plan, program, practice or
policy may provide, the Company shall continue benefits to
the Executive and/or the Executive's family at least equal
to those which would have been provided to them in
accordance with the plans, programs, practices and policies
described in Section 4(b)(iv) if the Executive's employment
had not been terminated in accordance with the most
favorable plans, practices, programs or policies of the
Company and its affiliated companies as in effect and
applicable generally to other peer executives and their
families during the 90-day period immediately preceding the
Effective Date or, if more favorable to the Executive, as in
effect generally at any time thereafter with respect to
other peer executives of the Company and its affiliated
companies and their families, provided, however, that if the
Executive becomes reemployed with another employer and is
eligible to receive medical or other welfare benefits under
another employer provided plan, the medical and other
welfare benefits described herein shall be secondary to
those provided under such other plan during such applicable
period of eligibility (such continuation of such benefits
for the applicable period herein set forth shall be
hereinafter referred to as "Welfare Benefit Continuation").
For purposes of determining eligibility of the Executive for
retiree benefits pursuant to such plans, practices, programs
and policies, the Executive shall be considered to have
remained employed until the end of the two year period
following the Date of Termination and to have retired on the
last day of such period; and
(iii) to the extent not theretofore paid or provided,
the Company shall timely pay or provide to the Executive
and/or the Executive's family any other amounts or benefits
required to be paid or provided or which the Executive
and/or the Executive's family is eligible to receive
pursuant to this Agreement and under any plan, program,
policy or practice or contract or agreement of the Company
and its affiliated companies as in effect and applicable
generally to other peer executives and their families during
the 90-day period immediately preceding the Effective Date
or, if more favorable to the Executive, as in effect
generally thereafter with respect to other peer executives
of the Company and its affiliated companies and their
families (such other amounts and benefits shall be
hereinafter referred to as the "Other Benefits").
(b) Death. If the Executive's employment is terminated
by reason of the Executive's death during the Employment
Period, in lieu of the obligations of the Company under
Section 4 for the remainder of the Employment Period, the
Company shall provide for (i) payment of Accrued Obligations
and the SERP Payment (which shall be paid to the Executive's
estate or beneficiary, as applicable, in a lump sum in cash
within 30 days of the Date of Termination) and the timely
payment or provision of the Welfare Benefit Continuation and
Other Benefits (excluding, in each case, Death Benefits (as
defined below)) and (ii) payment to the Executive's estate
or beneficiary, as applicable, in a lump sum in cash within
30 days of the Date of Termination of an amount equal to the
greater of (A) the sum of the Severance Amount and the
Supplemental Retirement Amount and (B) the present value
(determined as provided in Section 280G(d)(4) of the Code of
any cash amount to be received by the Executive or the
Executive's family as a death benefit pursuant to the terms
of any plan, policy or arrangement of the Company and its
affiliated companies, but not including any proceeds of life
insurance covering the Executive to the extent paid for
directly or on a contributory basis by the Executive (which
shall be paid in any event as an Other Benefit) (the
benefits included in this clause (B) shall be hereinafter
referred to as the "Death Benefits").
(c) Disability. If the Executive's employment is
terminated by reason of the Executive's Disability during
the Employment Period, in lieu of the obligations of the
Company under Section 4 for the remainder of the Employment
Period, the Company shall provide for (i) payment of Accrued
Obligations and the SERP Payment (which shall be paid to the
Executive in a lump sum in cash within 30 days of the Date
of Termination) and the timely payment or provision of the
Welfare Benefit Continuation and Other Benefits (excluding,
in each case, Disability Benefits (as defined below)) and
(ii) payment to the Executive in a lump sum in cash within
30 days of the Date of Termination of an amount equal to the
greater of (A) the sum of the Severance Amount and the
Supplemental Retirement Amount and (B) the present value
(determined as provided in Section 280G(d)(4) of the Code)
of any cash amount to be received by the Executive as a
disability benefit pursuant to the terms of any plan, policy
or arrangement of the Company and its affiliated companies,
but not including any proceeds of disability insurance
covering the Executive to the extent paid for directly or on
a contributory basis by the Executive (which shall be paid
in any event as an Other Benefit) (the benefits included in
this clause (B) shall be hereinafter referred to as the
"Disability Benefits").
(d) Cause; Other than for Good Reason. If the
Executive's employment shall be terminated for Cause during
the Employment Period, in lieu of the obligations of the
Company under Section 4 for the remainder of the Employment
Period, the Company shall, within 30 days following the Date
of Termination, pay to the Executive any unpaid Annual Base
Salary through the Date of Termination plus the amount of
any compensation previously deferred by the Executive to the
extent theretofore unpaid. If the Executive terminates
employment during the Employment Period, excluding a
termination either for Good Reason or without any reason
during the Window Period, in lieu of the obligations of the
Company under Section 4 for the remainder of the Employment
Period, the Company shall, within 30 days following the Date
of Termination, pay to the Executive all Accrued Obligations
and the SERP Payment and pay or provide all Other Benefits
on a timely basis.
7. Non-exclusivity of Rights. Except as provided in
Sections 6(a)(ii), 6(b) and 6(c), nothing in this Agreement
shall prevent or limit the Executive's continuing or future
participation in any plan, program, policy or practice
provided by the Company or any of its affiliated companies
and for which the Executive may qualify, nor shall anything
herein limit or otherwise affect such rights as the
Executive may have under any contract or agreement with the
Company or any of its affiliated companies. Amounts which
are vested benefits or which the Executive is otherwise
entitled to receive under any plan, policy, practice or
program of or any contract or agreement with the Company or
any of its affiliated companies at or subsequent to the Date
of Termination shall be payable in accordance with such
plan, policy, practice or program or contract or agreement
except as explicitly modified by this Agreement.
8. Full Settlement; Resolution of Disputes.
(a) The Company's obligation to make the payments provided
for in this Agreement and otherwise to perform its
obligations hereunder shall not be affected by any set-off,
counterclaim, recoupment, defense or other claim, right or
action which the Company may have against the Executive or
others. In no event shall the Executive be obligated to
seek other employment or take any other action by way of
mitigation of the amounts payable to the Executive under any
of the provisions of this Agreement and, except as provided
in Section 6(a)(ii), such amounts shall not be reduced
whether or not the Executive obtains other employment. The
Company agrees to pay promptly as incurred, to the full
extent permitted by law, all legal fees and expenses which
the Executive may reasonably incur as a result of any
contest (regardless of the outcome thereof) by the Company,
the Executive or others of the validity or enforceability
of, or liability under, any provision of this Agreement or
any guarantee of performance thereof (including as a result
of any contest by the Executive about the amount of any
payment pursuant to this Agreement), plus in each case
interest on any delayed payment at the applicable Federal
rate provided for in Section 7872(f)(2)(A) of the Code.
(b) If there shall be any dispute between the Company
and the Executive (i) in the event of any termination of the
Executive's employment by the Company, whether such
termination was for Cause, or (ii) in the event of any
termination of employment by the Executive, whether Good
Reason existed, then, unless and until there is a final,
nonappealable judgment by a court of competent jurisdiction
declaring that such termination was for Cause or that the
determination by the Executive of the existence of Good
Reason was not made in good faith, the Company shall pay all
amounts, and provide all benefits, to the Executive and/or
the Executive's family or other beneficiaries, as the case
may be, that the Company would be required to pay or provide
pursuant to Section 6(a) as though such termination were by
the Company without Cause or by the Executive with Good
Reason; provided, however, that the Company shall not be
required to pay any disputed amounts pursuant to this
paragraph except upon receipt of an undertaking by or on
behalf of the Executive to repay all such amounts to which
the Executive is ultimately adjudged by such court not to be
entitled.
9. Certain Additional Payments by the Company.
(a) Anything in this Agreement to the contrary
notwithstanding, in the event it shall be determined that
any payment or distribution by the Company to or for the
benefit of the Executive (whether paid or payable or
distributed or distributable pursuant to the terms of this
Agreement or otherwise, but determined without regard to any
additional payments required under this Section 9) (a
"Payment") would be subject to the excise tax imposed by
Section 4999 of the Code or any interest or penalties are
incurred by the Executive with respect to such excise tax
(such excise tax, together with any such interest and
penalties, are hereinafter collectively referred to as the
"Excise Tax"), then the Executive shall be entitled to
receive an additional payment (a "Gross-Up Payment") in an
amount such that after payment by the Executive of all taxes
(including any interest or penalties imposed with respect to
such taxes), including, without limitation, any income taxes
(and any interest and penalties imposed with respect
thereto) and Excise Tax imposed upon the Gross-Up Payment,
the Executive retains an amount of the Gross-Up Payment
equal to the Excise Tax imposed upon the Payments.
(b) Subject to the provisions of Section 9(c), all
determinations required to be made under this Section 9,
including whether and when a Gross-Up Payment is required
and the amount of such Gross-Up Payment and the assumptions
to be utilized in arriving at such determination, shall be
made by the auditors for the Company for the fiscal year in
which the Change of Control occurs (the "Accounting Firm")
who shall provide detailed supporting calculations, together
with a written opinion with respect to the accuracy of such
calculations, both to the Company and the Executive within
15 business days of the receipt of notice from the Executive
that there has been a Payment, or such earlier time as is
requested by the Company. In the event that the Accounting
Firm is serving (or has served within the three years
preceding the Effective Date) as accountant or auditor for
the individual, entity or group effecting the Change of
Control or any affiliate thereof, the Executive shall
appoint another nationally recognized accounting firm to
make the determinations required hereunder (which accounting
firm shall then be referred to as the Accounting Firm
hereunder). All fees and expenses of the Accounting Firm
shall be borne solely by the Company. Any Gross-Up Payment,
as determined pursuant to this Section 9, shall be paid by
the Company to the Executive within five days of the receipt
of the Accounting Firm's determination. If the Accounting
Firm determines that no Excise Tax is payable by the
Executive, it shall furnish the Executive with a written
opinion that failure to report the Excise Tax on the
Executive's applicable federal income tax return would not
result in the imposition of a negligence or similar penalty.
Any determination by the Accounting Firm shall be binding
upon the Company and the Executive. As a result of the
uncertainty in the application of Section 4999 of the Code
at the time of the initial determination by the Accounting
Firm hereunder, it is possible that Gross-Up Payments which
will not have been made by the Company should have been made
("Underpayment"), consistent with the calculations required
to be made hereunder. In the event that the Company
exhausts its remedies pursuant to Section 9(c) and the
Executive thereafter is required to make a payment of any
Excise Tax, the Accounting Firm shall determine the amount
of the Underpayment that has occurred and any such
Underpayment shall be promptly paid by the Company to or for
the benefit of the Executive.
(c) The Executive shall notify the Company in writing
of any claim by the Internal Revenue Service that, if
successful, would require the payment by the Company of the
Gross-Up Payment. Such notification shall be given as soon
as practicable but no later than ten business days after the
Executive is informed in writing of such claim and shall
apprise the Company of the nature of such claim and the date
on which such claim is requested to be paid. The Executive
shall not pay such claim prior to the expiration of the 30-
day period following the date on which it gives such notice
to the Company (or such shorter period ending on the date
that any payment of taxes with respect to such claim is
due). If the Company notifies the Executive in writing
prior to the expiration of such period that it desires to
contest such claim, the Executive shall:
(i) give the Company any information reasonably
requested by the Company relating to such claim,
(ii) take such action in connection with contesting
such claim as the Company shall reasonably request in
writing from time to time, including, without limitation,
accepting legal representation with respect to such claim by
an attorney reasonably selected by the Company,
(iii) cooperate with the Company in good faith in order
effectively to contest such claim, and
(iv) permit the Company to participate in any
proceedings relating to such claim; provided, however, that
the Company shall bear and pay directly all costs and
expenses (including additional interest and penalties)
incurred in connection with such contest and shall indemnify
and hold the Executive harmless, on an after-tax basis, for
any Excise Tax or income tax (including interest and
penalties with respect thereto) imposed as a result of such
representation and payment of costs and expenses. Without
limitation on the foregoing provisions of this Section 9(c),
the Company shall control all proceedings taken in
connection with such contest and, at its sole option, may
pursue or forgo any and all administrative appeals,
proceedings, hearings and conferences with the taxing
authority in respect of such claim and may, at its sole
option, either direct the Executive to pay the tax claimed
and sue for a refund or contest the claim in any permissible
manner, and the Executive agrees to prosecute such contest
to a determination before any administrative tribunal, in a
court of initial jurisdiction and in one or more appellate
courts, as the Company shall determine; provided, however,
that if the Company directs the Executive to pay such claim
and sue for a refund, the Company shall advance the amount
of such payment to the Executive, on an interest-free basis
and shall indemnify and hold the Executive harmless, on an
after-tax basis, from any Excise Tax or income tax
(including interest or penalties with respect thereto)
imposed with respect to such advance or with respect to any
imputed income with respect to such advance; and further
provided that any extension of the statute of limitations
relating to payment of taxes for the taxable year of the
Executive with respect to which such contested amount is
claimed to be due is limited solely to such contested
amount. Furthermore, the Company's control of the contest
shall be limited to issues with respect to which a Gross-Up
Payment would be payable hereunder and the Executive shall
be entitled to settle or contest, as the case may be, any
other issue raised by the Internal Revenue Service or any
other taxing authority.
(d) If, after the receipt by the Executive of an amount
advanced by the Company pursuant to Section 9(c), the
Executive becomes entitled to receive any refund with
respect to such claim, the Executive shall (subject to the
Company's complying with the requirements of Section 9(c))
promptly pay to the Company the amount of such refund
(together with any interest paid or credited thereon after
taxes applicable thereto). If, after the receipt by the
Executive of an amount advanced by the Company pursuant to
Section 9(c), a determination is made that the Executive
shall not be entitled to any refund with respect to such
claim and the Company does not notify the Executive in
writing of its intent to contest such denial of refund prior
to the expiration of 30 days after such determination, then
such advance shall be forgiven and shall not be required to
be repaid and the amount of such advance shall offset, to
the extent thereof, the amount of Gross-Up Payment required
to be paid.
10. Confidential Information. The Executive shall
hold in a fiduciary capacity for the benefit of the Company
all secret or confidential information, knowledge or data
relating to the Company or any of its affiliated companies,
and their respective businesses, which shall have been
obtained by the Executive during the Executive's employment
by the Company or any of its affiliated companies and which
shall not be or become public knowledge (other than by acts
by the Executive or representatives of the Executive in
violation of this Agreement). After termination of the
Executive's employment with the Company, the Executive shall
not, without the prior written consent of the Company or as
may otherwise be required by law or legal process,
communicate or divulge any such information, knowledge or
data to anyone other than the Company and those designated
by it. In no event shall an asserted violation of the
provisions of this Section 10 constitute a basis for
deferring or withholding any amounts otherwise payable to
the Executive under this Agreement.
11. Successors. (a) This Agreement is personal to the
Executive and without the prior written consent of the
Company shall not be assignable by the Executive otherwise
than by will or the laws of descent and distribution. This
Agreement shall inure to the benefit of and be enforceable
by the Executive's legal representatives.
(b) This Agreement shall inure to the benefit of and be
binding upon the Company and its successors and assigns.
(c) The Company will require any successor (whether
direct or indirect, by purchase, merger, consolidation or
otherwise) to all or substantially all of the business
and/or assets of the Company to assume expressly and agree
to perform this Agreement in the same manner and to the same
extent that the Company would be required to perform it if
no such succession had taken place. As used in this
Agreement, "Company" shall mean the Company as hereinbefore
defined and any successor to its business and/or assets as
aforesaid which assumes and agrees to perform this Agreement
by operation of law, or otherwise.
12. Miscellaneous. (a) This Agreement shall be
governed by and construed in accordance with the laws of the
State of New York, without reference to principles of
conflict of laws. The captions of this Agreement are not
part of the provisions hereof and shall have no force or
effect. This Agreement may not be amended or modified
otherwise than by a written agreement executed by the
parties hereto or their respective successors and legal
representatives.
(b) All notices and other communications hereunder
shall be in writing and shall be given by hand delivery to
the other party or by registered or certified mail, return
receipt requested, postage prepaid, addressed as follows:
If to the Executive:
If to the Company:
Bausch & Lomb Incorporated
One Bausch & Lomb Place
Rochester, New York 14604-2701
Attention: General Counsel
or to such other address as either party shall have
furnished to the other in writing in accordance herewith.
Notice and communications shall be effective when actually
received by the addressee.
(c) The invalidity or unenforceability of any provision
of this Agreement shall not affect the validity or
enforceability of any other provision of this Agreement.
(d) The Company may withhold from any amounts payable
under this Agreement such Federal, state or local taxes as
shall be required to be withheld pursuant to any applicable
law or regulation.
(e) The Executive's or the Company's failure to insist
upon strict compliance with any provision hereof or any
other provision of this Agreement or the failure to assert
any right the Executive or the Company may have hereunder,
including, without limitation, the right of the Executive to
terminate employment for Good Reason pursuant to Section
5(c)(i)-(v), shall not be deemed to be a waiver of such
provision or right or any other provision or right of this
Agreement.
(f) The Executive and the Company acknowledge that,
except as may otherwise be provided under any other written
agreement between the Executive and the Company, the
employment of the Executive by the Company is "at will" and,
prior to the Effective Date, may be terminated by either the
Executive or the Company at any time. Moreover, if prior to
the Effective Date, the Executive's employment with the
Company terminates, then the Executive shall have no further
rights under this Agreement.
IN WITNESS WHEREOF, the Executive has hereunto set the
Executive's hand and, pursuant to the authorization from its
Board of Directors, the Company has caused these presents to
be executed in its name on its behalf, all as of the day and
year first above written.
BAUSCH & LOMB INCORPORATED
By: ___________________________
William M. Carpenter
President and
Chief Executive Officer
By: __________________________
Exhibit (10)-e
Restated 7/31/96
THE EXECUTIVE INCENTIVE COMPENSATION PLAN
1.0 INTRODUCTION
The Executive Incentive Compensation Plan is established to
provide incentive compensation in the form of a supplement
to the base salaries of those officers; manager, and key
employees who contribute significantly to the growth and
success of the Company's business; to attract and to retain,
in the employ of the Company, individuals of outstanding
ability; and to align the interests of those who hold
positions of major responsibility in the Company with the
interests of the Company's shareholders.
2.0 ELIGIBILITY
Those members of the executive management group, whose
duties and responsibilities contribute significantly to the
growth and success if the Company's business are eligible.
This generally includes all positions in the mid-
management/technical band and above, in Rochester based
divisions or functions. The Plan may be adopted by non-
Rochester based divisions.
The participant must be on the payroll in an eligible
position before July 1 of the plan year, to be eligible for
an award.
3.0 DEFINITIONS
3.1 A standard inventive award has been established for
each salary grade or job band and is expressed as a
percentage of period salary (i.e., eligible base salary
earnings for the year). Exhibit I defines standard
percentage scheduled.
The standard incentive award is the award payout level which
over time, participants, units and the corporation should
average, and will be the amount which will be used for
financial accrual purposes during the incentive years.
3.2 An approved incentive award is the incentive which has
been approved by the Chairman of the Board of Directors and
the Committee on Management of the Board of Directors to be
paid by the company to the participant.
Actual incentive award amounts, based upon individual and
organizational performance, can vary from 0% for
unacceptable to a maximum of 175% of standard. In any
event, an award cannot exceed the maximum.
4.0 MEASURES OF PERFORMANCE
Each organizational unit and eligible participant will set
performance measures. these will be applied for incentive
plan purposes as follows:
<TABLE>
<CAPTION>
Global
Corporation Business Unit(s) Individual
<S> <C> <C> <C> <C>
Global Business 25% 75%
Managers
Staff Officers 75% 25%
Corporate Staff 50% 50%
Participants
Division or
Group 25% or 75%
Presidents 25%
Division or
Global 50% or 50%
Business
Participants 50%
</TABLE>
4.1 The "Organizational Performance Management System"
(OPMS) has been established to evaluate corporate, division,
global business, and profit center performance for the
Executive Incentive Compensation Plan purposes.
The OPMS is based upon five organizational objectives.
These objectives are to be agreed upon at the beginning of
the plan year. They must include the following categories
and weightings:
Sales 25%
Operating Earnings 25%
Asset Management 20%
Long Term Vitality 15%
How Goals are Achieved 15%
For the three financial goals performance levels for
5,4,3,2, and 1 ratings are to be defined at the beginning of
the plan year for each goals. The fourth and fifth goals
will be assessed at year end by the COO and the CEO.
After calculation of year end OPMS results, the CEO may make
a modification of +/- 20% (if performance is not accurately
reflected in performance measures i.e., due to general
economic, industry change, corporate strategy change).
Adjustments must be made in 5% increments.
4.2 The Individual Performance Management System (IPMS) for
use with the Executive Incentive Plan will consist of five
or fewer specific individual objectives. these objectives
are to be agreed upon at the beginning of the plan year.
They must be measurable and generally within the
participant's control. Further, there will be a pre-
determined weighting among the objectives reflecting the
priority of these objectives. Individual performance will
be determined by the participant's supervisors and approved
by the Division/Group Presidents or appropriate corporate
staff function head.
The unit or functional officer may make an adjustment of
+/- 20% to the calculated ratings if performance is not
accurately reflected in performance measures. Adjustments
must be made in 5% increments.
5.0 DEFINITION OF PERFORMANCE
The following "definitions of performance" are to be
utilized for the plan:
PERFORMANCE
DESIGNATION DEFINITION
5 (maximum) Extraordinary performance where
the objective was exceeded by a
wide margin
4 (high standard) Excellent performance where the
objective was exceeded.
3 (standard) Successful performance where the
objective was well met.
2 (low standard) Performance fell short of goal.
1 (minimum) Performance was well below
expectations.
6.0 PROCEDURE FOR BONUS CALCULATION AND APPROVAL
Each participant's total bonus will calculated as follows:
The standard bonus (see Section 3.1) is divided into
appropriate corporation/unit individual components (as
defined in Section 4.0).
For organizational components:
A. The final rating is converted to a percentage factor
(see Attachment I conversion table).
B. The factor is multiplied by the standard
organizational bonus.
C. There is no organizational award granted if final
overall rating is below 1.0.
For the individual component:
A. The final rating is converted to a percentage factor
(see Attachment III conversion table).
B. The factor is multiplied by the standard individual
bonus.
C. There is no individual award granted if final overall
rating is below 1.0.
To calculate the total bonus, the components are added.
The Division Presidents will submit their recommendations
for individual incentive awards to their immediate
superiors. In all instances the recommendations for the
Corporate awards will be submitted to the Chief Executive
Officer for concurrence.
Corporate function heads will submit their recommendations
for individual awards to their immediate superior who will
then submit the recommendations to the Chief Executive
Officer for concurrence.
7.0 REMOVAL, TRANSFERS AND TERMINATIONS
7.1 Participants whose employment with the Company is
terminated because of retirement, death, or disability:
After the close of the plan year, but prior to the actual
distribution of awards for such year, may be awarded a full
incentive award earned for the plan year. In the case of
death, such payment will be made to a beneficiary.
After the beginning, but prior to the end of the plan year,
may receive an incentive award for that year based on a
prorated calculation reflecting their employment with the
Company and participation in the Plan during the year.
Awards will not be paid for any period less than six months
participation in the plan year.
7.2 Participants who are terminated in the fourth quarter
of the year due to a re-structuring which results in job
elimination, may receive an incentive award for that year
based on a prorated calculation reflecting their employment
with the Company and participation in the Plan during that
year.
7.3 Participants transferred during the plan year within
the Company will be awarded an incentive payment through the
division in which the participant is employed at the end of
the plan year. It will be based on the contribution made in
each division in which the participant was employed during
the year. To this end a written evaluation and rating must
be completed by the participant's superior upon transfer.
The awarding division will be charged for the full amount of
the bonus.
7.4 Notwithstanding the foregoing, a special prorated
incentive award shall be paid to participants if, during the
period between the date of a change in control and the next
award date determined pursuant to Section 10: the
participant's employment is terminated involuntarily other
than for good cause, or the Plan is terminated.
The amount of the ward shall be calculated as a percentage
of period earnings based upon standard performance and
prorated through the date of termination of the participant
or the Plan, as applicable.
A change of control of the Company is defined as follows:
(a) The acquisition by any individual, entity or group
(within the meaning of Section 13(d)(3) or 14(d)(2) of the
Securities Exchange Act of 1934, as amended (the "Exchange
Act")) (a "Person") of beneficial ownership (within the
meaning of Rule 13d-3 promulgated under the Exchange Act) of
20% or more of either (i) the then outstanding shares of
common stock of the Company (the "Outstanding Company Common
Stock") or (ii) the combined voting power of the election of
directors (the "Outstanding Company Voting Securities");
provided, however, that the following acquisitions shall not
constitute a Change of Control: (i) any acquisition
directly from the Company (excluding an acquisition by
virtue of the exercise of a conversion privilege unless the
security being so converted was itself acquired directly
from the Company), (ii) any acquisition by the Company,
(iii) any acquisition by any employee benefit plan (or
related trust) sponsored or maintained by the Company or any
corporation controlled by the Company or (iv) any
acquisition by any corporation pursuant to a reorganization,
merger or consolidation, if, following such reorganization,
merger or consolidation, the conditions described in clauses
(i), (ii) and (iii) of subsection (c) of this Section 2 are
satisfied; or
(b) Individuals who, as of the date hereof, constitute the
Board (the "Incumbent Board") cease for any reason to
constitute at least a majority of the Board; provided,
however, that any individual becoming a director subsequent
to the date hereof whose election, or nomination for
election by the Company's shareholders, was approved by a
vote of at least a majority of the directors then comprising
the Incumbent Board shall be considered as though such
individual were a member of the Incumbent Board, but
excluding, for this purpose, any such individual whose
initial assumption of office occurs as a result of either an
actual or threatened election contest (as such terms are
used in Rule 14a-11 of Regulation 14A promulgated under the
Exchange Act) or other actual or threatened solicitation of
proxies or consents by or on behalf of a Person other than
the Board; or
(c) Approval by the shareholders of the Company of a
reorganization, merger, binding share exchange or
consolidation, in each case, unless, following such
reorganization, merger, binding share exchange or
consolidation, (i) more than 60% of, respectively, the then
outstanding shares of common stock of the corporation
resulting from such reorganization, merger, binding share
exchange or consolidation and the combined voting power of
the then outstanding voting securities of such corporation
entitled to vote generally in the election of directors is
then beneficially owned, directly or indirectly, by all or
substantially all of the individuals and entities who were
the beneficial owners, respectively, of the Outstanding
Company Common Stock and Outstanding Company Voting
Securities immediately prior to such reorganization, merger,
binding share exchange or consolidation in substantially the
same proportions as their ownership, immediately prior to
such reorganization, merger, binding share exchange or
consolidation, of the Outstanding Company Common Stock and
Outstanding Company Voting Securities, as the case may be,
(ii) no Person (excluding the Company, any employee benefit
plan (or related trust) of the Company or such corporation
resulting from such reorganization, merger, binding share
exchange or consolidation and any Person beneficially
owning, immediately prior to such reorganization, merger,
binding share exchange or consolidation, directly or
indirectly, 20% or more of the Outstanding Company Common
Stock or Outstanding Voting Securities, as the case may be)
beneficially owns, directly or indirectly, 20% or more of,
respectively, the then outstanding shares of common stock of
the corporation resulting from such reorganization, merger,
binding share exchange or consolidation or the combined
voting power of the then outstanding voting securities of
such corporation entitled to vote generally in the election
of directors and (iii) at least a majority of the members of
the board of directors of the corporation resulting from
such reorganization, merger, binding share exchange or
consolidation were members of the Incumbent Board at the
time of the execution of the initial agreement providing for
such reorganization, merger, binding share exchange or
consolidation; or
(d) Approval by the shareholders of the Company of (i) a
complete liquidation or dissolution of the Company or (ii)
the sale or other disposition of all or substantially all of
the assets of the Company, other than to a corporation, with
respect to which following such sale or other disposition,
(A) more than 60% of, respectively, the then outstanding
shares of common stock of such corporation and the combined
voting power of the then outstanding voting securities of
such corporation entitled to vote generally in the election
of directors is then beneficially owned, directly or
indirectly, by all or substantially all of the individuals
and entities who were the beneficial owners, respectively,
of the Outstanding Company Common Stock and Outstanding
Company Voting Securities immediately prior to such sale or
other disposition in substantially the same proportion as
their ownership, immediately prior to such sale or other
disposition, of the Outstanding Company Common Stock and
Outstanding Company Voting Securities, as the case may be,
(B) no Person (excluding the Company and any employee
benefit plan (or related trust) of the Company or such
corporation and any Person beneficially owning, immediately
prior to such sale or other disposition, directly or
indirectly, 20% or more of the Outstanding Company Common
Stock or Outstanding Company Voting Securities, as the case
may be) beneficially owns, directly or indirectly, 20% or
more of, respectively, the then outstanding shares of common
stock of such corporation and the combined voting power of
the then outstanding voting securities of such corporation
entitled to vote generally in the election of directors and
(C) at least a majority of the members of the board of
directors of such corporation were members of the Incumbent
Board at the time of the execution of the initial agreement
or action of the Board providing for such sale or other
disposition of assets of the Company.
7.5 Participants who leave the company or are terminated
prior to the actual payment of award for reasons other than
retirement, death, disability, termination in the fourth
quarter due to restructuring which results in job
elimination, change in control, will forfeit the award for
that plan year.
8.0 INCENTIVE AWARDS THROUGH CONTRACTUAL AGREEMENTS
Incentive awards may be made to participants who do not meet
the six month eligibility requirements only if the following
conditions are met.
(1) Award must be made through contractual agreement made
upon hiring, re-assignment, or commencement of special
project or assignment. These arrangements must be approved
in writing by Division President, Corporate Compensation,
Corporate V.P. Human Resources, and normal 1 over 1 approval
matrix.
9.0 ADMINISTRATION OF THE PLAN
The Committee on Management reserves the right to interpret,
amend, modify or terminate the existing program in
accordance with changing. Further, no participant eligible
to receive any payments shall have any rights to pledge,
assign, or otherwise dispose of unpaid portion of such
payments. The Committee on Management is responsible for
overall administration of the Plan. It will determine who
will receive incentives and the amount of each incentive.
It may also review the standards and objectives for a
particular year. The Committee on Management may change or
terminate the Plan at any time and no person has any rights
with respect to an incentive award until it has been paid.
10.0 INCENTIVE AWARD DISTRIBUTION
Incentive awards, when payable, shall be paid in the latter
part of the month of February following the close of the
preceding fiscal year.
Participants may also elect to defer all or part of an
incentive award in accordance with the procedure set forth
in the Company's Deferred Compensation Plan.
BAUSCH & LOMB INCORPORATED
BY:_________________________
JEAN F. GEISEL
ASSISTANT SECRETARY
AGREED to this ____ day
of __________, 1996.
Exhibit (10)-m
As amended and restated 2/27/96
THE MANAGEMENT EXECUTIVE INCENTIVE PLAN
1.0 INTRODUCTION
The Management Executive Incentive Plan is established to
provide incentive compensation in the form of a supplement
to the base salaries of the top Corporate officers; to
attract and to retain, in the employ of the Company,
individuals of outstanding ability; and to align the
interests of those who hold positions of major
responsibility in the Company with the interests of the
Company's shareholders.
2.0 ELIGIBILITY
The Chairman and Chief Executive Officer, President and
Chief Operating Officer, Executive Vice President and Chief
Administrative Officer, and Senior Vice President Finance
are eligible to participate in The Management Executive
Incentive Plan. The participant must be on the payroll in
an eligible position before July 1 of the plan year, to be
eligible for an award. Participants in this Plan are not
eligible to participate in the Executive Incentive
Compensation Plan.
3.0 DEFINITIONS
3.1 A standard inventive award has been established for
each salary grade or job band for participants in this Plan
and is expressed as a percentage of period salary (i.e.,
eligible base salary earnings for the year). The standard
percentages are:
Chairman and Chief Executive Officer 65
President and Chief Operating Officer 55
Executive Vice President and
Chief Administrative Officer 50
Senior Vice President Finance 50
3.2 An approved incentive award is the incentive award
which has been approved by the Committee on Management of
the Board of Directors (The "Committee on Management") to
be paid by the Company to the participant.
Actual incentive award amounts, based upon organizational
performance, can vary from 0% for unacceptable performance
to a range from a minimum of 50% to a maximum of 175% of
standard for acceptable performance. In any event, an award
cannot exceed the maximum.
4.0 MEASURES OF PERFORMANCE
The Committee on Management will set performance measures to
be applied for incentive plan purposes. These performance
measures will determine 100% of the bonus calculation for
participants in this Plan.
4.1 The "Organizational Performance Management System"
(OPMS) has been established to evaluate performance for the
Management Executive Incentive Plan.
The OPMS is based upon specific organizational objectives,
which are established during the first quarter of the year
by the Committee on Management. These objectives include
the following:
<TABLE>
<CAPTION>
Performance Measures Weightings
<S> <C>
Sales growth 30%
EPS growth 30%
ROE 30%
Aggregate weighted long 10%
term vitality
ratings from each of
the operating divisions
</TABLE>
Performance levels for 5,4,3,2, and 1 ratings are defined by
the Committee on Management prior to the end of the first
quarter.
5.0 DEFINITION OF PERFORMANCE
The following "definitions of performance" are to be
utilized for the Plan:
PERFORMANCE
DESIGNATION DEFINITION
5 (maximum) Extraordinary performance where
the objective was exceeded by a
wide margin
4 (high standard) Excellent performance where the
objective was exceeded.
3 (standard) Successful performance where the
objective was well met.
2 (low standard) Performance fell short of goal.
1 (minimum) Performance was well below
expectations.
6.0 PROCEDURE FOR BONUS CALCULATION AND APPROVAL
Each participant's total bonus will calculated as follows:
The standard award is calculated by multiplying the
participant's period salary by the standard percentage set
forth in Section 3.1.
The final organizational rating is determined by weighting
the performance ratings determined under Section 5 in
accordance with the percentages in Section 4.1; adding the
four weighted ratings; and converting the total performance
ratings to a percentage factor pursuant to Attachment I,
conversion table.
The percentage factor is ten multiplied times the standard
bonus.
There is no award granted if final organizational rating is
below 2.0.
7.0 REMOVAL, TRANSFERS AND TERMINATIONS
Participants whose employment with the Company is terminated
because of retirement, death, or disability:
After the close of the plan year, but prior to the actual
distribution of awards for such year, may be awarded a full
incentive award earned for the plan year. In the case of
death, such payment will be made to a beneficiary.
After the beginning, but prior to the end of the plan year,
may receive an incentive award for that year based on a
prorated calculation reflecting their employment with the
Company within the year and the award earned. Awards will
not be paid for any period less than six months
participation in the plan year.
Participants who leave the company for reasons other than
retirement, death, disability, change in control, or are
terminated prior to the actual payment of award will forfeit
the award for that plan years.
Notwithstanding the foregoing, a special prorated incentive
award shall be paid to participants if, during the period
between the date of a change in control and the next award
date determined pursuant to Section 10:
The participant's employment is terminated involuntarily
other than for good cause, or the Plan is terminated.
The amount of the award shall be calculated as a percentage
of period earnings based upon standard performance and
prorated through the date of termination of the participant
or the Plan, as applicable.
A change of control of the Company is defined as follows:
(a) The acquisition by any individual, entity or group
(within the meaning of Section 13(d)(3) or 14(d)(2) of the
Securities Exchange Act of 1934, as amended (the "Exchange
Act")) (a "Person") of beneficial ownership (within the
meaning of Rule 13d-3 promulgated under the Exchange Act) of
20% or more of either (i) the then outstanding shares of
common stock of the Company (the "Outstanding Company Common
Stock") or (ii) the combined voting power of the election of
directors (the "Outstanding Company Voting Securities");
provided, however, that the following acquisitions shall not
constitute a Change of Control: (i) any acquisition
directly from the Company (excluding an acquisition by
virtue of the exercise of a conversion privilege unless the
security being so converted was itself acquired directly
from the Company), (ii) any acquisition by the Company,
(iii) any acquisition by any employee benefit plan (or
related trust) sponsored or maintained by the Company or any
corporation controlled by the Company or (iv) any
acquisition by any corporation pursuant to a reorganization,
merger or consolidation, if, following such reorganization,
merger or consolidation, the conditions described in clauses
(i), (ii) and (iii) of subsection (c) of this Section 2 are
satisfied; or
(b) Individuals who, as of the date hereof, constitute the
Board (the "Incumbent Board") cease for any reason to
constitute at least a majority of the Board; provided,
however, that any individual becoming a director subsequent
to the date hereof whose election, or nomination for
election by the Company's shareholders, was approved by a
vote of at least a majority of the directors then comprising
the Incumbent Board shall be considered as though such
individual were a member of the Incumbent Board, but
excluding, for this purpose, any such individual whose
initial assumption of office occurs as a result of either an
actual or threatened election contest (as such terms are
used in Rule 14a-11 of Regulation 14A promulgated under the
Exchange Act) or other actual or threatened solicitation of
proxies or consents by or on behalf of a Person other than
the Board; or
(c) Approval by the shareholders of the Company of a
reorganization, merger, binding share exchange or
consolidation, in each case, unless, following such
reorganization, merger, binding share exchange or
consolidation, (i) more than 60% of, respectively, the then
outstanding shares of common stock of the corporation
resulting from such reorganization, merger, binding share
exchange or consolidation and the combined voting power of
the then outstanding voting securities of such corporation
entitled to vote generally in the election of directors is
then beneficially owned, directly or indirectly, by all or
substantially all of the individuals and entities who were
the beneficial owners, respectively, of the Outstanding
Company Common Stock and Outstanding Company Voting
Securities immediately prior to such reorganization, merger,
binding share exchange or consolidation in substantially the
same proportions as their ownership, immediately prior to
such reorganization, merger, binding share exchange or
consolidation, of the Outstanding Company Common Stock and
Outstanding Company Voting Securities, as the case may be,
(ii) no Person (excluding the Company, any employee benefit
plan (or related trust) of the Company or such corporation
resulting from such reorganization, merger, binding share
exchange or consolidation and any Person beneficially
owning, immediately prior to such reorganization, merger,
binding share exchange or consolidation, directly or
indirectly, 20% or more of the Outstanding Company Common
Stock or Outstanding Voting Securities, as the case may be)
beneficially owns, directly or indirectly, 20% or more of,
respectively, the then outstanding shares of common stock of
the corporation resulting from such reorganization, merger,
binding share exchange or consolidation or the combined
voting power of the then outstanding voting securities of
such corporation entitled to vote generally in the election
of directors and (iii) at least a majority of the members of
the board of directors of the corporation resulting from
such reorganization, merger, binding share exchange or
consolidation were members of the Incumbent Board at the
time of the execution of the initial agreement providing for
such reorganization, merger, binding share exchange or
consolidation; or
(d) Approval by the shareholders of the Company of (i) a
complete liquidation or dissolution of the Company or (ii)
the sale or other disposition of all or substantially all of
the assets of the Company, other than to a corporation, with
respect to which following such sale or other disposition,
(A) more than 60% of, respectively, the then outstanding
shares of common stock of such corporation and the combined
voting power of the then outstanding voting securities of
such corporation entitled to vote generally in the election
of directors is then beneficially owned, directly or
indirectly, by all or substantially all of the individuals
and entities who were the beneficial owners, respectively,
of the Outstanding Company Common Stock and Outstanding
Company Voting Securities immediately prior to such sale or
other disposition in substantially the same proportion as
their ownership, immediately prior to such sale or other
disposition, of the Outstanding Company Common Stock and
Outstanding Company Voting Securities, as the case may be,
(B) no Person (excluding the Company and any employee
benefit plan (or related trust) of the Company or such
corporation and any Person beneficially owning, immediately
prior to such sale or other disposition, directly or
indirectly, 20% or more of the Outstanding Company Common
Stock or Outstanding Company Voting Securities, as the case
may be) beneficially owns, directly or indirectly, 20% or
more of, respectively, the then outstanding shares of common
stock of such corporation and the combined voting power of
the then outstanding voting securities of such corporation
entitled to vote generally in the election of directors and
(C) at least a majority of the members of the board of
directors of such corporation were members of the Incumbent
Board at the time of the execution of the initial agreement
or action of the Board providing for such sale or other
disposition of assets of the Company.
8.0 ADMINISTRATION OF THE PLAN
The Committee on Management reserves the right to interpret,
amend, modify or terminate the existing program in
accordance with changing conditions, but only to the extent
authorized or permitted by law. The Committee on Management
is responsible for overall administration of the Plan. It
will determine who will receive incentives and the amount of
each incentive. It may also review the standards and
objectives for a particular year. The Committee on
Management may change or terminate the Plan at any time and
no person has any rights with respect to an incentive award
until it has been paid. Notwithstanding the foregoing, the
Committee on Management shall not exercise any discretionary
authority granted to it pursuant to the Section in a way
which cause the Company to lose the benefit of the
performance based exemption from the $1 million cap on
individual compensation deductions for publicly traded
corporations set forth in IRC Section 162(m).
No participant eligible to receive any payments shall have
any rights to pledge, assign, or otherwise dispose of unpaid
portions of such payments.
9.0 INCENTIVE AWARD DISTRIBUTION
Incentive awards, when payable, shall be paid in the latter
part of the month of February following the close of the
preceding fiscal year.
Participants may also elect to defer all or part of an
incentive award in accordance with the procedure set forth
in the Company's Deferred Compensation Plan.
BAUSCH & LOMB INCORPORATED
BY:_____________________________
DEBORAH K. SMITH
SENIOR VICE PRESIDENT
HUMAN RESOURCES
AGREED to this ____ day
of __________, 1996.
Exhibit (10)-y
THE
BAUSCH & LOMB INCORPORATED
1990 STOCK INCENTIVE PLAN
AND
RELATED INFORMATION
This document constitutes part of a prospectus covering
securities that have been registered
under the Securities Act of 1933
July 24, 1990
Amended by the Committee on Management December 9, 1996
INTRODUCTION
The 1990 Stock Incentive Plan (the "Plan") was adopted by the
Company's Board of Directors on February 27, 1990, and
subsequently was approved by the Company's shareholders at the
1990 Annual Meeting, which was held on April 24, 1990. Under the
Plan, shares of the Company's Class B stock, as well as options
to purchase such stock, may be awarded to directors, officers and
other key employees. The Plan is intended to advance the
interests of the Company and its shareholders by providing to
those individuals upon whose judgment, initiative and efforts the
conduct of the Company's business largely depends an incentive to
continue their service with the Company and/or its subsidiaries.
In recognition of your contributions to the Company, you have
been selected to receive an award under the Plan. To enable you
to better understand how the Plan works, we have attached a copy
of the Plan, as well as certain supplemental information
concerning the Plan and the awards made thereunder. Please read
all parts of this document carefully.
As explained in Section 3 of the Plan, the Plan is administered
by the Compensation Committee of the Board of Directors, which is
now called the Committee on Management ("Committee"). The
Committee consists of at least three directors, and is elected
annually by the entire Board of Directors. In addition to its
specific authority with respect to implementation of the Plan,
the Committee has the general responsibility for recommending to
the Board remuneration for the Chairman of the Board, the
President and directors, and determining the remuneration of
other corporate officers. The Plan is not subject to the
provisions of the Employee Retirement Income Security Act of 1974
and is not a qualified plan under Section 401(a) of the Internal
Revenue Code.
To obtain more information about the Plan and its administrators,
contact Stephen A. Hellrung, Vice President and General Counsel,
Bausch & Lomb Incorporated, One Lincoln First Square, Rochester,
New York 14601-0054 (telephone (716) 338-6000).
1990 STOCK INCENTIVE PLAN
BAUSCH & LOMB INCORPORATED
1. Purpose. The purpose of this Stock Incentive Plan (the
"Plan") is to advance the interests of Bausch & Lomb
Incorporated, a New York corporation (referred to herein as the
"Company"), and its shareholders by providing an incentive for
its directors, officers and other key employees who are primarily
responsible for the management of the business to continue
service with the Company and its subsidiaries. By encouraging
such directors, officers and other key employees to become owners
of Common Stock of the Company, the Company seeks to attract and
retain people of experience, ability and training and to furnish
additional incentive to directors, officers and other key
employees upon whose judgment, initiative and efforts the
successful conduct of its business largely depends. It is
intended that this purpose will be effected through the granting
of stock options and stock awards (sometimes collectively
referred to as "grants") as provided herein.
2. Effective Date. The effective date of the Plan shall be the
date the Plan is approved by the shareholders of the Company.
3. Administration of the Plan. The Plan shall be administered
by the Compensation Committee of the Board of Directors of the
Company (referred to herein as the "Committee"), which shall
consist of at least three directors, none of whom, while serving
on such Committee, shall be, or within one year prior thereto
have been, eligible to receive any grants hereunder, except as
specifically authorized under Section 14 of the Plan. The
Committee shall have authority to adopt rules and regulations for
carrying out the Plan, select the employees to whom grants will
be made, determine the number of shares to be optioned or awarded
to each such employee and interpret, construe and implement the
provisions of the Plan. Decisions of the Committee shall be
binding on the Company and on all persons eligible to participate
in the Plan.
4. Stock Subject to the Plan. Subject to adjustment as
provided in Sections 9 and 10, the total number of shares of the
$.08 par value Class B Stock of the Company available for grant
under the Plan in each calendar year (including partial calendar
years) during which the Plan is in effect shall be equal to three
percent (3%) of the total number of shares of Common Stock of the
Company outstanding as of the first day of each such year for
which the Plan is in effect; provided that any shares available
for grant in a particular calendar year (or partial calendar
year) which are not, in fact, granted in such year shall not be
added to the shares available for grant in any subsequent
calendar year. In addition to the limitation set forth above
with respect to the number of shares available for grant in any
single calendar year, no more than three million (3,000,000)
shares of Class B Stock shall be cumulatively available for the
grant of incentive options over the life of the Plan. Shares
subject to an option or award under the Plan may be authorized
and unissued shares or may be "treasury shares" as defined in
Section 102(a)(14) of the New York Business Corporation Law.
Approval by a majority vote of the shareholders of the Company
shall constitute authorization to use such Class B shares for the
purposes of the Plan. Any shares subject to an option or award
which for any reason expires or is terminated unexercised as to
such shares may again be subject to an option or award under the
Plan.
5. Eligible Persons. Options and awards may be granted only to
directors, officers and other key employees of the Company or any
subsidiary corporation of the Company. Except as expressly
authorized by Section 14 of the Plan, however, no grant shall be
made to a director who is not an officer or salaried employee.
Further, no grant shall be made to an individual who as a result
of such grant would own stock possessing more than 10% of the
total combined voting power or value of all classes of stock of
the Company or a subsidiary. Stock which such individual may
purchase under outstanding options, whether incentive or
nonqualified, shall be treated as stock owned by such individual
for purposes of this Section.
6. Stock Options. It is intended that options granted hereunder
to officers and other employees of the Company shall be, at the
discretion of the Committee, either "incentive options," under
the provisions of Section 422A of the Internal Revenue Code of
1986 and the regulations thereunder or corresponding provisions
of subsequent revenue laws and regulations in effect at the time
such options are granted hereunder, or nonqualified options.
Incentive options shall be granted within ten (10) years from the
effective date of the Plan and shall be evidenced by stock option
agreements in such form as the Committee shall approve from time
to time, which agreements shall conform with the Plan and shall
contain in substance the following terms and conditions:
(a) Number of Shares. The option agreement shall specify the
number of shares to which it pertains.
(b) Purchase Price. The purchase price per share of stock under
each option shall be 100% of the fair market value of such stock
on the day the option is granted, which shall be deemed to be the
mean between the highest and lowest quoted selling prices of the
Company's Common Stock on the New York Stock Exchange (or other
composite quoted market) on that day (or, if there were no such
sales on such day, on the next preceding day on which there were
such sales). The purchase price of an option shall not be
reduced during its term (except as provided in Section 9 or 10
hereof).
(c) Exercise. No option shall be exercisable after the
expiration of ten (10) years from the date such option is
granted.
Except as provided in Section 14 of the Plan, each such option
may be exercised at such time and in such manner as specified by
the Committee, which may, among other things, provide that
options may become subject to exercise in installments. Except
as provided in Section 13 hereof, no option may be exercised at
any time unless the holder thereof is then an employee or
director, as applicable, of the Company or one of its
subsidiaries. An individual electing to exercise an option under
the Plan shall give written notice of such election to the
Company.
(d) Payment; Loans. The purchase price of any stock purchased
pursuant to the exercise of an option granted hereunder shall be
payable in full on the exercise date in cash or by check or by
surrender of shares of Class B Stock or Common Stock of the
Company registered in the name of the optionee duly assigned to
the Company with the assignment guaranteed by a bank, trust
company or member firm of the New York Stock Exchange, or by a
combination of the foregoing. Any such shares so surrendered
shall be deemed to have a value per share equal to the fair
market value of a share of Common Stock on such date.
Notwithstanding any other provision of this Plan, the exercise
price of an option (or any portion thereof) shall not be payable
by surrender of Class B Stock or Common Stock of the Company
registered in the name of the optionee unless the shares to be so
surrendered have been held for such period of time and in such
manner as may be required by generally accepted accounting
principles in order to prevent the exercise of such option to be
deemed additional cash compensation to the optionee chargeable
against the earnings of the Company.
Subject to the approval of the Committee, or of such person to
whom the Committee may delegate such authority (its "designee"),
the Company may loan to the optionee a sum equal to an amount
which is not in excess of 100% of the purchase price of the
shares so purchased, such loan to be evidenced by the execution
and delivery of a promissory note; provided, however, that a
designee shall have no authority to approve loans to himself.
Approval of the Plan by a majority vote of the shareholders of
the Company shall constitute authorization under Section 714 of
the New York Business Corporation Law for any loan made hereunder
(including loans made pursuant to Section 14(d) of the Plan) to
any director of the Company.
Interest shall be paid on the unpaid balance of the promissory
note at such times and at such rate as shall be determined by the
Committee. Such promissory note shall be secured by the pledge
to the Company of shares having an aggregate purchase price on
the date of purchase equal to or greater than the amount of such
note. An optionee shall have, as to such pledged shares, all
rights of ownership including the right to vote such shares and
to receive dividends paid on such shares, subject to the security
interest of the Company. Such shares shall not be released by
the Company from the pledge unless the proportionate amount of
the note secured thereby has been repaid to the Company;
provided, however, that shares subject to a pledge may be used to
pay all or part of the purchase price of any other option granted
hereunder or under any other stock incentive plan of the Company
under the terms of which the purchase price of an option may be
paid by the surrender of shares, subject to the terms and
conditions of this Plan relating to the surrender of shares in
payment of the exercise price of an option. In such event, that
number of the newly purchased shares equal to the shares
previously pledged shall be immediately pledged as substitute
security for the pre-existing debt of the optionee to the
Company, and thereupon shall be subject to the provisions hereof
relating to pledged shares. All notes executed hereunder shall
be payable at such times and in such amounts and shall contain
such other terms as shall be specified by the Committee or its
designee or stated in the option agreement; provided, however,
that such terms shall conform to requirements contained in any
applicable regulations which are issued by any governmental
authority.
If employment of the optionee terminates for any reason other
than death, disability or retirement, any unpaid balance
remaining on any such promissory note shall become due and
payable upon not less than three months' notice from the Company,
which notice may be given at any time after such termination;
provided, however, that such unpaid balance shall without notice,
demand or presentation become due and payable in any event five
years following the date of such termination. Notwithstanding
any other provision of this section, in the event that an
optionee's employment is terminated within two years after a
Change in Control (as defined in Section 7(b)(3)), any unpaid
balance remaining on any such promissory note shall be due and
payable five years from the date of the Change in Control.
In the case of termination of employment due to disability or
retirement, any unpaid balance on such promissory note shall
become due and payable five years from the date of such
termination. Notwithstanding the above, in the case of death, at
any time, of an employee who has delivered a promissory note to
the Company hereunder, any unpaid balance remaining on such note
on the date of his death shall without notice, demand or
presentation become due and payable one year from such date.
"Retirement" as used herein shall mean early or normal
retirement as defined in the Company's retirement program.
(e) Rights as a Shareholder. The individual shall have no
rights as a shareholder with respect to any shares covered by his
grant until the date of issuance to him of such shares. No
adjustment shall be made for dividends or other rights for which
the record date is prior to the date such stock is issued.
(f) Maximum Value of Shares. The aggregate fair market value of
stock (determined at the time the option is granted) with respect
to which incentive stock options are exercisable for the first
time by an employee during any calendar year, under this or any
other incentive stock option plan of the Company or its
subsidiaries, shall not exceed $100,000.
(g) Non-Transferability of Rights. No grant shall be
transferable by the individual except by will or the laws of
descent or distribution. During the life of an individual, the
grant shall be exercisable only by him or his guardian or legal
representative.
Nonqualified options shall be evidenced by stock option
agreements in such form as the Committee shall approve from time
to time, which agreements shall indicate that the options are not
incentive options, shall conform with the Plan and shall contain
in substance the terms and conditions specified in parts (a),
(c), (d), (e), and (g) of this Section 6, plus such other terms
and conditions as the Committee shall designate. Except as
provided in Section 14 of the Plan, the purchase price per share
of stock under a nonqualified option shall be determined by the
Committee, in its discretion; provided, however, that the
purchase price shall in no case be less than the par value of the
shares subject to the option. Notwithstanding the provisions of
Section 6(g) the individual may also transfer grants of non-
qualified stock options to members of the individual's immediate
family, charitable institutions, or trusts or other entities
whose beneficiaries or beneficial owners are members of the
individual's immediate family and/or charitable institutions
pursuant to such conditions and procedures as the Committee may
establish. Any transfer permitted hereunder shall be subject to
the condition that the Committee receive evidence satisfactory to
it that the transfer is being made on a gratuitous or donative
basis and without consideration (other than nominal
consideration).
Without in any way limiting the authority of the Committee to
make grants hereunder, and in order to induce officers and other
key employees to retain ownership of shares in the Company, the
Committee shall have the authority (but not an obligation) to
include within any option agreement a provision entitling the
optionee to a further option (a "Re-load Option") in the event
the optionee exercises the option evidenced by the option
agreement, in whole or in part, by surrendering other shares of
the Company in accordance with this Plan and the terms and
conditions of the option agreement. Any such Re-load Option
shall be for a number of shares equal to the number of
surrendered shares, shall become exercisable in the event the
purchased shares are held for a minimum period of time not less
than three years, and shall be subject to such other terms and
conditions as the Committee may determine.
7. Alternate Rights. The Committee may, in its discretion,
award alternate rights to any officer or director who is also an
employee of the Company who is subject to Section 16(b) of the
Securities Exchange Act of 1934, in conjunction with incentive
stock options or nonqualified stock options then being granted to
him or her, or to be attached to one or more such options
theretofore granted and at the time held unexercised by such
officer or director, which shall entitle such individual to
receive payment from the Company in accordance with the terms of
the alternate right so awarded. The alternate rights set forth
in Subsections (a) and (b) herein shall be subject to such terms
and conditions as the Committee shall determine from time to
time.
(a) Stock Appreciation Rights
(1) An alternate right granted under this Subsection (a) (an
"SAR") may be made part of an option at the time of its grant or
at any time thereafter up to six months prior to the expiration
of the option.
(2) An SAR will entitle the holder to elect to receive, in lieu
of exercising the option to which it relates, an amount (in cash
or in Common Stock, or a combination thereof, all in the sole
discretion of the Committee) equal to 100% of the excess of:
(A) the fair market value per share of the Company's Common
Stock on the date of exercise of such SAR, multiplied by the
number of shares with respect to which the SAR is being
exercised, over
(B) the aggregate option price for such number of shares.
(3) An SAR will be exercisable only to the extent that it has a
positive value and the option to which it relates is exercisable.
(4) Notwithstanding the foregoing, no SAR shall be exercisable
(i) during the first six months after the date of its grant, or
(ii) if any related stock option was exercised during the first
six months after the date of its grant; provided, however, that
the limitations contained in this paragraph (4) shall not apply
in the event death or disability of the grantee occurs prior to
the expiration of the six-month period.
(5) Upon exercise of an SAR, the option (or portion thereof)
with respect to which such SAR is exercised shall be surrendered
and shall not thereafter be exercisable.
(6) Exercise of an SAR will reduce the number of shares
purchasable pursuant to the related option and available under
the Plan to the extent of the number of shares with respect to
which the SAR is exercised.
(b) Accelerated Rights.
(1) An alternate right granted under this Subsection (b) (an
"Accelerated Right") may be made part of an option at the time of
its grant or at any time up to six months prior to its
expiration, and shall provide the optionee with the rights
specified in Subsection (b) (2) below.
(2) Upon the occurrence of a Change in Control (as defined in
Subsection (b) (3) below), all options to which an Accelerated
Right is attached (i) shall become immediately and fully
exercisable and (ii) unless the Committee shall determine
otherwise at the time of grant, will entitle the holder, in lieu
of exercising the option, to elect to surrender all or part of
the option to the Company, provided that written notice of the
election (the "Election") is given to the Company within the
sixty (60) day period from and after the Change in Control (the
"Election Period"). Upon making such an Election, the holder
shall be entitled to receive in cash, within thirty (30) days of
such Election, an amount equal to the amount by which the Change
in Control Price (as defined in Subsection (b) (4) below) per
share of the Company's Common Stock on the date of such Election
shall exceed the exercise price per share of stock under the
option, multiplied by the number of shares of stock granted under
the option as to which the Accelerated Right shall have been
exercised (such excess referred to herein as the "Aggregate
Spread"); provided, however, that if the option to which the
Accelerated Right is attached is held by an individual subject to
Section 16 of the Securities Exchange Act of 1934 (the "Exchange
Act"), the Election provided for herein shall not be made prior
to six months from the date of grant of the Accelerated Right.
Notwithstanding any other provision of the Plan, if the end of
the Election Period is within six months of the date of grant of
an Accelerated Right held by an individual subject to Section 16
of the Exchange Act, the option to which the Accelerated Right is
attached shall be canceled in exchange for a cash payment equal
to the Aggregate Spread on the day which is six months and one
day after the date of grant of such Accelerated Right.
(3) "Change in Control" shall mean (i) the acquisition by any
individual, partnership, firm1 corporation, association, trust,
unincorporated organization or other entity, or any syndicate or
group deemed to be a person under Section 14(d)(2) of the
Exchange Act (a "person") of beneficial ownership (within the
meaning of Rule 13d-3 promulgated under the Exchange Act) of 30%
or more of the Company's outstanding shares of stock having
general voting rights, or (ii) individuals who currently
constitute the Board (the "Incumbent Board") cease for any reason
to constitute at least a majority of the Board, provided,
however, that any individual becoming a director subsequent to
the date hereof whose election or nomination was approved by a
vote of at least a majority of the directors then comprising the
Incumbent Board shall be deemed a member of the Incumbent Board.
(4) In the event of a Change in Control under Subsection (b) (3)
(ii) above, "Change in Control Price" shall mean the highest
reported sales price of a share of Common Stock on the Composite
Tape for New York Stock Exchange Listed Stocks (the "Market
High") during the sixty (60) day period prior to and ending on
the date of the Change in Control. If the Change of Control is
the result of a transaction or series of transactions described
in Subsection (b) (3) (i) above, the "Change in Control Price"
shall mean the higher of (i) the highest price per share of the
Common Stock paid in such transaction or series of transactions
by the person having made the acquisition, and (ii) the Market
High as determined above. Notwithstanding the foregoing, with
respect to any incentive option, the Change in Control Price
shall not exceed the market price of a share of Common Stock (to
the extent required by Section 422A of the Internal Revenue Code
of 1986, as amended) on the date of surrender thereof.
8. Stock Grants. The Committee may make a grant, evidenced by
such written agreement as the Committee shall, from time to time,
prescribe, to any officer or other key employee consisting of a
specified number of shares of the Company's Class B Stock, as
defined in Section 4 ("Stock Grants"). A Stock Grant shall be
neither an option nor a sale. The Committee, in its discretion,
shall decide whether any Stock Grant shall be subject to certain
conditions and restrictions, in which case appropriate written
notice of the conditions and restrictions shall be set forth in
the document effecting the grant ("Restricted Stock"). Restricted
Stock shall be subject to the following conditions and
restrictions.
(a) Restricted Stock may not be sold or otherwise transferred by
the employee until ownership vests at such time and in such
manner as specified by the Committee.
(b) Restricted Stock may be offered for sale to the Company
after all conditions are fulfilled and all restrictions lapse,
and the Company shall be obligated to purchase all shares so
offered at the then fair market value of the Company's Common
Stock or, at the Company's sole discretion, to issue in exchange
for any or all such Restricted Stock the equivalent number of
shares of the Company's Common Stock.
(c) The Company may at any time exchange any shares of Class B
Stock held as Restricted Stock for an equivalent number of shares
of its Common Stock encumbered by the same restrictions as those
shares exchanged, in which case an appropriate restrictive legend
shall be affixed to the Common Stock certificate(s).
(d) If the holder of Restricted Stock shall die while still in
the employ of the Company or a subsidiary prior to the lapse of
restrictions, the Company shall be obligated to purchase all such
shares at the then fair market value of its Common Stock if and
as offered by the employee's executor.
(e) Except as provided in Section 8(d) or as otherwise
determined by the Committee, all rights and title to Restricted
Stock granted to a participant under the Plan shall terminate and
be forfeited upon termination of the participant's employment
with the Company or other failure to fulfill all conditions and
restrictions applicable to such Restricted Stock.
(f) Except for the restrictions set forth herein and those
specified by the Committee, a holder of Restricted Stock shall
possess all the rights of a holder of the Company's Class B
Stock.
All other provisions of the Plan not inconsistent with this
Section shall apply to Stock Grants or the holder thereof, as
appropriate, unless otherwise determined by the Committee. In
addition, a grantee may elect to have a portion of the stock
otherwise issuable to him or her pursuant to a Stock Grant
withheld in order to satisfy applicable Federal, state and local
withholding tax requirements, provided that such election
complies with the following:
(1) The election shall be submitted to the Company in writing
and shall be irrevocable;
(2) The value of the shares subject to the withholding election
shall not exceed the maximum marginal tax rate to which the
grantee is subject in connection with the Stock Grant; and
(3) If made by an individual subject to Section 16 of the
Exchange Act, the election shall be made during the 10-day period
beginning on the third business day following the date of release
of the Company's quarterly or annual summary statements of sales
and earnings and ending on the twelfth business day following
such date or, as an alternative in the case of a Restricted Stock
Grant, at least six months prior to the lapse of the
restrictions.
For purposes of the foregoing, the shares withheld shall be
deemed to have a value per share equal to the fair market value
of the shares on the date the tax liability arises, and any
balance due on the liability shall be payable in cash or by
delivery of a check.
9. Recapitalization. In the event there is any recapitalization
in the form of a stock dividend, distribution, split, subdivision
or combination of shares of Common Stock of the Company,
resulting in an increase or decrease in the number of Common
shares outstanding, and there is not a corresponding
recapitalization in the Class B shares, the number of Class B
shares then available for grants or options under the Plan or
covered by then outstanding grants or options or authorized
pursuant to Section 14 of the Plan shall not change. However, in
such a case, proportionate adjustment shall be made in the number
of shares of Common Stock the aggregate value of which will
determine the purchase price of a Class B share or which are
exchangeable by the Company for a Class B share. In the event
there is a recapitalization resulting in an increase or decrease
in the number of Common shares outstanding and there is a
corresponding increase or decrease in the number of Class B
shares outstanding, the number of Class B shares available or
authorized under the Plan shall be increased or decreased
proportionately, as the case may be, and the number of shares
covered by each outstanding grant or option and the price per
share thereof in each such grant or option shall be increased or
decreased proportionately, as the case may be, without change in
the aggregate purchase price.
10. Reorganization. If, pursuant to any reorganization, sale or
exchange of assets, consolidation or merger, outstanding Class B
Stock is or would be exchanged for other securities of the
Company or of another company which is a party to such
transaction, or for property, any option or other award under the
Plan theretofore granted shall apply to the securities or
property into which the Class B Stock covered thereby would have
been changed or for which such Class B Stock would have been
exchanged had such Class B Stock been outstanding at the time. In
any of such events, the total number and class of shares then
remaining available for issuance under the Plan (including shares
reserved for outstanding options and awards and shares available
for future grant of options or other award under the Plan or
authorized under Section 14 hereof) shall likewise be adjusted so
that the Plan shall thereafter cover the number and class of
shares equivalent to the shares covered by the Plan immediately
prior to such event.
11. Transfer of Certain Shares. In addition to any other
restrictions hereunder, Class B shares issued pursuant to this
Plan may not be conveyed, transferred, or encumbered, except as
follows:
(a) Such shares may be pledged to the Company under Section 6(d)
of the Plan.
(b) Subject to any security interest of the Company in such
shares as established under Section 6(d) of the Plan, such shares
may be transferred by will or by the laws of descent or
distribution, or may be transferred by gift to members of an
employee's family or their descendants or to trusts solely for
their benefit.
(c) Such shares may be offered for sale to the Company at any
time by a grantee, his legal representative or transferee or such
other person who acquires such shares by bequest or inheritance.
The Company shall be obligated to purchase all shares so offered
at the current fair market value of the Company's Common Stock on
the date of such offer, provided, however, that the Company may,
in its discretion, issue in exchange for any or all Class B
shares so offered an equivalent number of shares of the Company's
Common Stock and provided further that the portion of any loan
secured by such shares under Section 6(d) has been fully paid on
the date of such offer or is paid forthwith.
Upon demand by the Company at any time, the Company may exchange
any shares of Class B Stock outstanding which are in the
possession of the Company as collateral security for a note
executed under Section 6(d) of the Plan for an equivalent number
of shares of its Common Stock, which Common Stock shall be held
by the Company as collateral security on the same basis as the
Class B Stock was held.
12. General Restriction- Each grant shall be subject to the
requirement that if at any time the Board of Directors shall
determine, in its reasonable discretion, that the listing,
registration or qualification of the shares subject to such grant
upon any securities exchange or under any state or federal law,
or that the consent or approval of any government regulatory
body, is necessary or advisable as a condition of, or in
connection with, such grant or the issue or purchase of shares
thereunder, such grant shall be subject to the condition that
such listing, registration, qualification, consent or approval
shall have been effected or obtained free of any conditions not
reasonably acceptable to the Board of Directors.
13. Termination of Employment or Director Status.
(a) Incentive Stock Options. Incentive stock options, to the
extent exercisable as of the termination date, may be exercised
within three months of the date of termination unless such
termination results from disability (as defined in Section 105(d)
(4) of the Internal Revenue Code, as amended) or death, in which
case such options shall be exercisable by the optionee or his
legal representative, heir or devisee, as appropriate, within one
year from the date of disability or death.
(b) Nonqualified Stock Options. Nonqualified stock options, to
the extent exercisable as of the date of termination, may be
exercised within three months of the date of termination unless
such termination results from death, disability (as defined in
Section 105(d)(4) of the Internal Revenue Code, as amended) or
retirement (as defined in the Company's retirement plan or age
65), in which case such options may be exercised by the optionee,
his legal representative, heir or devisee, as appropriate, within
five years from the earliest of the dates of death, disability or
retirement.
(c) Exercise Period Not Extended. Nothing contained in this
Section 13 shall under any circumstances be interpreted as or
have the effect of extending the period during which an option
may be exercised beyond the terms or the expiration date provided
in such option agreement or established by law or regulation.
Death of an optionee subsequent to termination shall not extend
such periods. Whether leave of absence shall constitute a
termination of employment for purposes of the Plan shall be
determined by the Committee.
(d) Work in Competing Capacity.
(1) Notwithstanding anything to the contrary contained in the
Plan, the Committee, in its discretion, may include as a term of
any employee's option agreement a proviso that, if the employee
voluntarily terminates his or her employment with the Company or
is terminated for misconduct or failure or refusal to perform his
or her duties of employment (as determined by the Committee), and
within a period of one year after such termination shall,
directly or indirectly, engage in a competing activity (as
defined below), the employee shall be required to remit to the
Company, with respect to the exercise of any option by the
employee on or after the date six months prior to such
termination1 an amount in cash or a certified or bank check equal
to 100% of the excess of:
(A) the fair market value per share of the Company's Common
Stock on the date of exercise of such option, multiplied by the
number of shares with respect to which the option is exercised,
over
(B) the aggregate option price for such number of shares.
(2) Notwithstanding anything to the contrary contained in the
Plan, the Committee may, in its discretion, as a condition of any
Stock Grant to an employee, provide that, if the employee
voluntarily terminates his or her employment with the Company or
is terminated for misconduct or failure or refusal to perform his
or her duties of employment (as determined by the Committee), and
within a period of one year after such termination shall,
directly or indirectly, engage in a competing activity (as
defined below), the employee shall be required to remit to the
Company, with respect to any unrestricted Stock Grant which was
made or any Restricted Stock Grant which became fully vested on
or after the date six months prior to such termination, the fair
market value of the shares subject to such grant on the date of
the grant (as to unrestricted stock) or the date of vesting (as
to Restricted Stock). Such remittance shall be payable in cash
or by certified or bank check or by delivery of shares of Class B
Stock or Common Stock of the Company registered in the name of
the grantee duly assigned to the Company with the assignment
guaranteed by a bank, trust company or member firm of the New
York Stock Exchange, or by a combination of the foregoing. Any
such shares so delivered shall be deemed to have a value per
share equal to the fair market value of the shares on such date.
(3) For purposes of this Section 13(d), an employee is deemed to
be "engaged in a competing activity" if he or she owns, manages,
operates, controls, is employed by, or otherwise engages in or
assists another to engage in any activity or business which
competes with any business or activity of the Company in which
the employee was engaged or involved, or which, as of the time of
the employee's termination, was in a state of research or
development by any such business of the Company.
(4) No provision or condition implemented by the Committee under
subparagraphs (1) and (2) above shall be interpreted as or deemed
to constitute a waiver of, or diminish or be in lieu of, any
other rights the Company may possess as a result of the
employee's direct or indirect involvement with a business
competing with the business of the Company.
14. Director Stock Options.
(a) Each director of the Company who is not an employee of the
Company or any subsidiary shall, on the fourth Tuesday of July
following the director's election at the annual meeting of
shareholders (commencing with July 1990)and on the fourth Tuesday
of each July thereafter during such director's term,
automatically be granted nonqualified options to purchase Class B
Stock at a purchase price per share determined in accordance with
Subsection 6(b) of the Plan. The number of shares subject to
each such option shall be equal to (i) two times the average of
all compensation paid to non-employee directors, divided by (ii)
the fair market value per share of the Company's Common Stock on
the date of grant. The average of non-employee director
compensation shall be determined by dividing the number of non-
employee directors who were eligible for director stock options
throughout the entire twelve (12) month period ending on the date
of the Annual Meeting of the Shareholders of the Company
preceding the grant (the "Calculation Year") into the aggregate
compensation paid or payable (including compensation which is
deferred) to all such directors with respect to services rendered
to the Company as directors during the Calculation Year. A
director's stock option granted hereunder shall be fully vested
on the date of grant.
(b) Transition grants of nonqualified options shall
automatically be made to non-employee directors who are not up
for election at the 1990 annual meeting of shareholders. The
transition grants shall be made at the times and shall be based
upon the formula set forth in Section 14(a) for the number of
years remaining in such director's term following the 1990
shareholder meeting. A transition grant made hereunder shall be
fully vested upon the date of grant.
(c) The grants to directors provided for in this Section 14
shall in all respects supersede, and be in lieu of, any automatic
grants to directors which would otherwise be made pursuant to the
Company's 1987 Stock Incentive Plan, it being intended that the
only options to be granted to directors shall be made pursuant to
this Plan. Approval of this Plan by a majority vote of the
shareholders of the Company shall constitute approval by the
shareholders of the cessation of future grants to directors under
the 1987 Stock Incentive Plan.
(d) Automatic director stock option grants shall only be made
if, as of each date of grant, the director (i) is not an employee
of the Company or any subsidiary, (ii) has not been an employee
of the Company or any subsidiary for any part of the preceding
fiscal year, and (iii) has served on the Board of Directors
continuously since the commencement of his term.
(e) A director may, upon the exercise of director stock options,
request that the Company loan to him a sum equal to an amount
which is not in excess of 100% of the exercise price of the
shares so purchased, and the loan shall be made to the director,
and shall be subject to the terms and conditions set forth in
Section 6(d) of the Plan, except that "retirement" shall be as
defined in the Company's policy for directors. No member of the
Committee shall participate in the approval of loans to himself.
(f) Director stock options, as grants to directors of the
Company who are subject to Section 16(b) of the Exchange Act,
shall automatically include Accelerated Rights as provided for in
Subsection 7(b) of the Plan.
(g) In the event that the number of shares of the Company's
Class B Stock available for future grant under the Plan is
insufficient to make all automatic grants required to be made on
such date, then all non-employee directors entitled to a grant on
such date shall share ratably in the number of options on shares
of the Company's Class B Stock available for grant under the
Plan.
(h) Except as expressly provided in this Section 14, director
stock options shall be subject to the terms and conditions of
Section 6 for nonqualified stock options and in accordance with
the Plan.
15. Definitions. Any terms or provisions used herein which are
defined in Sections 83, 421, 422A or 425 of the Internal Revenue
Code of 1986 or the regulations thereunder or corresponding
provisions of subsequent laws and regulations in effect at the
time grants or options are made hereunder shall have the meanings
as therein defined.
16. Amendment of the Plan. The Plan may at any time be
terminated, modified, or amended by a majority vote of the
outstanding shares of the Company having general voting power or,
to the extent authorized or permitted by applicable law, rule or
regulation, by the Board of Directors of the Company or the
Committee.
17. Duration of the Plan. The Plan shall remain in effect until
all shares subject to, or which may become subject to, the Plan
shall have been conveyed pursuant to the provisions of the Plan.
SUPPLEMENTAL INFORMATION CONCERNING THE
1990 STOCK INCENTIVE PLAN
FEDERAL INCOME TAX CONSEQUENCES
Incentive Stock Options
Neither the grant nor the exercise of an incentive option will
result in taxable income to the optionee. Provided that the
disposition of stock acquired pursuant to the exercise of an
incentive option occurs at least two years after the grant of the
option and one year after the transfer of the shares upon
exercise, the gain or loss realized on disposition would be
treated as a long-term capital gain or loss. The gain or loss
would be equal to the difference between the option price and the
amount realized from the disposition.
A "disqualifying disposition" occurs if stock acquired upon the
exercise of an incentive option is disposed of before the
expiration of either the one-year or two-year holding periods
referred to above. Any amount received upon a disqualifying
disposition generally will be taxable as ordinary income in the
year of disposition to the extent that the lesser of (a) the fair
market value of the shares on the date the option was exercised,
or (b) the amount realized from such disposition, exceeds the
option price.
Any amount realized from a disqualifying disposition in excess of
the fair market value of the shares on the date of exercise will
be treated as long- or short-term capital gain, depending on the
holding period of the shares. If the amount realized is less
than the option price, the loss will be treated as long- or
short-term capital loss, depending upon the holding period of the
shares.
No deduction will be allowed to the Company for federal income
tax purposes upon the grant or exercise of an incentive option.
At the time of a disqualifying disposition by an optionee, the
Company will be entitled to a deduction for the amount taxable to
the optionee as ordinary income.
While it is possible to pay the option price under an incentive
option with previously acquired stock of the Company, it is not
possible to do so by making a series of connected option
exercises. Optionees are urged to consult their own tax advisors
and the Company if they contemplate using stock to pay the
exercise price.
Since 1983, the excess of the fair market value of stock on the
date of exercise of an incentive option over the option price has
been an "item of tax preference". Items of tax preference will
be taken into account for purposes of the alternative minimum
tax. Beginning in 1987, this tax is imposed at the rate of 21%
of the alternative minimum tax base and is payable to the extent
that it exceeds the regular income tax. The alternative minimum
tax base is generally equal to adjusted gross income, less
certain itemized deductions, less an exemption amount, plus items
of tax preference.
Nonqualified Stock Options
No income will be recognized by an optionee at the time a
nonqualified option is granted.
The rules for recognizing income upon exercise of the option
depend on whether the optionee is an "insider" (i.e., is subject
to Section 16(b) of the Securities Exchange Act of 1934). In the
case of a non-insider, ordinary income will be recognized by the
optionee on the date he exercises a nonqualified stock option.
The amount of income will be equal to the excess of the fair
market value of the shares on the date of exercise over the
option price. The holding period for capital gain and loss
purposes will begin on the date of exercise.
In the case of an insider, ordinary income will be recognized by
the optionee on the first day on which a sale of the stock at a
profit would not expose the optionee to Section 16(b) liability
(the "date of taxation"). The amount of income will be equal to
the excess of the fair market value of the shares on the date of
taxation over the option price. The holding period for capital
gain and loss purposes will begin on the date of taxation. An
insider may elect to be taxed according to the rules applicable
to non-insiders by filing an election with the Internal Revenue
Service within 30 days from the date of exercise.
The Company will be entitled to a deduction at the time that the
optionee is required to recognize income from the option
exercise. The deduction will be equal to the amount which is
taxable to the optionee as ordinary income as a result of
exercise.
If the option price of a nonqualified stock option is paid by
surrendering stock of the Company, the optionee will recognize no
gain or loss on the shares that he surrenders to pay the option
price (the "surrendered shares"). The shares that he receives
upon exercise of the option in excess of the surrendered shares
will be called the "additional shares". The optionee will
recognize ordinary income upon the exercise equal to the fair
market value of the additional shares on the date of exercise,
less any cash paid toward the option price. The basis of the
additional shares will be equal to their fair market value on the
date of exercise, and their holding period will begin on that
date. The shares that the optionee receives upon exercise equal
to the surrendered shares will have a basis and holding period
equal to that of the surrendered shares.
Alternate Rights
No income will be recognized by a recipient at the time a Stock
Appreciation Right or Accelerated Right is granted. In the case
of a non-insider, ordinary income will be recognized by the
recipient on the date the non-insider exercises any such right.
The amount of income will be equal to the sum of (a) the amount
of cash received, and (b) the fair market value of the Company's
stock received, determined as of the date of exercise. The
holding period for capital gain and loss purposes will begin on
the date of exercise.
In the case of an insider, ordinary income attributable to stock
received upon the exercise of a Stock Appreciation Right or
Accelerated Right will be recognized on the first day on which a
sale of the stock at a profit would not expose the recipient to
Section 16(b) liability (the "date of taxation"). The amount of
income will be equal to the fair market value of the shares on
the date of taxation. The holding period for capital gain and
loss purposes will begin on the date of taxation. Any cash
received by an insider upon exercise of a Stock Appreciation
Right will be taxed as ordinary income upon receipt. An insider
may elect to be taxed according to the rules applicable to non-
insiders by filing an election with the Internal Revenue Service
within 30 days from the date of exercise.
The Company will be entitled to a deduction at the time that the
optionee is required to recognize income. The deduction will be
equal to the amount which is taxable as ordinary income as a
result of the exercise.
Cash received pursuant to the automatic payment on an Accelerated
Right due to a change in control will be taxed as ordinary income
on the date it is received.
Stock Awards
No income will be recognized by a recipient at the time that a
Restricted Stock award is made. Ordinary income will be
recognized on the day when an unrestricted stock award is made
or, as to Restricted Stock, when the conditions and restrictions
set forth in the grant with respect to any shares of stock are
fulfilled (the "date of taxation"). The amount of such income
will be equal to the fair market value of the shares on the date
of taxation. The holding period of the shares for capital gain
and loss purposes will begin on the date of taxation.
Dividend payments made with respect to a share of stock prior to
the date of taxation will constitute ordinary compensation
income.
The Company will be entitled to a deduction equal to the amount
of ordinary income recognized by the recipient of a stock award,
including income resulting from dividend payments or from the
fulfilling of the conditions and restrictions.
Subsequent Dispositions
The basis of a share acquired pursuant to the exercise of a
nonqualified option, Stock Appreciation Right, or Accelerated
Right, or pursuant to a stock award will be the amount included
in ordinary income due to receipt of that share.
When the recipient disposes of shares acquired pursuant to a
nonqualified stock option, a Stock Appreciation Right, an
Accelerated Right, or a stock award, any amount realized in
excess of the basis of the shares will be treated as a long- or
short-term capital gain, depending on the holding period of the
shares. If the amount realized is less than the basis of the
shares, the loss will be treated as long- or short-term capital
loss, depending on the holding period of the shares.
STATE INCOME TAX CONSEQUENCES
New York State Income Tax Consequences
The New York State income tax treatment of incentive and
nonqualified stock options, Stock Appreciation Rights,
Accelerated Rights and stock awards generally is the same for New
York State residents as the federal income tax treatment.
Ordinary income from the disqualifying disposition of incentive
stock option stock, from the exercise of a nonqualified stock
option, Stock Appreciation Right, or Accelerated Right, and from
a stock award will be eligible for the 9% New York State maximum
tax on personal service income. The item of tax preference
arising from the exercise of an incentive stock option will be
subject to the New York State minimum tax, and will also reduce,
dollar for dollar, the income eligible for the 9% maximum tax.
Other State Income Taxes
Participants in the Plan should consult their tax advisors
concerning the applicability of any other state law which may
impose income taxes in connection with Grants and Director Stock
Options under the Plan.
DESCRIPTION OF BAUSCH & LOMB
COMMON AND CLASS B STOCK
The Company's Certificate of Incorporation authorizes the
issuance of 100,000,000 shares of Common Stock, par value $.40
per share, 6,875,000 shares of Class B Stock, par value $.08 per
share, 10,000 shares of 4% Cumulative Preferred Stock, par value
$100 per share, and 25,000,000 shares of Class A Preferred Stock,
par value $1 per share.
The shares of Common Stock and of Class B Stock are equal in all
respects except that the par value of the Common Stock is $.40
per share and the par value of the Class B Stock is $.08 per
share, and except as otherwise specified in this paragraph.
Shares of Class B Stock are issuable only under the Plan and the
Company's 1975, 1982 and 1987 stock option plans. All such
shares are subject to restrictions on transferability, as
described in the plans. The Company's Common Stock is listed on
the New York Stock Exchange, whereas the Class B Stock is not so
listed.
Subject to the prior payment, or declaration and setting apart
for payment, of dividends on any 4% Cumulative Preferred Stock
hereafter issued and to any preferred dividends to which Class A
Preferred Stock hereafter issued may be entitled, the holders of
the Common Stock and of the Class B Stock are entitled to receive
(equally per share) such dividends as the Board of Directors may
from time to time lawfully declare.
The Certificate of Incorporation of the Company provides that, if
any of its 4% Cumulative Preferred Stock is issued and
outstanding, there shall be certain limitations upon the amount
of dividends (other than stock dividends) which may be paid on
any class of stock junior to such 4% Cumulative Preferred Stock
(which would include both the Common Stock and the Class B
Stock).
The holders of Common Stock and of Class B Stock, voting together
as a single class (except on such matters as to which they each
may be required by law to vote separately as a class), possess
the full and exclusive voting power for the election of directors
and for all other purposes, except to the extent that Class A
Preferred Stock hereafter issued may be granted voting rights,
and subject to any rights of 4% Cumulative Preferred Stock
hereafter issued to vote as to certain matters as described in
the Company's Certificate of Incorporation. Each share of Common
Stock and each share of Class B Stock is entitled to one vote.
The shares of Common Stock and the shares of Class B Stock do not
have cumulative voting rights.
In the event that the Company is liquidated, dissolved or wound
up, the holders of Common Stock and of Class B Stock are entitled
to receive all assets available for distribution to shareholders,
after there shall have been paid or set apart for the holders of
any 4% Cumulative Preferred Stock and the holders of any Class A
Preferred Stock the full preferential amounts to which they are
entitled.
The holders of Common Stock and the holders of Class B Stock have
no pre-emptive rights. All such stock issued under the Plan
will, when paid for in cash, be fully paid and non-assessable.
Shares of Class B Stock, to the extent that they are pledged to
secure loans by the Company, are considered not to be fully paid
and to be assessable, but only to the extent of the amounts owed
on the promissory notes secured thereby.
Any amendments to or changes in the description of stock reported
on documents filed by the Company pursuant to Sections 13 and
15(d) of the Securities Exchange Act of 1934 made subsequent to
the date of these materials are incorporated herein by reference.
RESTRICTIONS ON REOFFER OR RESALE OF COMMON STOCK
These materials may not be relied upon for reoffers or resales by
"affiliates" of the Company of shares of the Company's Common
Stock acquired by them in exchange for shares of Class B Stock.
According to the definition set forth in Rule 405 under the
Securities Act of 1933, an "affiliate" of the Company is "a
person that directly, or indirectly through one or more
intermediaries, controls, or is controlled by, or is under common
control with" the Company. Affiliates must effect such reoffers
or resales either in accordance with Rule 144 under the
Securities Act of 1933 or pursuant to a separate prospectus
covering such reoffer or resale. Persons who are not affiliates
of the Company generally are entitled to make such reoffers or
resales without such restrictions.
In addition, every person who is directly or indirectly the
beneficial owner of more than 10% of the outstanding shares of
the Company's Common Stock and every person who is a director or
officer of the Company is subject to the provisions of Section
16(b) of the Securities Exchange Act of 1934, which restrict the
ability of such persons to sell and purchase or purchase and sell
any equity security of the Company within any period of less than
six months.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents, which have been filed by Bausch & Lomb
Incorporated (the "Company") with the Securities and Exchange
Commission, are incorporated herein by reference:
1. The Company's Annual Report on Form 10-K for the fiscal year
ended December 30, 1989.
2. The Company's Quarterly Report on Form 10-Q for the quarter
ended March 31, 1990, and all other reports filed by the Company
pursuant to Section 13(a) or 15(d) of the Securities Exchange Act
of 1934 since December 30, 1989.
All documents subsequently filed by the Company pursuant to
Sections 13(a), 13(c), 14 and 15(d) of the Securities Exchange
Act of 1934 prior to the filing of a post-effective amendment
which indicates that all securities offered have been sold or
which deregisters all securities then remaining unsold, also
shall be deemed to be incorporated by reference and to be a part
of these materials from the date of filing of such documents.
Upon request, the company will provide without charge to each
person to whom a copy of these materials has been delivered a
copy of any and all of the information that has been incorporated
by reference herein, except exhibits, as well as any other
document required to be delivered to participants in the Plan
pursuant to Rule 42B(b) under the Securities Act of 1933.
Requests should be directed to Stephen A. Hellrung, Vice
President and General Counsel, Bausch & Lomb Incorporated, One
Lincoln First Square, Rochester, New York 14601-0054 (telephone
(716) 338-6000).
Exhibit (10)-bb
As restated by the Committee on Management
of the Board of Directors
December 9, 1996
DIRECTOR DEFERRED COMPENSATION PLAN
1. Introduction
The Director Deferred Compensation Plan (the "Plan")
provides the opportunity for Directors of Bausch & Lomb
Incorporated (the "Company") to defer all or part of their
cash compensation for serving on the Company's Board of
Directors or Committees of the Board of Directors pursuant
to the terms of this Plan. This Plan is a restatement of
the Company's Deferred Compensation Plan dated February 25,
1992, as amended (the "1992 Plan").
2. Effective Date
The effective date of the Plan is January 1, 1997 (the
"Effective Date"). It covers eligible compensation earned
after the Effective Date as well as all monies previously
deferred under the 1992 Plan.
3. Eligibility
Any director of the company who is not an officer or
employee of the Company is eligible to participate in the
Plan with respect to the cash compensation otherwise payable
to him or her for serving on the Company's Board of
Directors or Committees of the Board of Directors.
4. Amount of Deferral
A director may elect to defer receipt of the compensation
described in Section 3 hereof; provided that a minimum
amount of $5,000 per year must be deferred..
5. Time of Election of Deferral
A director's election to defer cash compensation must be
made before the compensation is earned, which means that the
election for any year of service commencing with the meeting
of the Board of Directors immediately following the Annual
Meeting of the Company's Shareholders must be made prior to
that meeting.
6. Deferral Election
a) To defer compensation under the Plan, a director must
give written notice to the Plan Administrator. This notice
must include (1) the amount or percentage of compensation to
be deferred; (2) selection of investment account(s) (as
described in Section 7 hereof); (3) the payment commencement
date, (i.e. retirement or date certain); (4) the method of
payment desired (i.e. annual, lump sum) and, if annual, the
number of years of installment payments; and (5) the
designation of payment to the director's estate or
beneficiary in the event of the director's death. The
Company will provide notice forms for deferral elections
(see Exhibits I and II).
b) If a director names someone other than his or her spouse
as a beneficiary in the event of director's death, a spousal
consent form must be signed by that director's spouse and
returned to the Company.
c) A deferral election (including payment commencement date
and method of payout) will continue in effect as to
compensation earned in future years until such time as the
Company is notified in writing that (1) the director no
longer wishes to defer compensation payable subsequent to
such notification, or (2) an alternate payment commencement
date and/or method of payout is elected for future deferrals
of earnings.
d) For all compensation deferred after the Effective Date
of this Plan, a director may elect only two payment options,
each consisting of a payment commencement date and a method
of payment.
e) If a director elects to receive his or her deferred
compensation in installments, the installment payments will
be calculated in the following manner: the director's
account balance at the payment commencement date will be
multiplied by a fraction, the numerator of which is 1, and
the denominator of which is the number of remaining
installment periods.
f) Retirement, for purposes of the Plan shall mean the date
on which the director is both (i) at least age 55 and (ii)
no longer a director of the Company.
7. Deferred Compensation Accounts
a) Monies deferred under the Plan will be transferred to a
trustee subject to a "Rabbi" Trust Agreement between the
Company and a trustee designated by the Plan Administrator
(the "Trust").
b) The rate of return on deferred compensation is
determined by the performance of one or more deferred
compensation investment accounts selected by the director
pursuant to the Plan. Deferred compensation investment
accounts available under the Plan are determined by the
Company's Investment Committee ("Investment Account(s)").
Information on each Investment Account currently available
under the Plan may be obtained from the Plan Administrator.
The Investment Committee may, from time to time, in its
discretion, deem it necessary or advisable to add or delete
Investment Accounts or substitute new Investment Accounts
for existing Investment Accounts. In such an event, the
Plan Administrator will provide directors with reasonable
notice of the effective date of the change to permit
directors to change their future investment elections.
c) All investments in Investment Accounts under the Plan
are hypothetical. At the time of each deferral of
compensation into the Plan, a director will be credited with
an imputed number of shares for the Investment Account(s)
selected by the director. Thereafter, the value of a
director's Investment Accounts will fluctuate in accordance
with the actual performance of the Investment Accounts.
Dividends on the imputed shares also will be credited to the
director's Investment Accounts.
c) Earnings/losses on a director's Investment Account will
be credited effective on the last business day of each
month. All such earnings are net of expenses. Quarterly
statements will be provided by the Plan Administrator.
e) The deferral of compensation on a current basis will be
allocated into Investment Account(s) pursuant to the
deferral election determined by the director. The
allocation must be in whole percentages; (i.e. 100% into one
Investment Account, a 60-20-20 split among three Investment
Accounts, etc.).
f) By written notice to the Plan Administrator, a director
may elect to reallocate amounts already in his/her
Investment Accounts among the various Investment Account(s)
on a monthly basis; except that a reallocation into or out
of the Bausch & Lomb Common Stock Investment Account by
directors of the Company may not be made more than once in
any six (6) month period.
8. Payment of Deferred Compensation
a) A director's right to payment of deferred compensation
under the Plan is a contractual obligation of the Company to
the director, and his or her right to such monies shall be
an unsecured claim against the general assets of the
Company. However, the Company has established the Trust as
an irrevocable rabbi trust for directors for the purpose of
holding assets used to provide the benefits required by this
Plan. The Company shall make periodic contributions to the
Trust as may be required to fund amounts payable under the
Plan. The Trust provides a director with assurance that
deferred monies will be paid to him or her in accordance
with the Plan, except in the event of the Company's
bankruptcy or insolvency. Amounts previously deferred have
also been transferred to the Trust for the benefit of
directors. Notwithstanding the establishment of the Trust,
the Company remains ultimately responsible to pay deferred
compensation to each director. This obligation shall be met
from the general assets of the Company if the Trust has
insufficient funds to pay benefits.
b) Payments of deferred compensation to a director shall be
pursuant to the director's deferral election notice given
pursuant to Section 6 hereof. Except as provided in
Subsections c) and d) below, a director may not change the
payment commencement date or method of payment for monies
already in his or her Investment Account(s). However, a
director may choose a different payment commencement date
and/or method payout for future deferrals subject to Section
6 above.
c) If, in the discretion of the Plan Administrator, a
director has a need for funds due to a financial emergency
beyond the control of the director, a payment may be made to
the director from the funds in his or her account at a date
earlier than the payment commencement date chosen by the
director at the time of deferral. A distribution based upon
financial hardship may not exceed the amount required to
meet the immediate financial need created by the hardship
less the amount reasonably available to the director from
other sources. Notwithstanding the foregoing, a director
may not obtain a distribution based on financial hardship as
to amounts paid into the director's Bausch & Lomb Common
Stock account subsequent to April 30, 1991 (including
earnings credited to those amounts).
A director requesting a hardship distribution must supply
the Plan Administrator with a statement indicating the
nature of the need creating the financial hardship, the fact
that all other available resources are insufficient to meet
the need, and any other information that the Plan
Administrator deems necessary to evaluate whether a
financial hardship exists.
d) A director may make an early withdrawal of monies
deferred under the Plan at anytime, subject to the following
penalties:
forfeiture of 10% of the amount of the early withdrawal; and
suspension of eligibility to make further deferral elections
for a period of five years.
Notwithstanding the foregoing, a director may not obtain a
distribution under this Subsection as to amounts paid into
the director's Bausch & Lomb Common Stock account subsequent
to April 30, 1991 (including earnings credited to those
amounts).
e) In the event of a director's death before he or she has
received all of the deferred payments to which he or she is
entitled, payments will be made, according to the director's
election pursuant to Section 6 hereof, to the director's
estate or beneficiary either (a) continuing in the same
manner as designated with respect to payments to the
director while living or (b) in a single lump sum payment
the value of which is determined as of the date immediately
following the director's death and paid on the first January
15 or July 15 following such valuation date (or as soon as
reasonably possible thereafter).
f) All payments made to a director shall be subject to all
taxes required to be withheld under applicable laws and
regulations of any governmental authorities.
g) If a director is terminated as a director of the
Company, the first day of February next following the date
of termination will be deemed to be the payment commencement
date for account balances of less than $3,500 and, payment
will be made to the director in a lump sum.
h) Upon a Change of Control (as defined below)
notwithstanding a director's payment commencement date with
respect to any compensation deferred hereunder or method of
payout with respect to any compensation deferred hereunder,
all amounts in a director's deferred compensation account
(including earnings credited thereto) shall be due and
payable to the director in a cash lump sum within 15 days
following the Change of Control; provided, however that
amounts paid into the director's Bausch & Lomb Common Stock
account during a Section 16 Period (including earnings
credited to those amounts) shall be due and payable only
upon termination of the director's status as a director
following a Change in Control or, if earlier, the payment
commencement date previously elected by the director. For
purposes of this Plan, Change of Control shall mean:
(a) The acquisition by any individual, entity or group
(within the meaning of Section 13(d)(3) or 14(d)(2) of the
Securities Exchange Act of 1934, as amended (the "Exchange
Act")) (a "Person") of beneficial ownership (within the
meaning of Rule 13d-3 promulgated under the Exchange Act) of
20% or more of either (i) the then outstanding shares of
common stock of the Company (the "Outstanding Company Common
Stock") or (ii) the combined voting power of the election of
directors (the "Outstanding Company Voting Securities");
provided, however, that the following acquisitions shall not
constitute a Change of Control: (i) any acquisition
directly from the Company (excluding an acquisition by
virtue of the exercise of a conversion privilege unless the
security being so converted was itself acquired directly
from the Company), (ii) any acquisition by the Company,
(iii) any acquisition by any employee benefit plan (or
related trust) sponsored or maintained by the Company or any
corporation controlled by the Company or (iv) any
acquisition by any corporation pursuant to a reorganization,
merger or consolidation, if, following such reorganization,
merger or consolidation, the conditions described in clauses
(i), (ii) and (iii) of subsection (c) of this Section 2 are
satisfied; or
(b) Individuals who, as of the date hereof, constitute the
Board (the "Incumbent Board") cease for any reason to
constitute at least a majority of the Board; provided,
however, that any individual becoming a director subsequent
to the date hereof whose election, or nomination for
election by the Company's shareholders, was approved by a
vote of at least a majority of the directors then comprising
the Incumbent Board shall be considered as though such
individual were a member of the Incumbent Board, but
excluding, for this purpose, any such individual whose
initial assumption of office occurs as a result of either an
actual or threatened election contest (as such terms are
used in Rule 14a-11 of Regulation 14A promulgated under the
Exchange Act) or other actual or threatened solicitation of
proxies or consents by or on behalf of a Person other than
the Board; or
(c) Approval by the shareholders of the Company of a
reorganization, merger, binding share exchange or
consolidation, in each case, unless, following such
reorganization, merger, binding share exchange or
consolidation, (i) more than 60% of, respectively, the then
outstanding shares of common stock of the corporation
resulting from such reorganization, merger, binding share
exchange or consolidation and the combined voting power of
the then outstanding voting securities of such corporation
entitled to vote generally in the election of directors is
then beneficially owned, directly or indirectly, by all or
substantially all of the individuals and entities who were
the beneficial owners, respectively, of the Outstanding
Company Common Stock and Outstanding Company Voting
Securities immediately prior to such reorganization, merger,
binding share exchange or consolidation in substantially the
same proportions as their ownership, immediately prior to
such reorganization, merger, binding share exchange or
consolidation, of the Outstanding Company Common Stock and
Outstanding Company Voting Securities, as the case may be,
(ii) no Person (excluding the Company, any employee benefit
plan (or related trust) of the Company or such corporation
resulting from such reorganization, merger, binding share
exchange or consolidation and any Person beneficially
owning, immediately prior to such reorganization, merger,
binding share exchange or consolidation, directly or
indirectly, 20% or more of the Outstanding Company Common
Stock or Outstanding Voting Securities, as the case may be)
beneficially owns, directly or indirectly, 20% or more of,
respectively, the then outstanding shares of common stock of
the corporation resulting from such reorganization, merger,
binding share exchange or consolidation or the combined
voting power of the then outstanding voting securities of
such corporation entitled to vote generally in the election
of directors and (iii) at least a majority of the members of
the board of directors of the corporation resulting from
such reorganization, merger, binding share exchange or
consolidation were members of the Incumbent Board at the
time of the execution of the initial agreement providing for
such reorganization, merger, binding share exchange or
consolidation; or
(d) Approval by the shareholders of the Company of (i) a
complete liquidation or dissolution of the Company or (ii)
the sale or other disposition of all or substantially all of
the assets of the Company, other than to a corporation, with
respect to which following such sale or other disposition,
(A) more than 60% of, respectively, the then outstanding
shares of common stock of such corporation and the combined
voting power of the then outstanding voting securities of
such corporation entitled to vote generally in the election
of directors is then beneficially owned, directly or
indirectly, by all or substantially all of the individuals
and entities who were the beneficial owners, respectively,
of the Outstanding Company Common Stock and Outstanding
Company Voting Securities immediately prior to such sale or
other disposition in substantially the same proportion as
their ownership, immediately prior to such sale or other
disposition, of the Outstanding Company Common Stock and
Outstanding Company Voting Securities, as the case may be,
(B) no Person (excluding the Company and any employee
benefit plan (or related trust) of the Company or such
corporation and any Person beneficially owning, immediately
prior to such sale or other disposition, directly or
indirectly, 20% or more of the Outstanding Company Common
Stock or Outstanding Company Voting Securities, as the case
may be) beneficially owns, directly or indirectly, 20% or
more of, respectively, the then outstanding shares of common
stock of such corporation and the combined voting power of
the then outstanding voting securities of such corporation
entitled to vote generally in the election of directors and
(C) at least a majority of the members of the board of
directors of such corporation were members of the Incumbent
Board at the time of the execution of the initial agreement
or action of the Board providing for such sale or other
disposition of assets of the Company.
9. Administration
The Treasurer of the Company, as the designee of the
Committee on Management of the Board of Directors, shall be
the Plan Administrator and has the authority to control and
manage the operation and administration of the Plan. The
Investment Committee shall be the Investment Committee of
Bausch & Lomb Incorporated.
10. Assignability
No right to receive payments under the Plan is transferable
or assignable by a director except by will or by the laws of
descent and distribution.
11. Business Days
In the event any date specified falls on a Saturday, Sunday,
or holiday, such date will be deemed to refer to the next
business day thereafter.
12. Amendment
The Plan may at any time or from time to time be amended,
modified, or terminated by the Board of Directors or the
Committee on Management of the Board of Directors of the
Company. No such amendment, modification, or termination
will, without the consent of the director, adversely affect
the director's accruals in his or her deferred compensation
account
BAUSCH & LOMB INCORPORATED
By:____________________________
Date:__________________________
Exhibit (10)-cc
As restated by the Committee on Management
of the Board of Directors
December 9, 1996
EXECUTIVE DEFERRED COMPENSATION PLAN
Introduction
The Executive Deferred Compensation Plan (the "Plan") provides
the opportunity for executives of Bausch & Lomb Incorporated (the
"Company") to defer all or part of their compensation as
follows:
Payments under the Executive Incentive Compensation Program
("EICP");
b) Base salary and;
c) After deferrals to the Company's Savings Plus Plan exceed the
indexed cap on contributions to the Savings Plus Plan under
Section 401(k) of the Internal Revenue Code (the "Savings Plus
Plan Cap"), salary may be deferred to the Plan and the Company
will make matching contributions to the extent it would have made
such contributions under the Savings Plus Plan, but for the
Savings Plus Plan Cap.
Restatement, Effective Date
This Plan is a restatement of the Company's Executive Deferred
Compensation Plan dated February 25, 1992, as amended (the "1992
Plan"). The effective date of the Plan is January 1, 1997 (the
"Effective Date"). It covers eligible compensation earned
after the Effective Date and deferred hereunder as well as all
monies previously deferred under the 1992 Plan.
Eligibility
Commencing on the Effective Date, the Plan is available to all
employees in the senior executive and executive bands and
officers of the Company. Compensation deferred under the 1992
Plan by employees who are no longer eligible to defer
compensation under this Plan will nonetheless be subject to the
terms of this Plan; provided that no modification of the 1992
Plan effected by this Plan shall adversely affect such employees'
deferrals under the 1992 Plan.
Amount of Deferral
An eligible employee may become a participant in the Plan by
electing to defer all or part of the compensation referred to in
Section 1.
With respect to compensation otherwise due under EICP, a minimum
amount of $5,000 per year must be deferred. For deferrals of
compensation otherwise payable as base salary, a minimum amount
of $500 per month must be deferred. For deferrals of salary to
the Plan in excess of the Savings Plus Plan Cap, there is no
minimum amount of deferral. Prior to any deferral of compensation
all applicable FICA and Medicare taxes will be withheld
Time of Deferral Election
A participant's election to defer compensation must be made by
written notice to the Plan Administrator on behalf of the Company
before the compensation is earned.
In the case of compensation payable under EICP, the deferral
election must be made by December 31 prior to the year during
which the incentive payment will be earned. For new employees,
the election to defer EICP compensation to be earned in the year
of hire, but otherwise payable in the following year, must be
made within thirty (30) days of the date of hire.
To defer base salary or salary in excess of the Savings Plus Cap,
the deferral election must be made at least 15 days prior to the
first day of the month for which the participant wishes to defer
salary.
d) A deferral election will continue in effect only for
compensation earned in the current year and must be renewed
annually for compensation earned in each subsequent year.
Deferral Election
To defer compensation under the Plan, a participant must give
written notice to the Plan Administrator. This notice must
include (1) the amount or percentage of compensation to be
deferred; (2) selection of investment account(s) (as described in
Section 7 hereof); (3) the payment commencement date, (i.e.
retirement or date certain); (4) the method of payment desired
(i.e. annual, lump sum) and, if annual, the number of years of
installment payments; and (5) the designation of payment to the
participant's estate or beneficiary in the event of the
participant's death. The Company will provide notice forms for
deferral elections (see Exhibits I and II).
b) If a participant names someone other than his or her spouse
as a beneficiary in the event of participant's death, a spousal
consent form must be signed by that participant's spouse and
returned to the Company.
c) EICP deferrals and deferrals in excess of the Savings Plus
Plan Cap must be for at least one year. All base salary
deferrals must be for at least six months.
d) For all compensation deferred after the Effective Date of
this Plan, a participant may elect only two payment options, each
consisting of a payment commencement date and a method of
payment.
e) If a participant elects to receive his or her deferred
compensation in installments, the installment payments will be
calculated in the following manner: the participant's account
balance at the payment commencement date will be multiplied by a
fraction, the numerator of which is 1, and the denominator of
which is the number of remaining installment periods.
f) Retirement, for purposes of the Plan shall mean the date on
which the participant is both (i) at least age 55 and (ii) no
longer employed by the Company.
Deferred Compensation Investment Accounts
a) Monies deferred under the Plan will be transferred to a
trustee subject to a "Rabbi" Trust Agreement between the
Company and a trustee designated by the Plan Administrator (the
"Trust").
b) The rate of return on deferred compensation is determined by
the performance of one or more deferred compensation investment
accounts selected by the participant pursuant to the Plan.
Deferred compensation investment accounts available under the
Plan are determined by the Company's Investment Committee
("Investment Account(s)"). Information on each Investment
Account currently available under the Plan may be obtained from
the Plan Administrator. The Investment Committee may, from time
to time, in its discretion, deem it necessary or advisable to add
or delete Investment Accounts or substitute new Investment
Accounts for existing Investment Accounts. In such an event, the
Plan Administrator will provide participants with reasonable
notice of the effective date of the change to permit participants
to change their future investment elections.
c) All investments in Investment Accounts under the Plan are
hypothetical. At the time of each deferral of compensation into
the Plan, participant will be credited with an imputed number of
shares for the Investment Account(s) selected by the participant.
Thereafter, the value of a participant's Investment Accounts will
fluctuate in accordance with the actual performance of the
Investment Accounts. Dividends on the imputed shares also will
be credited to the participant's Investment Account.
d) Earnings/losses on a participant's Investment Account will be
credited effective on the last business day of each month. All
such earnings are net of expenses. Quarterly statements will be
provided by the Plan Administrator.
e) The deferral of compensation on a current basis will be
allocated into Investment Account(s) pursuant to the deferral
election determined by the participant. The allocation must be
in whole percentages; (i.e. 100% into one Investment Account, a
60-20-20 split among three Investment Accounts, etc.).
f) By written notice to the Plan Administrator, a participant
may elect to reallocate amounts already in his/her Investment
Accounts among the various Investment Account(s) on a monthly
basis; except that a reallocation into or out of the Bausch &
Lomb Common Stock Investment Account by officers of the Company
subject to Section 15 of the Securities Exchange Act of 1934
(i.e. Section 16(b) regulations) may not be made more than once
in any six (6) month period.
8. Payment of Deferred Compensation
a) A participant's right to payment of deferred compensation
under the Plan is a contractual obligation of the Company to the
participant, and his or her right to such monies shall be an
unsecured claim against the general assets of the Company.
However, the Company has established the Trust as an irrevocable
rabbi trust for participants for the purpose of holding assets
used to pay deferred compensation required by this Plan. The
Company shall make periodic contributions to the Trust as may be
required to fund amounts payable under the Plan. The Trust
provides a participant with assurance that deferred monies will
be paid to the participant in accordance with the Plan, except in
the event of the Company's bankruptcy or insolvency. Amounts
previously deferred have also been transferred to the Trust for
the benefit of participants. Notwithstanding the establishment
of the Trust, the Company remains ultimately responsible to pay
deferred compensation to each participant. This obligation shall
be met from the general assets of the Company if the Trust has
insufficient funds to pay benefits.
b) Payments of deferred compensation to a participant shall be
pursuant to the participant's deferral election notice given
pursuant to Section 6 hereof. Except as provided in Subsections
c) and d) below, a participant may not change the payment
commencement date or method of payment for monies already in his
or her Investment Account(s). However, a participant may choose
a different payment commencement date and/or method payout for
future deferrals subject to Section 6 above.
If, in the discretion of the Plan Administrator, a participant
has a need for funds due to a financial emergency beyond the
control of the participant, a payment may be made to the
participant from the funds in his or her account at a date
earlier than the payment commencement date chosen by the
participant at the time of deferral. A distribution based upon
financial hardship may not exceed the amount required to meet the
immediate financial need created by the hardship less the amount
reasonably available to the participant from other sources.
Notwithstanding the foregoing, a participant may not, during a
Section 16 Period, obtain a distribution based on financial
hardship as to amounts paid into the participant's Bausch & Lomb
Common Stock Investment Account (including earnings credited to
those amounts). As used herein, the term "Section 16 Period"
shall mean any period subsequent to the Effective Date, during
which the participant was subject to Section 15 of the Securities
Exchange Act of 1934.
A participant requesting a hardship distribution must supply the
Plan Administrator with a statement indicating the nature of the
need creating the financial hardship, the fact that all other
available resources are insufficient to meet the need, and any
other information that the Plan Administrator deems necessary to
evaluate whether a financial hardship exists.
d) A participant may make an early withdrawal of monies
deferred under the Plan at anytime, subject to the following
penalties:
forfeiture of 10% of the amount of the early withdrawal; and
suspension of eligibility to make further deferral elections for
a period of five years.
Notwithstanding the foregoing, a participant may not, during a
Section 16 Period, obtain a distribution under this Subsection as
to amounts paid into the participant's Bausch & Lomb Common Stock
Investment Account (including earnings credited to those
amounts).
e) In the event of a participant's death before he or she has
received all of the deferred compensation payments to which he or
she is entitled, payments will be made, according to the
participant's deferral election pursuant to Section 6 hereof, to
the participant's estate or beneficiary either (a) continuing in
the same manner as designated with respect to payments to the
participant while living or (b) in a single lump sum payment the
value of which is determined as of the date immediately following
the participant's death and paid on the first January 15 or July
15 following such valuation date (or as soon as reasonably
possible thereafter).
f) All payments made to participants under the Plan shall be
subject to all taxes required to be withheld under applicable
laws and regulations of any governmental authorities.
g) Upon termination of a participant as an employee of the
Company, the first day of February next following the date of
termination will be deemed to be the payment commencement date
for account balances of less than $3,500 and, such payment will
be made to the participant in a lump sum.
h) If the Company determines in good faith prior to a Change in
Control that there is a reasonable likelihood that any
compensation paid to a participant for a taxable year of the
Company would not be deductible by the Company solely by reason
of the limitation under Internal Revenue Code Section 162(m),
then to the extent deemed necessary by the Company to ensure that
the entire amount of any distribution to the participant pursuant
to this Plan prior to the Change in Control is deductible, the
Company may defer all or any portion of such distribution under
this Plan.
i) Upon a Change of Control (as defined below) notwithstanding a
participant's payment commencement date with respect to any
compensation deferred hereunder or method of payout with respect
to any compensation deferred hereunder, all amounts in a
participant's deferred compensation account (including earnings
credited thereto) shall be due and payable to the participant in
a cash lump sum within 15 days following the Change of Control;
provided, however that amounts paid into the participant's Bausch
& Lomb Common Stock Investment Account during a Section 16 Period
(including earnings credited to those amounts) shall be due and
payable only upon termination of the participant's employment
following a Change in Control or, if earlier, the payment
commencement date previously elected by the participant. For
purposes of this Plan, Change of Control shall mean:
(a) The acquisition by any individual, entity or group (within
the meaning of Section 13(d)(3) or 14(d)(2) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act")) (a
"Person") of beneficial ownership (within the meaning of Rule
13d-3 promulgated under the Exchange Act) of 20% or more of
either (i) the then outstanding shares of common stock of the
Company (the "Outstanding Company Common Stock") or (ii) the
combined voting power of the election of directors (the
"Outstanding Company Voting Securities"); provided, however, that
the following acquisitions shall not constitute a Change of
Control: (i) any acquisition directly from the Company
(excluding an acquisition by virtue of the exercise of a
conversion privilege unless the security being so converted was
itself acquired directly from the Company), (ii) any acquisition
by the Company, (iii) any acquisition by any employee benefit
plan (or related trust) sponsored or maintained by the Company or
any corporation controlled by the Company or (iv) any acquisition
by any corporation pursuant to a reorganization, merger or
consolidation, if, following such reorganization, merger or
consolidation, the conditions described in clauses (i), (ii) and
(iii) of subsection (c) of this Section 2 are satisfied; or
(b) Individuals who, as of the date hereof, constitute the
Board (the "Incumbent Board") cease for any reason to constitute
at least a majority of the Board; provided, however, that any
individual becoming a director subsequent to the date hereof
whose election, or nomination for election by the Company's
shareholders, was approved by a vote of at least a majority of
the directors then comprising the Incumbent Board shall be
considered as though such individual were a member of the
Incumbent Board, but excluding, for this purpose, any such
individual whose initial assumption of office occurs as a result
of either an actual or threatened election contest (as such terms
are used in Rule 14a-11 of Regulation 14A promulgated under the
Exchange Act) or other actual or threatened solicitation of
proxies or consents by or on behalf of a Person other than the
Board; or
(c) Approval by the shareholders of the Company of a
reorganization, merger, binding share exchange or consolidation,
in each case, unless, following such reorganization, merger,
binding share exchange or consolidation, (i) more than 60% of,
respectively, the then outstanding shares of common stock of the
corporation resulting from such reorganization, merger, binding
share exchange or consolidation and the combined voting power of
the then outstanding voting securities of such corporation
entitled to vote generally in the election of directors is then
beneficially owned, directly or indirectly, by all or
substantially all of the individuals and entities who were the
beneficial owners, respectively, of the Outstanding Company
Common Stock and Outstanding Company Voting Securities
immediately prior to such reorganization, merger, binding share
exchange or consolidation in substantially the same proportions
as their ownership, immediately prior to such reorganization,
merger, binding share exchange or consolidation, of the
Outstanding Company Common Stock and Outstanding Company Voting
Securities, as the case may be, (ii) no Person (excluding the
Company, any employee benefit plan (or related trust) of the
Company or such corporation resulting from such reorganization,
merger, binding share exchange or consolidation and any Person
beneficially owning, immediately prior to such reorganization,
merger, binding share exchange or consolidation, directly or
indirectly, 20% or more of the Outstanding Company Common Stock
or Outstanding Voting Securities, as the case may be)
beneficially owns, directly or indirectly, 20% or more of,
respectively, the then outstanding shares of common stock of the
corporation resulting from such reorganization, merger, binding
share exchange or consolidation or the combined voting power of
the then outstanding voting securities of such corporation
entitled to vote generally in the election of directors and (iii)
at least a majority of the members of the board of directors of
the corporation resulting from such reorganization, merger,
binding share exchange or consolidation were members of the
Incumbent Board at the time of the execution of the initial
agreement providing for such reorganization, merger, binding
share exchange or consolidation; or
(d) Approval by the shareholders of the Company of (i) a
complete liquidation or dissolution of the Company or (ii) the
sale or other disposition of all or substantially all of the
assets of the Company, other than to a corporation, with respect
to which following such sale or other disposition, (A) more than
60% of, respectively, the then outstanding shares of common stock
of such corporation and the combined voting power of the then
outstanding voting securities of such corporation entitled to
vote generally in the election of directors is then beneficially
owned, directly or indirectly, by all or substantially all of the
individuals and entities who were the beneficial owners,
respectively, of the Outstanding Company Common Stock and
Outstanding Company Voting Securities immediately prior to such
sale or other disposition in substantially the same proportion as
their ownership, immediately prior to such sale or other
disposition, of the Outstanding Company Common Stock and
Outstanding Company Voting Securities, as the case may be, (B) no
Person (excluding the Company and any employee benefit plan (or
related trust) of the Company or such corporation and any Person
beneficially owning, immediately prior to such sale or other
disposition, directly or indirectly, 20% or more of the
Outstanding Company Common Stock or Outstanding Company Voting
Securities, as the case may be) beneficially owns, directly or
indirectly, 20% or more of, respectively, the then outstanding
shares of common stock of such corporation and the combined
voting power of the then outstanding voting securities of such
corporation entitled to vote generally in the election of
directors and (C) at least a majority of the members of the board
of directors of such corporation were members of the Incumbent
Board at the time of the execution of the initial agreement or
action of the Board providing for such sale or other disposition
of assets of the Company.
9. Administration
The Treasurer of the Company, as the designee of the Committee on
Management of the Board of Directors, shall be the Plan
Administrator and has the authority to control and manage the
operation and administration of the Plan. The Investment
Committee shall be the Investment Committee of Bausch & Lomb
Incorporated.
10. Assignability
No right to receive payments under the Plan is transferable or
assignable by a participant except by will or by the laws of
descent and distribution.
11. Business Days
In the event any date specified falls on a Saturday, Sunday, or
holiday, such date will be deemed to refer to the next business
day thereafter.
12. Amendment
The Plan may at any time or from time to time be amended,
modified, or terminated by the Board of Directors or the
Committee on Management of the Board of Directors of the Company.
No such amendment, modification, or termination will, without the
consent of the director, adversely affect the director's accruals
in his or her deferred compensation account
BAUSCH & LOMB INCORPORATED
BY:____________________________
DATE:__________________________
Exhibit (10)-dd
BAUSCH & LOMB INCORPORATED
ANNUAL RETAINER STOCK PLAN FOR
NON-EMPLOYEE DIRECTORS
1. INTRODUCTION
This plan shall be known as the "Bausch & Lomb Annual
Retainer Stock Plan For Non-Employee Directors" and is
hereinafter referred to as the "Plan". The purposes of the
Plan are to enable Bausch & Lomb Incorporated, a New York
corporation (the "Company"), to promote the interests of the
Company and its shareholders by attracting and retaining
non-employee Directors capable of furthering the future
success of the Company and by aligning their economic
interests more closely with those of the Company's
shareholders, by paying half of what heretofore had been
their annual cash retainer in the form of shares of the
Company's common stock, par value $.40 per share (the
"Common Stock").
2. DEFINITIONS
The following terms shall have the meanings set forth below:
"Annual Meeting" means an annual meeting of the shareholders
of the Company.
The "Annual Cash Retainer Amount" for a Participant means
the dollar amount of the annual cash retainer payable to the
Participant for service on the Board for the Plan Year or
the portion of the Plan Year during which he or she is a
Participant; provided that, for these purposes only, such
dollar amount shall not be increased more than once every
three years. The Annual Cash Retainer Amount for the first
Plan Year shall be $15,000, which is one-half the retainer
amount that would be paid in cash to Directors for service
on the Board during the year commencing with the Annual
Meeting in 1996, absent the Plan.
The "Board" means the Board of Directors of the Company.
"Change of Control" has the meaning set forth in Section
12(d).
The "Code" means the Internal Revenue Code of 1986, as
amended, and the rules and regulations thereunder.
References to any provision of the Code or rule or
regulation thereunder shall be deemed to include any amended
or successor provision, rule or regulation.
The "Committee" means the committee that administers the
Plan, as more fully defined in Section 13.
"Common Stock" has the meaning set forth in Section 1.
The "Company" has the meaning set forth in Section 1.
"Deferral Election" has the meaning set forth in Section 6.
"Deferred Stock Account" means a bookkeeping account
maintained by the Company for a Participant representing the
Participant's interest in the shares credited to such
Deferred Stock Account pursuant to Section 7.
"Delivery Date" has the meaning set forth in Section 6.
"Director" means an individual who is a member of the Board
of Directors of the Company.
The "Dividend Equivalent" for a given dividend or other
distribution means a number of shares of Common Stock having
a Fair Market Value, as of the record date for such dividend
or distribution, equal to the amount of cash, plus the fair
market value on the date of distribution of any property,
that is distributed with respect to one share of Common
Stock pursuant to such dividend or distribution; such fair
market value to be determined by the Committee in good
faith.
The "Effective Date" has the meaning set forth in Section 3.
The "Exchange Act" has the meaning set forth in Section
13(b).
The "Fair Market Value" means the mean between the highest
and lowest reported sales prices of the Common Stock on the
NYSE Composite Tape or, if not listed on such exchange, on
any other national securities exchange on which the Common
Stock is listed or on NASDAQ on the last trading day prior
to the date with respect to which the Fair Market Value is
to be determined.
"Participant" has the meaning set forth in Section 4.
"Payment Time" means the time when a Stock Retainer is
payable to a Participant pursuant to Section 5 (without
regard to the effect of any Deferral Election).
"Plan Year" means the period from the date of an Annual
Meeting through the day immediately preceding the date of
the next Annual Meeting.
"Stock Retainer" has the meaning set forth in Section 5.
"Third Anniversary" has the meaning set forth in Section 6.
The "Valuation Date" for a Stock Retainer means the date of
the Annual Meeting that begins the Plan Year with respect to
which such Stock Retainer is payable; provided that, if a
person becomes a Participant on a day other than the date of
an Annual Meeting, that day shall be the "Valuation Date"
for such Participant for the Plan Year in which that day
occurs.
3. EFFECTIVE DATE OF THE PLAN
The Plan shall be effective as of the date of the Annual
Meeting that occurs in 1996 (the "Effective Date"), provided
that it is approved by the shareholders at such Annual
Meeting.
4. ELIGIBILITY
Each individual who is a Director on the Effective Date and
each individual who becomes a Director thereafter during the
term of the Plan, shall be a participant ("Participant") in
the Plan, in each case during such period as such individual
remains a Director and is not an employee of the Company or
any of its subsidiaries. Each credit of shares of Common
Stock pursuant to the Plan shall be evidenced by a written
agreement duly executed and delivered by or on behalf of the
Company and a Participant, if such an agreement is required
by the Company to assure compliance with all applicable laws
and regulations.
5. GRANTS OF SHARES
Commencing on the Effective Date, one-half of the amount
that had prior to the Effective Date been paid in cash to
each Participant for service on the Board shall instead be
payable in shares of Common Stock (the "Stock Retainer")
pursuant to this Plan. The number of shares of Common Stock
paid to each Participant as the Stock Retainer for a given
Plan Year shall be determined by dividing (i) the Annual
Cash Retainer Amount for such Participant for such Plan Year
by (ii) the Fair Market Value on the Valuation Date, and
then rounding to the nearest whole share. The Stock
Retainer shall be payable immediately following the
Company's Annual Meeting, provided that the Stock Retainer
payable to any person who becomes a Participant following
the Company's Annual Meeting, whether by appointment or
election as a Director or by change in status from a full-
time employee, shall be payable on the date such person
first becomes a Participant. Shares of Common Stock
credited to a Deferred Stock Account pursuant to Section 7
shall be delivered pursuant to Section 8 hereof.
6. DEFERRAL ELECTION
From and after the Effective Date, a Participant may make an
election (a "Deferral Election") on an annual basis to defer
delivery of the Stock Retainer for the subsequent Plan Year,
specifying which one of the following ways the Stock
Retainer is to be delivered: (a) on the date which is three
years after the date of the Annual Meeting for which it was
originally payable (the "Third Anniversary"), (b) on the
date upon which the Participant ceases to be a Director for
any reason (the "Departure Date") or (c) in five equal
annual installments commencing on the Departure Date (the
"Third Anniversary" and the "Departure Date" each being
referred to herein as a "Delivery Date"). Such Deferral
Election shall remain in effect for each subsequent Plan
Year unless changed, provided that, any Deferral Election
with respect to a particular Plan Year may not be changed
less than six months prior to the beginning of such Plan
Year and provided, further, that no more than one Deferral
Election or change thereof may be made in any Plan Year.
Any Deferral Election and any change or revocation thereof
shall be made by delivering written notice thereof to the
Committee no later than six months prior to the beginning of
the Plan Year in which it is to be effected; provided that,
with respect to the Plan Year beginning on the Effective
Date, any Deferral Election or revocation thereof must be
delivered no later than the close of business on the 30th
day prior to the 1996 Annual Meeting.
7. DEFERRED STOCK ACCOUNTS
The Company shall maintain a Deferred Stock Account for each
Participant who makes a Deferral Election to which shall be
credited, as of the applicable Payment Time, the number of
shares of Common Stock payable pursuant to the Stock
Retainer to which the Deferral Election relates. So long as
any amounts in such Deferred Stock Account have not been
delivered to the Participant under Section 8, each Deferred
Stock Account shall be credited as of the payment date for
any dividend paid or other distribution made with respect to
the Common Stock, with a number of shares of Common Stock
equal to (a) the number of shares of Common Stock shown in
such Deferred Stock Account on the record date for such
dividend or distribution multiplied by (b) the Dividend
Equivalent for such dividend or distribution.
8. DELIVERY OF SHARES
(a) The shares of Common Stock in a Participant's Deferred
Stock Account with respect to any Stock Retainer for which a
Deferral Election has been made (together with dividends
attributable to such shares credited to such Deferred Stock
Account) shall be delivered in accordance with this Section
8 as soon as practicable after the applicable Delivery Date.
Except with respect to a Deferral Election pursuant to
Section 6(c), such shares shall be delivered at one time;
provided that, if the number of shares so delivered includes
a fractional share, such number shall be rounded to the
nearest whole number of shares. If the Participant has in
effect a Deferral Election pursuant to Section 6(c), then
such shares shall be delivered in five equal annual
installments (together with dividends attributable to such
shares credited to such Deferred Stock Account), with the
first such installment being delivered on the first
anniversary of the Delivery Date; provided that, if in order
to equalize such installments, fractional shares would have
to be delivered, such installments shall be adjusted by
rounding to the nearest whole share. If any such shares are
to be delivered after the Participant has died or become
legally incompetent, they shall be delivered to the
Participant's estate or legal guardian, as the case may be,
in accordance with the foregoing; provided that, if the
Participant dies with a Deferral Election pursuant to
Section 6(c) in effect, the Committee shall deliver all
remaining undelivered shares to the Participant's estate
immediately. References to a Participant in this Plan shall
be deemed to refer to the Participant's estate or legal
guardian, where appropriate.
(b) The Company may, but shall not be required to, create a
grantor trust or utilize an existing grantor trust (in
either case, the "Trust") to assist it in accumulating the
shares of Common Stock needed to fulfill its obligations
under this Section 8. However, Participants shall have no
beneficial or other interest in the Trust and the assets
thereof, and their rights under the Plan shall be as general
creditors of the Company, unaffected by the existence or
nonexistence of the Trust, except that deliveries of Stock
Retainers to Participants from the Trust shall, to the
extent thereof, be treated as satisfying the Company's
obligations under this Section 8.
9. SHARE CERTIFICATES; VOTING AND OTHER RIGHTS
The certificates for shares delivered to a Participant
pursuant to Section 8 above shall be issued in the name of
the Participant, and from and after the date of such
issuance the Participant shall be entitled to all rights of
a shareholder with respect to Common Stock for all such
shares issued in his or her name, including the right to
vote the shares, and the Participant shall receive all
dividends and other distributions paid or made with respect
thereto.
10. GENERAL RESTRICTIONS
(a) Notwithstanding any other provision of the Plan or
agreements made pursuant thereto, the Company shall not be
required to issue or deliver any certificate or certificates
for shares of Common Stock under the Plan prior to
fulfillment of all of the following conditions:
(i) Listing or approval for listing upon official notice of
issuance of such shares on the New York Stock Exchange,
Inc., or such other securities exchange as may at the time
be a market for the Common Stock;
(ii) Any registration or other qualification of such shares
under any state or federal law or regulation, or the
maintaining in effect of any such registration or other
qualification which the Committee shall, upon the advice of
counsel, deem necessary or advisable; and
(iii) Obtaining any other consent, approval, or permit
from any state or federal governmental agency which the
Committee shall, after receiving the advice of counsel,
determine to be necessary or advisable.
(b) Nothing contained in the Plan shall prevent the Company
from adopting other or additional compensation arrangements
for the Participants.
(c) No Common Stock received by a Participant pursuant to
the Plan may be sold until at least six months after the
Payment Date for such Common Stock.
11. SHARES AVAILABLE
Subject to Section 12 below, the maximum number of shares of
Common Stock which may in the aggregate be paid as Stock
Retainers pursuant to the Plan is 100,000. Shares of Common
Stock issuable under the Plan may be taken from treasury
shares of the Company or purchased on the open market.
12. ADJUSTMENTS; CHANGE OF CONTROL
(a) In the event that there is, at any time after the Board
adopts the Plan, any change in corporate capitalization,
such as a stock split, combination of shares, exchange of
shares, warrants or rights offering to purchase Common Stock
at a price below its fair market value, reclassification, or
recapitalization, or a corporate transaction, such as any
merger, consolidation, separation, including a spin-off, or
other extraordinary distribution of stock or property of the
Company, any reorganization (whether or not such
reorganization comes within the definition of such term in
Section 368 of the Code) or any partial or complete
liquidation of the Company (each of the foregoing a
"Transaction"), in each case other than any such Transaction
which constitutes a Change of Control (as defined below),
(i) the Deferred Stock Accounts shall be credited with the
amount and kind of shares or other property which would have
been received by a holder of the number of shares of Common
Stock held in such Deferred Stock Account had such shares of
Common Stock been outstanding as of the effectiveness of any
such Transaction, (ii) the number and kind of shares or
other property subject to the Plan shall likewise be
appropriately adjusted to reflect the effectiveness of any
such Transaction and (iii) the Committee shall appropriately
adjust any other relevant provisions of the Plan and any
such modification by the Committee shall be binding and
conclusive on all persons.
(b) If the shares of Common Stock credited to the Deferred
Stock Accounts are converted pursuant to Section 12(a) into
another form of property, references in the Plan to the
Common Stock shall be deemed, where appropriate, to refer to
such other form of property, with such other modifications
as may be required for the Plan to operate in accordance
with its purposes. Without limiting the generality of the
foregoing, references to delivery of certificates for shares
of Common Stock shall be deemed to refer to delivery of cash
and the incidents of ownership of any other property held in
the Deferred Stock Accounts.
(c) In lieu of the adjustment contemplated by Section
12(a), in the event of a Change of Control, the following
shall occur on the date of the Change of Control: (i) the
shares of Common Stock held in each Participant's Deferred
Stock Account shall be deemed to be issued and outstanding
as of the Change of Control; (ii) the Company shall
forthwith deliver to each Participant who has a Deferred
Stock Account all of the shares of Common Stock or any other
property held in such Participant's Deferred Stock Account;
and (iii) the Plan shall be terminated.
(d) For purposes of this Plan, Change of Control shall mean
any of the following events:
(i) The acquisition by any individual, entity or group
(within the meaning of Section 13(d)(3) or 14(d)(2) of the
Securities Exchange Act of 1934, as amended (the "Exchange
Act")) (a "Person") of beneficial ownership (within the
meaning of Rule 13d-3 promulgated under the Exchange Act) of
20% or more of either (a) the then outstanding shares of
common stock of the Company (the "Outstanding Company Common
Stock") or (b) the combined voting power of the then
outstanding voting securities of the Company entitled to
vote generally in the election of directors (the
"Outstanding Company Voting Securities"); provided, however,
that the following acquisitions shall not constitute a
Change of Control: (a) any acquisition directly from the
Company (excluding an acquisition by virtue of the exercise
of a conversion privilege unless the security being so
converted was itself acquired directly from the Company),
(b) any acquisition by the Company, (c) any acquisition by
any employee benefit plan (or related trust) sponsored or
maintained by the Company or any corporation controlled by
the Company or (d) any acquisition by any corporation
pursuant to a reorganization, merger or consolidation, if,
following such reorganization, merger or consolidation, the
conditions described in clauses (a), (b) and (c) of
paragraph (iii) of this Section 12(d) are satisfied; or
(ii) Individuals who, as of the date hereof, constitute the
Board of Directors of the Company (the "Board" and, as of
the date hereof, the "Incumbent Board") cease for any reason
to constitute at least a majority of the Board; provided,
however, that any individual becoming a director subsequent
to the date hereof whose election, or nomination for
election by the Company's shareholders, was approved by a
vote of at least a majority of the directors then comprising
the Incumbent Board shall be considered as though such
individual were a member of the Incumbent Board, but
excluding, for this purpose, any such individual whose
initial assumption of office occurs as a result of either an
actual or threatened election contest (as such terms are
used in Rule 14a-11 of Regulation 14A promulgated under the
Exchange Act) or other actual or threatened solicitation of
proxies or consents by or on behalf of a Person other than
the Board; or
(iii) Approval by the shareholders of the Company of a
reorganization, merger, binding share exchange or
consolidation, unless, following such reorganization,
merger, binding share exchange or consolidation (a) more
than 60% of, respectively, the then outstanding shares of
common stock of the corporation resulting from such
reorganization, merger, binding share exchange or
consolidation and the combined voting power of the then
outstanding voting securities of such corporation entitled
to vote generally in the election of directors is then
beneficially owned, directly or indirectly, by all or
substantially all of the individuals and entities who were
the beneficial owners, respectively, of the Outstanding
Company Common Stock and Outstanding Company Voting
Securities immediately prior to such reorganization, merger,
binding share exchange or consolidation in substantially the
same proportions as their ownership, immediately prior to
such reorganization, merger, binding share exchange or
consolidation, of the Outstanding Company Common Stock and
Outstanding Company Voting Securities, as the case may be,
(b) no Person (excluding the Company, any employee benefit
plan (or related trust) of the Company or such corporation
resulting from such reorganization, merger, binding share
exchange or consolidation and any Person beneficially
owning, immediately prior to such reorganization, merger,
binding share exchange or consolidation, directly or
indirectly, 20% or more of the Outstanding Company Common
Stock or Outstanding Company Voting Securities, as the case
may be) beneficially owns, directly or indirectly, 20% or
more of, respectively, the then outstanding shares of common
stock of the corporation resulting from such reorganization,
merger, binding share exchange or consolidation or the
combined voting power of the then outstanding voting
securities of such corporation entitled to vote generally in
the election of directors and (c) at least a majority of the
members of the board of directors of the corporation
resulting from such reorganization, merger, binding share
exchange or consolidation were members of the Incumbent
Board at the time of the execution of the initial agreement
providing for such reorganization, merger, binding share
exchange or consolidation; or
(iv) Approval by the shareholders of the Company of (a) a
complete liquidation or dissolution of the Company or (b)
the sale or other disposition of all or substantially all of
the assets of the Company, other than to a corporation, with
respect to which following such sale or other disposition,
(x) more than 60% of, respectively, the then outstanding
shares of common stock of such corporation and the combined
voting power of the then outstanding voting securities of
such corporation entitled to vote generally in the election
of directors is then beneficially owned, directly or
indirectly, by all or substantially all of the individuals
and entities who were the beneficial owners, respectively,
of the Outstanding Company Common Stock and Outstanding
Company Voting Securities immediately prior to such sale or
other disposition in substantially the same proportion as
their ownership, immediately prior to such sale or other
disposition, of the Outstanding Company Common Stock and
Outstanding Company Voting Securities, as the case may be,
(y) no Person (excluding the Company and any employee
benefit plan (or related trust) of the Company or such
corporation and any Person beneficially owning, immediately
prior to such sale or other disposition, directly or
indirectly, 20% or more of the Outstanding Company Common
Stock or Outstanding Company Voting Securities, as the case
may be) beneficially owns, directly or indirectly, 20% or
more of, respectively, the then outstanding shares of common
stock of such corporation and the combined voting power of
the then outstanding voting securities of such corporation
entitled to vote generally in the election of directors and
(z) at least a majority of the members of the board of
directors of such corporation were members of the Incumbent
Board at the time of the execution of the initial agreement
or action of the Board providing for such sale or other
disposition of assets of the Company.
13. ADMINISTRATION; AMENDMENT AND TERMINATION
(a) The Plan shall be administered by a committee
consisting of three members who shall be the Chief Executive
Officer, the Chief Financial Officer and the Senior Vice
President - Human Resources or such other senior executive
officers or other directors who are not Participants as may
be designated by the Chief Executive Officer (the
"Committee"), which shall have full authority to construe
and interpret the Plan, to establish, amend and rescind
rules and regulations relating to the Plan, and to take all
such actions and make all such determinations in connection
with the Plan as it may deem necessary or desirable.
(b) The Board may from time to time make such amendments to
the Plan, including to preserve or come within any exemption
from liability under Section 16(b) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), as it
may deem proper and in the best interest of the Company
without further approval of the Company's stockholders,
provided that, to the extent required under New York law or
to qualify transactions under the Plan for exemption under
Rule 16b-3 promulgated under the Exchange Act, no amendment
to the Plan shall be adopted without further approval of the
Company's stockholders and, provided, further, that if and
to the extent required for the Plan to comply with Rule 16b-
3 promulgated under the Exchange Act, no amendment to the
Plan shall be made more than once in any six-month period
that would change the amount, price or timing of the grants
of Common Stock hereunder other than to comport with changes
in the Internal Revenue Code of 1986, as amended, the
Employee Retirement Income Security Act of 1974, as amended,
or the regulations thereunder.
(c) The Board may terminate the Plan at any time by a vote
of a majority of the members thereof.
(d) Notwithstanding any other provision of the Plan,
neither the Board nor the Committee shall be authorized to
exercise any discretion with respect to the selection of
persons to receive shares or credits of shares of Common
Stock under the Plan or concerning the amount or timing of
such receipt or credits under the Plan, and no amendment or
termination of the Plan shall adversely affect the interest
of any Participant in shares previously credited to such
Participant's Deferred Stock Account without that
Participant's express written consent.
14. MISCELLANEOUS
(a) Nothing in the Plan shall be deemed to create any
obligation on the part of the Board to nominate any Director
for reelection by the Company's shareholders or to limit the
rights of the shareholders to remove any Director.
(b) The Company shall have the right to require, prior to
the issuance or delivery of any shares of Common Stock
pursuant to the Plan, that a Participant make arrangements
satisfactory to the Committee for the withholding of any
taxes required by law to be withheld with respect to the
issuance or delivery of such shares, including without
limitation by the withholding of shares that would otherwise
be so issued or delivered, by withholding from any other
payment due to the Participant, or by a cash payment to the
Company by the Participant.
15. GOVERNING LAW
The Plan and all actions taken thereunder shall be governed
by and construed in accordance with the laws of the State of
New York.
<TABLE>
Bausch & Lomb Incorporated
Exhibit 11
<CAPTION>
Statement Regarding Computation of Per Share Earnings
Dollars and Shares TWELVE MONTHS ENDED
in Thousands December 28, December 30,
Except Per Share Data 1996 1995
___________________________________________________________
<S> <C> <C>
Net earnings $83,052 $112,022
Actual Outstanding Common
and Class B shares at
beginning of year 56,941 58,992
Average Common and Class B
shares issued for stock
options and effects of
assumed exercise of Common
stock equivalents and
repurchase of Common shares (389) (1,140)
Average Common shares
outstanding 56,552 57,852
Net earnings per Common and
Common share equivalent $1.47 $1.94
</TABLE>
<TABLE>
Bausch & Lomb Incorporated
Exhibit 12
<CAPTION>
Statement Regarding Computation of
Ratio of Earnings to Fixed Charges
Dollar Amounts in December 28, December 30,
Thousands 1996 1995
__________________________________________________________
<S> <C> <C>
Earnings before provision
for income taxes and
minority interest $168,897 $211,847
Fixed charges 53,496 47,584
Capitalized interest,
net of current period
amortization 320 260
Total earnings as adjusted $222,713 $259,691
Fixed charges:
Interest (including
interest expense and
capitalized interest) $ 51,718 $ 45,765
Portion of rents
representative of
the interest factor 1,778 1,819
Total fixed charges $ 53,496 $ 47,584
Ratio of earnings to
fixed charges 4.16<F2> 5.46<F1>
<FN>
<F1> Excluding the effect of the gain on sale of Sports
Optics Division and restructuring charges recorded in 1995,
the ratio of earnings to fixed charges at December 30, 1995
would have been 5.26.
<F2> Excluding the effects of the restructuring charges
recorded in 1996 and the net gain on divestutures of the
oral care and dental implant businesses, the ratio of
earnings to fixed charges at December 28, 1996 would have
been 4.47.
</FN>
</TABLE>
Bausch & Lomb 1996 Annual Report
1996 Annual Report
----------------------------------------------------------------------
[GRAPHIC OF EYEBALL]
Bausch & Lomb:
A Future
Focused on
Eye Care
Bausch
& Lomb
<PAGE>
<TABLE>
<CAPTION>
Financial Highlights
-----------------------------------------------------------------------------------------------------------------------
For The Years Ended Percentage
December 31, 1994, December 30, 1995 and December 28, 1996 Change
Dollar Amounts In Millions-- Except Per Share Data 1994 1995 1996 From 1995
=================================================================================================================================
<S> <C> <C> <C> <C>
Business Results (including restructuring,
gain or loss on divestitures
and goodwill impairment charges)
Net sales $ 1,892.7 $ 1,932.9 $ 1,926.8 --
Operating earnings 119.8 210.6 190.8 (9%)
Net earnings 31.1 112.0 83.1 (26%)
Per Common share:
Net earnings 0.52 1.94 1.47 (24%)
Dividends declared 0.955 1.01 1.04 3%
Shareholders' equity at year end 15.50 16.32 15.92 (2%)
Return on average shareholders' equity 3.2% 11.9% 9.2%
Business Results (excluding restructuring,
gain or loss on divestitures
and goodwill impairment charges)
Net sales $ 1,892.7 $ 1,932.9 $ 1,926.8 --
Net sales from continuing product lines 1,692.2 1,836.5 1,877.1 2%
Operating earnings 194.8 237.3 206.1 (13%)
Operating earnings from continuing product lines 200.5 242.2 213.6 (12%)
Net earnings 106.1 108.6 91.7 (16%)
Per Common share:
Net earnings 1.78 1.88 1.62 (14%)
Return on average shareholders' equity 11.0% 11.7% 10.3%
Other Financial Data
Capital expenditures $ 84.8 $ 95.5 $ 130.3
Working capital 277.4 70.9 18.5
Average Common shares outstanding (000s) 59,739 57,852 56,552
High/low stock price $53 7/8-$30 5/8 $44 1/2-$30 7/8 $44 1/2-$32 1/2
=================================================================================================================================
</TABLE>
Contents
-------------------------------------------
Bausch & Lomb at a Glance 1
Letter to Shareholders 2
Strategic Discussion 9
Report of Management 21
Financial Review 22
Financial Statements 35
Notes to Financial Statements 38
Report of Independent Accountants 57
Selected Financial Data 58
Directors and Officers 59
Divisions and Subsidiaries 60
Corporate Information 62
<PAGE>
Bausch & Lomb At A Glance
----------------------------------------------------------------------
In 1996, Bausch & Lomb realigned its business segments for the purpose of
reporting its financial results. Our four new business segments, listed below,
reflect a strategic emphasis on eye care products.
[THE FOLLOWING TABLE WAS REPRESENTED BY A PIE CHART IN THE PRINTED MATERIAL.]
Eyeware 27%
Pharmaceuticals 10%
Vision Care 45%
Healthcare 18%
Eyewear
Our eyewear segment includes premium-priced sunglasses sold worldwide under such
well-known names as Ray-Ban, Revo, Arnette and Killer Loop. This segment also
includes optical thin film coating services.
[Graphic of Sunglasses]
Vision Care
This segment includes contact lenses, lens materials and lens care products.
Brand names include ReNu, Sensitive Eyes, SofLens66, Award and Boston. Vision
care products are marketed through eye care professionals, pharmaceutical
retailers and mass merchandisers.
[Graphic of Vision Care Products]
Pharmaceuticals
This business manufactures and sells generic and proprietary prescription
pharmaceuticals, mostly in the ophthalmic field, and over-the-counter (OTC)
medications. These products are marketed under such names as Bausch & Lomb and
Dr. Mann Pharma.
[Graphic of Pharmaceutical Products]
Healthcare
Included in this segment are businesses which provide purpose-bred laboratory
animals, biomedical products and services, skin care products and hearing aids.
These products are marketed under such established names as Miracle-Ear, Mirage,
Curel, Soft Sense and Charles River.
[Graphic of Skin Care Products]
page 1
------
<PAGE>
To Our Shareholders
----------------------------------------------------------------------
Our 1996 financial results were as disappointing to us as, we're sure, they were
for you. But an unsatisfactory bottom line, resulting primarily from continuing
challenges in our U.S. sunglass business, should not obscure the demonstrable
progress we made in 1996 toward establishing a new foundation for growth at
Bausch & Lomb.
We're in the process of transforming Bausch & Lomb from every
perspective--where we focus our corporate resources, how we manage our core
product categories, how we structure our businesses, and in terms of leadership.
We believe these efforts have positioned us to show real improvement in our
financial performance in 1997, and to begin to deliver the solid, predictable
results you're looking for over the longer term.
Our Vision: Bausch & Lomb will be Number One in the Eyes of the World
Our strategic transition is based on a clear, simple, universally understood
vision of what we want the Company to be. From a diversified "healthcare and
optics" company, we have evolved to a strong focus on the eye care field.
Considering our heritage, our technological advantages, the skills of our
people, our global infrastructure, our well-established brand names, our
customer base, and the breadth of our product lines, it is obvious that this is
where our main sources of competitive advantage are to be found.
Our mission articulates how we will achieve our vision: As a global eye
care company, we will help consumers see, look and feel better through
innovative technology and design. This mission underscores a new focus on the
consumer as the ultimate driver of each of our businesses, even as we recognize
the critical importance of our partnership with eye care professionals.
This vision and mission, along with a set of operating principles which
serve as a guide to managing our business effectively and successfully, and a
series of commitments or pledges to all those who have a stake in our Company,
taken together, provide a clear focus and long-term direction for Bausch & Lomb.
Core Businesses Prepared to Optimize Growth Potential
In our vision care business, we've moved from a structure which treated soft and
rigid gas permeable contact lenses and the associated lens care products as
three completely different businesses, to one in which all contact lens and lens
care product lines are integrated and focused on the needs and desires of the
patient. Viewing the patient's needs as the ultimate driver of the business will
allow us to maximize revenue per patient--regardless of how the balance of the
patient's expenditure shifts between lenses and lens care products.
Developing global marketing strategies, integrated product supply systems
and unified research and development efforts in vision care also allows us to
maximize our investments and address the highest priority market needs. We're
now positioned with the broadest array of contact lenses and lens care products
for every consumer and professional need.
In the eyewear business, a similar transition is taking place--again based
on the needs and desires of the ultimate consumer. Here the strategy is twofold:
1) to transition the product development and supply process for our flagship
Ray-Ban brand from the traditional, classic styles for which it is famous, to a
more flexible, market responsive system that can quickly and efficiently respond
to changing consumer demands for trendier, more contemporary styles; and 2) to
develop a global portfolio approach to leveraging the assets associated with our
other eyewear brands including Arnette, Revo, Killer Loop, Liz Claiborne and
Porsche Design around the world.
page 2
- - ------
<PAGE>
[Picture of William H. Waltrip, Chairman and William M. Carpenter,
President and Chief Executive Officer]
William H. Waltrip, Chairman
and William M. Carpenter, President and Chief Executive Officer
----------------------------------------------------------------------
"We're in the process of transforming Bausch & Lomb from every perspective."
page 3
------
<PAGE>
We've begun the process of developing a global image and retail
merchandising strategy for Ray-Ban sunglasses, nearly completed the integration
of our eyewear new product supply process, and had solid initial success with
global expansion of our Killer Loop brand.
In our core pharmaceutical business, our growth strategy also involves
integration--the coalition of our generic ophthalmic, proprietary and
over-the-counter pharmaceutical businesses into a flexible, market-driven,
global business unit. Expanding the Dr. Mann Pharma franchise beyond its German
origins into other European and Asian markets and supplementing our generic
ophthalmic pharmaceutical product pipeline with higher margin proprietary
products are cornerstones of this strategy.
Global Business Structure Provides Management Focus
Creating integrated global management structures in our three core businesses
sharpens management focus within the vision care, eyewear and pharmaceuticals
areas. From a geographically organized structure where resources for everything
from marketing strategy to product development and supply were regionalized, we
have created a new system wherein all decisions related to the operation of our
core businesses are based on global market priorities.
The executive management of each of the global core businesses now has both
full responsibility for resource allocation and full accountability for results
within its business area.
Leadership in Transition
Not only have our global businesses been organized under new executive
management, but our full corporate structure is benefiting from new leadership
as well. The Board of Directors has designated William M. Carpenter, who has
served the company as president and chief operating officer during 1996, as the
chief executive officer and approved William H. Waltrip's transition from chief
executive officer to chairman. The Board conveyed its profound thanks to Mr.
Waltrip for guiding the Company through a period of unprecedented challenge, and
expressed its confidence that Mr. Carpenter's skills and experience would
facilitate the achievement of the Company's growth objectives.
1996 Operating Highlights
Our 1996 financial performance did not meet expectations, primarily because of
continuing challenges in the U.S. sunglass business, where problems experienced
by our largest customer resulted in sales declines. Nonetheless, there were
notable accomplishments in most of our business lines and we made considerable
progress against the key objectives we had identified as critical to our ability
to capitalize on the attractive growth opportunities available to our Company.
[bullet] Our vision care business is clearly back on track, with our disposable
contact lens product lines growing at double-digit rates and returning
the business to profitability after two difficult years. And while the
lens care market continues to mature, we're more than holding our own
in market share thanks to strong professional support. Developing
international markets offer continued growth potential for this
product line.
[bullet] New sunglass products, particularly in the Ray-Ban line, were
enthusiastically accepted in the market and more than 30% of sales
came from product designs that were new to the market since 1995. We
more than doubled revenue from our Killer Loop brand through global
expansion, clearly reinforcing the potential for international
expansion of our other sunglass brands.
[bullet] Our pharmaceuticals business continued to show steady growth, driven
by new product introductions, with especially strong performance in
the United States. We are focused on keeping a steady stream of new
products in the pipeline and building a base of proprietary products
to complement the highly profitable but shorter life-cycled generic
products. More than a dozen new products were introduced in 1996 and
nearly that many are in the 1997 pipeline.
[bullet] Our Miracle-Ear business had its best revenue growth in several years;
and Charles River Laboratories continued to provide steady sales and
earnings contributions.
[bullet] Our continuing businesses outside the United States combined for
growth of almost 8%, when the effects of currency are removed, with
particularly strong results in Japan and Europe. International
markets, now representing about one-half of our revenues, continue to
offer excellent future growth opportunities for Bausch & Lomb.
page 4
- - ------
<PAGE>
[Picture of Bausch & Lomb's Board of Directors in session]
Bausch & Lomb's Board of Directors in session, led by William H.
Waltrip, Chairman. The active participation of the Board in key
strategic, financial and operational issues has helped determine
Bausch & Lomb's new direction.
----------------------------------------------------------------------
"...a new focus on the consumer as the ultimate driver of each of our
businesses..."
page 5
------
<PAGE>
[bullet] We sharpened the focus of our product portfolio and investment
decisions through our decision to concentrate on the eye care field,
and during 1996 we divested the remainder of our oral care and dental
implant businesses. Acquisitions such as the Arnette Optic Illusions
performance sport sunglass company and the Award one-day disposable
contact lens business, both announced early in 1996, support our
strategic vision.
[bullet] We made real progress in accelerating new product flow. For example,
through changes in our new product development process, combined with
improvements in manufacturing and supply processes, we have cut in
half the time it takes to bring a new sunglass product to market.
[bullet] We've greatly improved our operational effectiveness through major
projects including the reconfiguration of our eyewear manufacturing
and product supply processes into three global product delivery
centers; restructuring our European warehousing and logistics
operations to yield better inventory management, improved product
delivery times and reduced shipping expenses; and investing in new
contact lens manufacturing capacity for both disposable and planned
replacement lenses.
Structural Cost Reductions Underway
During 1996, steps were taken, including those outlined above, to ensure
delivery of the $50 million in reduced overhead expenses we announced in late
1995.
We now believe that there is considerably more room for improvement in our
fixed cost structure and are proceeding with a global analysis to streamline the
Company's organization and assure that we're properly configured to meet our
strategic objectives. This major organizational assessment and cost study is
expected to be completed during the first half of 1997, with recommendations
beginning to be implemented by mid-year. This effort should result in additional
annual cost reductions significantly beyond the $50 million identified in 1996.
Savings realized through this process will allow us to reinvest in growing our
businesses and provide a more predictable return to our investors.
Building Shareholder Value
Recognizing our commitment to provide you with attractive long-term economic
returns and to achieve sustainable growth, Bausch & Lomb has joined the ranks of
a growing number of companies which use Economic Value Added (EVA) as a
financial management system to measure and drive the company's performance. EVA
is a tool which simply yet effectively combines the income statement and the
balance sheet into one number, by subtracting from earnings a charge for the
utilization of assets employed in generating those earnings.
We will make improvement in EVA the primary performance objective of all
Bausch & Lomb business decisions to ensure that we meet your expectations for a
fair return on your investment.
New Directors
We welcome new Directors, Domenico De Sole, president and chief executive
officer of Gucci Group N.V., and Jonathan R. Linen, vice chairman of American
Express Company, each of whom brings impressive experience in consumer marketing
and global operations to Bausch & Lomb. Our Board of Directors has always
provided excellent counsel, attentive oversight and a strong voice for
investors' interests, but never more so than during the recent challenging
years. We appreciate their continued commitment of time and talent to our
Company.
1997 will provide us with challenges of its own. But our confidence in the
men and women of Bausch & Lomb is boundless. We have articulated a clear,
focused corporate Vision. We have organized our core businesses to maximize
their global potential. We are in the process of becoming even more efficient,
responsive and cost effective. Working together, and with the continued
confidence and support of our shareholders, we can make our vision a reality--to
become NUMBER ONE IN THE EYES OF THE WORLD.
/s/ William H. Waltrip
- - --------------------------
William H. Waltrip
Chairman
/s/ William M. Carpenter
- - --------------------------
William M. Carpenter
President and Chief Executive Officer
page 6
- - ------
<PAGE>
Our Vision
--------------------
Bausch & Lomb
will be Number
One in the Eyes
of the World
Our Mission
- - -------------------
As a global
eye care
company, we
will help
consumers see,
look, and feel
better through
innovative
technology and
design
<PAGE>
[GRAPHIC OF FOUR EYES AND A PICTURE OF THE WORLD]]
<PAGE>
"We must complete the transformation...be a Company that is innovative and
consumer driven...react quickly to change in our markets...we must lead
change...find ways to reduce cost... make product investments for long term
growth."
page 8
- - ------
<PAGE>
[Picture of Bill Carpenter]
A Strategic Discussion
with Bill Carpenter
----------------------------------------------------------------------
Why have you decided to refocus Bausch & Lomb's strategy on eye care?
In many ways, redirecting our focus to eye care brings us "back to the future."
Bausch & Lomb's competencies and technical abilities are founded in our heritage
in eye care, and that is the category in which consumers know and trust us.
Eighty-two percent of our revenue is derived from eye care, and we have a global
organization that is second to none in its knowledge of and reputation with eye
care practitioners and retailers.
Eye care also presents us with tremendous opportunities for profitable
growth in the future. We do not limit those opportunities to our current core
eye care businesses of sunglasses, contact lens products and ophthalmic
pharmaceuticals, although each of these businesses has significant growth
potential in its own right. We define the eye care category broadly, to
encompass any product that goes in or on the eye. Globally, the category
represents over a $20 billion opportunity. Our eye care revenues represent less
than 10% of that market, with tremendous room to grow.
Our renewed focus on eye care has driven much of what we have done in the
past year. It has led us to divest two non-core businesses, our oral care and
dental implant businesses. It also shaped our decision to invest in our core
businesses with acquisitions such as Arnette and Award. As we transition Bausch
&Lomb from operating diversified, decentralized businesses to a focused,
globally-managed eye care company, we have opportunities to streamline our
infrastructure, and reinvest the savings to grow our core businesses and in
exciting new opportunities in eye care.
page 9
------
<PAGE>
- - --------------------------------------------------------------------------------
Eyewear
1996 Milestones
[bullet] Over 30% of revenues generated by products introduced since 1995.
[bullet] Enhanced our eyewear portfolio through the acquisition of Arnette
Optic Illusions Inc. and a licensing agreement with Porsche Design.
[bullet] Began integrating our global manufacturing into three regional product
delivery centers.
[bullet] More than doubled sales of the Killer Loop line through expansion
across international markets.
[bullet] Cut new product lead time in half.
1997 Goals
[bullet] 65% of revenues to be generated by products introduced since 1995.
[bullet] Increase international sales of eyewear brands other than Ray-Ban by
40%.
[bullet] Build capabilities to reduce cost and improve responsiveness within
the three product delivery centers.
- - --------------------------------------------------------------------------------
What caused the disappointing performance of your sunglass business last year?
Several factors came into play. For one thing, consumer demand for our
traditional Ray-Ban styles, like Wayfarer and Classic Metals, declined.
Recognizing this, our retail customers cut back sharply on their orders. At the
same time, new styles of Ray-Ban sunglasses, led by the Orbs and Sidestreet
lines, proved to be far more successful than we had expected. The problem was
that we couldn't produce them fast enough to offset the decline in our
traditional sunglass business. While we made progress in reducing our
manufacturing lead times, this program wasn't far enough along in 1996 to turn
things around. Finally, our largest retail customer in the U.S. experienced its
own inventory over-supply difficulties in the second half of the year, and
sharply cut back its orders.
Does the continued softness in your premium-priced sunglass business point to a
more serious, long-term weakness in this market?
To the contrary. We believe the sales curve in 1996 for Revo, Arnette, Killer
Loop and the new styles of Ray-Ban sunglasses was as strong as ever. Consider
the fact that in the U.S., where we have the most data, the premium-priced
sunglass ($30 and above) market grew by over 10% through the end of last year's
summer selling season. Elsewhere in the world, consumer demand for high-quality
sunglasses was also on the rise. In Europe, the market began to show some
vitality following a period of economic slow down, while Asia continues to be a
growth market for us.
[THE FOLLOWING TABLES WERE REPRESENTED BY TWO BAR CHARTS IN THE PRINTED
MATERIAL.]
Baush & Lomb Eyewear
Product Mix
(Percent)
Traditional Ray-Ban Contemporary Ray-Ban Other Brands
1994 49 35 16
1995 42 40 18
1996 27 47 26
Source: Bausch & Lomb sales data
U.S. Premium Sunglass Market
(Dollar Market Consumption)
(Millions of Dollars)
US Sunglasses Bar Chart
92 652
93 735
94 780
95 740
96 892
Source: Independent research
page 10
- - -------
<PAGE>
What are you doing to ensure a similar situation doesn't recur in 1997 or
beyond?
We're taking action on three different fronts. First, we're keeping up with
evolving consumer tastes and trends by speeding the flow of new styles to the
market. We've already cut in half the time it takes to bring a new sunglass
style to market, and our next goal is to cut that time in half again. Secondly,
as retail inventories of traditional styles come into balance, we are working to
ensure that the face of Ray-Ban sunglasses is right at retail. By that I mean
that we want consumers to find the right mix of new and traditional styles
available in the stores, and merchandised in a fresh, exciting way. We're making
significant improvements in our internal product supply processes and in our
relationships with key vendors so that we can keep up with consumer demand for
our new styles. Finally, we now receive electronic information on consumer sales
at our largest customer's locations and plan to expand that program to other
customers. That information will not only allow us to anticipate our customers'
inventory needs, it will keep us attuned to the consumer trends in the
marketplace.
[Picture of four people wearing Ray-Ban Sunglasses]
The Orbs and Sidestreet lines -- contemporary new styles of Ray-Ban sunglasses
- - -- drive growth by meeting changing consumer tastes.
page 11
-------
<PAGE>
[Picture of two people wearing sunglasses]
Catfish and Raven, two hot new styles of Arnette sunglasses, added to Bausch &
Lomb's eyewear portfolio in 1996.
- - --------------------------------------------------------------------------------
Eyewear
Key Strategies
[bullet] Continue to strengthen the Ray-Ban line globally with exciting and
contemporary new styles, improved merchandising presence and
breakthrough marketing efforts.
[bullet] Leverage other popular U.S. brands--like Killer Loop, Revo and Arnette
sunglasses--on a worldwide basis.
[bullet] Redesign the product delivery system to reduce cost and ensure quicker
responsiveness to customer needs.
- - --------------------------------------------------------------------------------
[Picture of one person wearing sunglasses]
The Killer Loop Pandemonium sunglasses combine a contemporary new style with a
bold attitude and youth relevant advertising to drive worldwide expansion.
page 12
- - -------
<PAGE>
- - --------------------------------------------------------------------------------
Vision Care
1996 Milestones
[bullet] Acquired Award plc, a U.K.-based producer of low-cost, daily
disposable contact lenses.
[bullet] Increased contact lens revenues 17% over the prior year, and
dramatically improved profitability ahead of schedule.
[bullet] Successfully maintained our leadership position in lens care despite
new entries in the highly competitive U.S. market.
[bullet] Created an integrated vision care organization to better capitalize on
our global strengths and resources.
1997 Goals
[bullet] Expand our market penetration and share of the daily disposable and
planned replacement contact lens market.
[bullet] Launch an improved ReNu multi-purpose lens solution.
[bullet] More than double our annual capacity for daily disposable lenses.
[bullet] Reduce contact lens manufacturing costs by 10%.
[bullet] Achieve vision care revenue growth in the range of 7%, and a return on
sales of greater than 20%.
- - --------------------------------------------------------------------------------
Why did you feel it necessary to combine your lens and lens care units into a
single vision care business?
The answer is simple: it made good sense. Both serve the same sets of
customers--consumers, eye care professionals and retailers--through the broadest
portfolio of contact lens and lens care products in the world. We realized that
by combining these lines, we could align our efforts behind a single global
strategy which would fully leverage our market-leading brand equity and family
of products. This would allow us to eliminate wasteful duplication and free up
investment dollars to grow the business around the world.
How do you intend to maintain the profitability of your vision care business
when you rank behind the leader in the growing disposable lens market?
Our goal is to be the global leader in total vision care, not just a specific
segment. Our greatest asset in obtaining this objective is our balanced
portfolio of products that allows us to meet the widest range of consumer vision
care needs. Consider what Bausch & Lomb currently has: a broad line of
recognized names in both lens and lens care products which positions us to take
full advantage of the worldwide trend to lens replacement on a more frequent
basis. More specifically, our SofLens66 lenses coupled with ReNu multi-purpose
solution, the global market leader in one-step lens care products, and Award
one-day disposable contact
[THE FOLLOWING TABLES WERE REPRESENTED BY TWO BAR CHARTS IN THE PRINTED
MATERIAL.]
Global Contact Lens
Patient Trends
(Millions of Patients)
Contact Lens Trends Bar Chart
RGP/PMMA Traditional PRP/Disposable One Day
95 13.5 23.1 15.6 0.3
96 13 22.9 21.5 0.7
97 (est.) 12.5 18.4 28.1 4.7
Bausch & Lomb estimate
Bausch & Lomb
Annual Per-Patient Margin
Lenses and Lens Care Products
Per Patient Margin Index Bar Chart
Traditional 100
RGP 80
1-3 Month 110
1-2 Wks 140
One Day 150
Margin indexed against traditional patient
Bausch & Lomb estimate
page 13
-------
<PAGE>
lenses, make for a powerful competitive advantage. We have lens and lens care
products for every wearing modality including daily disposable. Looking at the
individual patient as a long-term revenue stream, the combined lens and lens
care margin generated by patients in each modality provides significant dollars
for Bausch & Lomb regardless of the lens modality chosen. Our goal is to
maximize our share of contact lens wearers by leveraging the consumers'
knowledge of and trust in the Bausch & Lomb brand name.
Another important element of our strategy is our continuing effort to
reduce overall costs. In 1996, we cut costs on our key contact lens products by
more than 10% and significantly improved our margins. The integration of our
vision care business also will reduce structural cost. These vital cost
reduction programs will continue through 1997, and beyond.
Through these combined strategies, we intend not only to maintain the
profitability of our vision care business, but to enhance it over the long term.
[Graphic of watches and Bausch and Lomb SoftLens66 Package]
daily
weekly
monthly
serving
all lens markets
Award and SofLens66 contact lenses strengthen Bausch & Lomb's offerings of
premium products designed to meet the requirements of patients within all lens
wearing modalities.
page 14
- - -------
<PAGE>
[THE FOLLOWING TABLE WAS REPRESENTED BY A BAR CHART IN THE PRINTED MATERIAL.]
Consumer Loyalty Rating
(Percent Loyalty)
ReNu 85
Advil 26
Secret 33
Pert 29
Vaseline Intensive Care 39
Source: Independent research
The U.S. market has seen an onrush of new branded and private label lens care
products. What is your strategy for keeping your lead in this all-important
market?
It's true, there have been many new entries into the lens care business in
recent years. But that hasn't kept Bausch & Lomb from maintaining its leadership
of the $1.7 billion lens care business worldwide. And that, we believe, is
testimony to the technical superiority of our brands, particularly the ReNu and
Boston lines of quality products, which are unique, patented formulations. Our
strategy is to continue to build brand loyalty among consumers and health care
practitioners. An important vehicle for that effort will be the introduction of
innovative Bausch & Lomb products, as demonstrated by a new and improved ReNu
multi-purpose solution. Complementing this effort is a consumer marketing
program emphasizing the unique advantages of our products.
- - --------------------------------------------------------------------------------
Vision Care
Key Strategies
[bullet] Leverage our strengths and opportunities across our full lines of lens
and lens care products.
[bullet] Maintain global market leadership in the lens care business.
[bullet] Continue to drive lens costs down, and reinvest the savings to grow
the business.
[bullet] Increase our worldwide base of consumers using Bausch & Lomb vision
care products, particularly disposable and planned replacement lenses
and ReNu multi-purpose solution.
- - --------------------------------------------------------------------------------
[GRAPHIC]
ReNu multi-purpose solution maintains a strong #1 position based on brand
strength and patented formulations.
page 15
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<PAGE>
- - --------------------------------------------------------------------------------
Pharmaceuticals
1996 Milestones
[bullet] Formed global alliance with InSite Vision, Incorporated to develop and
market proprietary glaucoma treatments.
[bullet] Broadened our alliance with Pharmos Corporation to develop the Lotemax
line of ophthalmic anti-inflammatory products.
[bullet] Fifteen new products released to market.
1997 Goals
[bullet] Launch the first in a series of Lotemax ophthalmic products.
[bullet] File a New Drug Application (NDA) with the FDA for a Lotemax allergy
drug.
[bullet] Release to market eleven new products.
- - --------------------------------------------------------------------------------
You've identified pharmaceuticals as a core business of Bausch & Lomb. How do
you intend to compete against the established leaders in the field?
Our strategy is to concentrate on a relatively narrow niche--ophthalmic
pharmaceuticals--where we can capitalize on our Company's strong image among eye
care professionals, pharmacists and consumers. We intend to compete on several
key platforms. First is our proven ability to bring regulated products to market
in a timely manner. Second is a network of facilities for the production of
sterile and non-sterile preparations that is unsurpassed in the industry.
Further, we are a leading low-cost producer of generic pharmaceuticals in the
highly competitive U.S. market, and a leading manufacturer of prescription and
OTC eye care and other healthcare products in the U.S. and Germany. These
diverse pharmaceutical businesses provide critical mass and an earnings stream
that permit us to invest in expanding our proprietary ophthalmic lines around
the world.
How does Minoxidil fit into this niche pharmaceutical strategy?
Minoxidil is a special case. It presented us with a solid commercial opportunity
and the chance to take advantage of our low-cost manufacturing competency for
pharmaceutical preparations. It also played to our proven ability to bring
generic products to market quickly. The proceeds from the sale of Minoxidil are
not insignificant. They're allowing us to bring short-term value to our
shareholders, and help fund the development of additional ophthalmic drugs
which, ultimately, will be the key to the success of this core business.
What are your plans for growing the pharmaceutical business?
An integral part of our strategy is continuing the flow of new proprietary
products through the licensing and acquisition of new technologies and through
internal development. We're also exploiting opportunities to bring new generic
products to market as soon as patents expire, and to introduce OTC versions of
established prescription drugs. Globally, we're actively pursuing regulatory
approvals necessary to bring proprietary drugs and selected generics into new
markets outside the U.S. and Germany. We believe these strategies will result in
combined revenue growth exceeding 10% over the next three years for our
pharmaceutical business.
page 16
- - -------
<PAGE>
- - --------------------------------------------------------------------------------
[GRAPHIC]
[Graphic of eye and pharmaceutical bottles floating about]
Pharmaceuticals
Key Strategies
[bullet] Drive business growth through the aggressive acquisition of technology
coupled with internal development.
[bullet] Continue to invest in new generic drugs which leverage our drug
development, manufacturing and commercial capabilities.
[bullet] Take advantage of the Company's brand heritage and global
infrastructure to expand distribution of proprietary and select
generic products.
- - --------------------------------------------------------------------------------
A focused stream of new ophthalmic products along with opportunistic
non-ophthalmic product introductions are the keys to continued growth for Bausch
& Lomb's pharmaceutical business.
page 17
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<PAGE>
- - --------------------------------------------------------------------------------
Healthcare
1996 Milestones
[bullet] Divested the oral care and dental implant businesses.
[bullet] Continued the turnaround of our Miracle-Ear business with revenue
growth of 9%.
[bullet] The Curel brand was the growth leader in the U.S. hand and body lotion
market.
[bullet] Revenues from Charles River Laboratories' contract research services
grew 30% over the prior year.
1997 Goals
[bullet] Commercialize new Miracle-Ear technology.
[bullet] Launch Curel skin care line extensions.
[bullet] Increase revenue in our Charles River Laboratories business by at
least 7% while maintaining operating profit margins.
[bullet] Tightly manage businesses in this segment to maximize financial
returns.
- - --------------------------------------------------------------------------------
Since the "Healthcare" businesses are unrelated to your eye care strategy, how
do they figure in the growth plans for your business?
While these businesses aren't central to our eye care strategy, they can
certainly make important contributions to our overall performance. For that
reason, they will remain in our business portfolio as long as they can generate
value for our shareholders.
What are the prospects for these businesses?
In a word, outstanding. Charles River Laboratories, the world's leading producer
of purpose-bred research animals, continues to generate excellent earnings and
cash flow. Its newer contract research services and biomedical business lines
give it tremendous growth potential. Consolidation in the pharmaceutical
industry is driving more and more companies to outsource aspects of their
clinical research, and this works to the decided benefit of Charles River
Laboratories. Its biomedical products, which range from endotoxin testing kits
to pathogen-free eggs used in vaccine production, also realized impressive
market share gains last year.
In the skin care sector, Curel brand was the fastest growing hand and body
lotion in the U.S. last year. It leveraged Bausch & Lomb's extensive
distribution network for OTC health care products, targeted advertising and new
products to realize dramatic improvements in sales and profitability.
As for our Miracle-Ear hearing aid business, it proved to be an impressive
turnaround story in 1996, as revenues rose 9%. We believe the key to continued
growth and earnings will be the implementation of a strategy to supplement our
strong franchise network with Company-owned stores, along with the
commercialization of new technology.
We'll continue to closely follow the progress of each of these diverse
healthcare businesses to ensure that they're maximizing value for our
shareholders.
page 18
- - -------
<PAGE>
- - --------------------------------------------------------------------------------
Healthcare
Key Strategies
[bullet] Actively develop the biomedical and contract research services
businesses of Charles River Laboratories.
[bullet] Commercialize new Miracle-Ear hearing aid technology and expand the
network of company-owned stores.
[bullet] Grow our Curel skin care business through product expansion and new
marketing initiatives.
[bullet] Regularly review the financial performance of our healthcare
businesses to determine their contribution to shareholder value.
- - --------------------------------------------------------------------------------
[GRAPHIC]
The Curel brand leads the U.S. hand and body lotion category in growth.
[GRAPHIC]
Commercialization of new technology and strengthening of retail presence are key
to the growth of Bausch & Lomb's hearing aid business.
[GRAPHIC]
Charles River Laboratories, already the world's leading producer of
purpose-bred laboratory animals, is focusing on the development of its
biomedical products and services.
page 19
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<PAGE>
Your vision for Bausch & Lomb is to become "Number One in the Eyes of the
World." What gives you optimism that the Company will achieve that goal?
We consider our vision statement to be aspirational--a means of expressing our
commitment to the new direction we have set for the Company and aligning the
organization behind a common goal. But, in many respects, the statement also
reflects what Bausch & Lomb is today. I can think of no company that generates
greater revenues from eye care, and no company in this field that enjoys greater
recognition and respect from consumers. We recognize, however, that to achieve
our vision of being "number one in the eyes of the world," we have to complete
the transformation we have started. We must be a company that is innovative and
consumer driven. We must not only react quickly to change in our markets, we
must lead change. We must be unwavering in our resolve to find ways to reduce
cost in our business, and equally committed to making prudent investments for
our long term growth. By doing so, we will be able to better respond to the
needs of our consumers and customers, and generate the strong and predictable
results that our investors expect.
I am confident that we will achieve our vision because I recognize the
tremendous resources available to Bausch & Lomb. First, there is the strength of
our brands--names such as Ray-Ban, ReNu, Revo, SofLens66, Boston and of course,
the Bausch & Lomb name itself. Those brands are the foundation on which we will
build our future. The breadth of our portfolio and the leadership positions we
enjoy clearly provide leverageable competitive advantage. We also have the
distinct advantage of our global presence that permits us to capitalize on the
power in our brands. We have already forged key relationships and built equity
in the most rapidly growing markets around the world.
Most importantly, I am confident in our ability to achieve our vision
because of the caliber of the people at Bausch & Lomb. They have been through
tremendous change in the past year, and I believe they recognize that the pace
of change will only quicken in the future. Although change is never easy, I have
been singularly impressed with the quality and commitment I see in the men and
women of this Company.
[GRAPHIC]
page 20
- - -------
<PAGE>
Report of Management
----------------------------------------------------------------------
The following financial statements of Bausch & Lomb Incorporated were prepared
by the Company's management, which is responsible for their reliability and
objectivity. The statements have been prepared in conformity with generally
accepted accounting principles and, as such, include amounts based on informed
estimates and judgments of management with consideration given to materiality.
Financial information elsewhere in this annual report is consistent with that in
the financial statements.
Management is further responsible for maintaining a system of internal
controls to provide reasonable assurance that Bausch & Lomb's books and records
reflect the transactions of the Company; that assets are safeguarded; and that
its established policies and procedures are followed. Management systematically
reviews and modifies the system of internal controls to improve its
effectiveness. The internal control system is augmented by the communication of
accounting and business policies throughout the Company; the careful selection,
training and development of qualified personnel; the delegation of authority and
establishment of responsibilities; and a comprehensive program of internal
audit.
Independent accountants are engaged to audit the financial statements of
the Company and issue a report thereon. They have informed management and the
audit committee that their audits were conducted in accordance with generally
accepted auditing standards which require a review and evaluation of internal
controls to determine the nature, timing and extent of audit testing. The Report
Of Independent Accountants is on page 57 of this report.
The recommendations of the internal auditors and independent accountants
are reviewed by management. Control procedures have been implemented or revised
as appropriate to respond to these recommendations. In management's opinion, as
of December 28, 1996, the internal control system was functioning effectively
and accomplished the objectives discussed herein.
/s/ William H. Waltrip /s/ William M. Carpenter /s/ Stephen C. McCluski
William H. Waltrip William M. Carpenter Stephen C. McCluski
Chairman President and Senior Vice President
Chief Executive Officer Finance
Report of The Audit Committee
----------------------------------------------------------------------
The audit committee of the board of directors is comprised of three outside
directors. The members of the committee are: Kenneth L. Wolfe, Chairman; Linda
Johnson Rice; and Alvin W. Trivelpiece, Ph.D. The committee held four meetings
during 1996.
The audit committee meets with the independent accountants, management and
the internal auditors to provide reasonable assurance that management fulfills
its responsibilities in the preparation of the financial statements and in the
maintenance of an effective system of internal controls. The audit committee
reviews the performance and fees of the independent accountants, recommends
their appointment and meets with them and the internal auditors, without
management present, to discuss the scope and results of their audit work. Both
the independent accountants and the internal auditors have full access to the
audit committee.
/s/ Kenneth L. Wolfe
Kenneth L. Wolfe
Chairman
Bausch & Lomb Incorporated and Consolidated Subsidiaries page 21
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<PAGE>
Financial Review
----------------------------------------------------------------------
Dollar Amounts In Millions -- Except Per Share Data
This financial review, which should be read in conjunction with the accompanying
financial statements, contains management's discussion and analysis of the
Company's results of operations, liquidity and progress towards stated financial
objectives.
Results Of Operations
Bausch & Lomb strives to maximize total return to shareholders through a
combination of long-term growth in share price and the payment of cash
dividends. Although dividends have risen at a compound annual rate of 8% over
the most recent five-year period, total return to shareholders in 1996, 1995 and
1994 was impacted by a decline in the Company's stock price stemming from the
operational issues and other factors discussed in this review.
The Company systematically measures its financial progress against the
Standard & Poor's Healthcare Composite Group, with the goal of placing Bausch &
Lomb among the top performers for each of its selected financial objectives. To
achieve this goal, the Company has established multi-year objectives of compound
annual sales and earnings growth in the range of 10% and, on a longer-term
basis, a return on equity of approximately 20%. The Company also emphasizes the
need for operational stability, predictability and profitability. The Company's
management team is firmly committed to achieving these performance objectives on
a going-forward basis. In that regard, the Company recently adopted a new
financial management and performance measurement system, Economic Value Added
(EVA), which it plans to implement in 1997. EVA combines earnings and capital
management objectives into one index by subtracting from earnings a capital
charge for the utilization of assets employed to generate those earnings. It
aligns business decisions made by the Company with shareholder expectations that
capital is being utilized effectively.
Comparability Of Business Segment Information Analysis of the Company's
operating results requires the consideration of certain significant events as
described below.
In November 1996, the Company concluded the sale of its dental implant
business, which contributed approximately $28, $27 and $22 to healthcare segment
revenues in 1996, 1995 and 1994, respectively. Operating earnings from this
business were $4, $3 and $2 in 1996, 1995 and 1994, respectively. The Company
recorded an after-tax gain of $8 on the sale, which increased earnings per share
by $0.15 in the fourth quarter.
In September 1996, the Company completed the sale of its Oral Care
Division, which marketed the Interplak line of products. The Oral Care Division
contributed approximately $22, $51 and $67 in healthcare segment revenues in
1996, 1995 and 1994, respectively. Operating losses from this business were $11,
$7 and $18 in 1996, 1995 and 1994, respectively. The Company's third quarter
earnings reflected an after-tax loss of $6 or $0.11 per share on the sale.
As announced in June 1996, the Company's board of directors approved plans
to restructure portions of the eyewear and vision care segments, as well as
certain corporate administrative functions and a restructuring charge of $15
before taxes, or $11 after taxes, was recorded. This charge reduced earnings per
share by $0.19. In December 1995, the Company's board of directors approved
plans to restructure portions of eyewear, healthcare and vision care operations,
as well as certain corporate administrative functions and a pre-tax
restructuring charge of $27 was recorded. The after-tax impact of this charge
was $17, or $0.30 per share. These actions, the major components of which are
discussed in Note 2 --Restructuring Charges, are part of the Company's efforts
to enhance its competitive position and to reduce the annual impact of general
and administrative, logistics and distribution costs. During 1996, these actions
resulted in savings of $10 which were largely offset by one-time transition
costs and are expected to contribute towards annualized savings of $25 in 1997
and $50 in 1998 and thereafter.
As announced on May 1, 1995, the Company completed the sale of its Sports
Optics Division, which marketed binoculars, riflescopes and telescopes. Results
in 1995 reflect the operations of this business for only three months. The
sports optics business contributed approximately $18 and $111 in eyewear segment
revenues in 1995 and 1994, respectively; operating earnings from this business
were break-even in 1995 and $10 in 1994. Net earnings in 1995 reflected an
after-tax gain of $21 or $0.36 per share on the sale.
page 22 Bausch & Lomb Incorporated and Consolidated Subsidiaries
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<PAGE>
In December 1994, decisions were made fundamentally realigning global oral
care operations based on increased competition, a significant decline in market
share and operating losses, which greatly reduced estimated future cash flows
for this business. As a result, the Company recognized a goodwill impairment
charge of $75 with no associated tax benefit.
The Company's reported results for the three-year period described in this
review include the effect of the significant events described previously.
Operating Results By Business Segment Bausch & Lomb's operating results are
reported in four business segments: vision care, eyewear, pharmaceuticals and
healthcare. The vision care segment includes contact lenses and materials and
contact lens solutions. The eyewear segment is comprised of sunglasses, thin
film coating services and the divested sports optics business. The
pharmaceuticals segment includes prescription ophthalmics and over-the-counter
(OTC) medications. The healthcare segment is comprised of biomedical products,
hearing aids, skin care products and the divested oral care and dental implant
businesses.
The following table summarizes the proportion of reported revenues and
earnings derived from each business segment.
Revenues And Earnings By Business Segment
<TABLE>
<CAPTION>
Revenues Earnings
--------------------------------------------------------------------------------
1996 1995 1994 1996 1995 1994
- - ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Vision care 45% 42% 40% 76% 59% 86%
Eyewear 27% 30% 34% (2%) 16% 44%
Pharmaceuticals 10% 9% 7% 12% 14% 15%
Healthcare 18% 19% 19% 14% 11% (45%)
================================================================================
</TABLE>
A summary of reported sales and earnings by business segment, corporate
administration expense and operating earnings, and comparable basis results
which exclude the divested sports optics, oral care and dental implant
businesses, restructuring costs and goodwill impairment charges described above
follows. Unless otherwise specified, amounts in the remainder of this financial
review have been prepared using comparable basis results.
<TABLE>
<CAPTION>
1996 1995 1994
------------------------------------------------------------------------------------------------
Comparable Comparable Comparable
As Reported Basis As Reported Basis As Reported Basis
- - ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net Sales
Vision care $ 869.1 $ 869.1 $ 813.7 $ 813.7 $ 749.5 $ 749.5
Eyewear 525.1 525.1 581.4 563.1 649.9 538.9
Pharmaceuticals 189.0 189.0 181.5 181.5 142.3 142.3
Healthcare 343.6 293.9 356.3 278.2 351.0 261.5
-----------------------------------------------------------------------------------------------
Total $1,926.8 $1,877.1 $1,932.9 $1,836.5 $1,892.7 $1,692.2
===============================================================================================
Operating Earnings
Vision care $ 182.1 $ 190.7 $ 158.5 $ 161.7 $ 140.7 $ 140.7
Eyewear (5.6) (0.6) 43.7 60.9 72.6 62.2
Pharmaceuticals 28.6 28.6 38.5 38.5 24.7 24.7
Healthcare 34.8 42.5 30.8 39.0 (74.4) 16.7
-----------------------------------------------------------------------------------------------
239.9 261.2 271.5 300.1 163.6 244.3
Corporate
administration (49.1) (47.6) (60.9) (57.9) (43.8) (43.8)
-----------------------------------------------------------------------------------------------
Total $ 190.8 $ 213.6 $ 210.6 $ 242.2 $ 119.8 $ 200.5
===============================================================================================
</TABLE>
Bausch & Lomb Incorporated and Consolidated Subsidiaries page 23
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<PAGE>
Net Sales Reported revenues for 1996 were $1,927, a decrease of $6 or less than
1% from 1995, reflecting unfavorable currency exchange rate changes which
reduced sales in U.S. dollars by 2%. In 1995, reported revenues increased $40 or
2% over 1994, including the favorable effect of changes in currency exchange
rates which increased sales in U.S. dollars by 3%.
Comparable basis revenues totaled $1,877 in 1996, an increase of $41 or 2%
from 1995, including the unfavorable effect of changes in currency exchange
rates which decreased revenues in U.S. dollars by 2%. In 1995, sales increased
$144 or 9% from 1994.
Consolidated reported revenues have increased at compound annual rates of
2% and 5% for the most recent three- and five-year periods, respectively. On a
comparable basis, these rates were 5% and 7%, respectively.
Operating Earnings Reported operating earnings were $191 in 1996, a decrease of
$20 or 9% from 1995. On a comparable basis, operating earnings totaled $214, a
decrease of $29 or 12% from the prior year. An increase in operating earnings in
the vision care segment was more than offset by reduced earnings in the eyewear
and pharmaceuticals segments. Reported operating earnings were $211 in 1995, an
increase of $91 or 76% from 1994. Comparable basis operating earnings totaled
$242, an increase of $42 or 21% from 1994. The ratio of operating earnings to
sales on a comparable basis was 11.4% in 1996, 13.2% in 1995 and 11.8% in 1994.
Vision Care Segment Results
1996 Versus 1995 - The vision care segment includes results of the contact lens
and lens care businesses, with lenses comprising 43% of the total 1996 revenues
and lens care representing 57%. In 1996 revenues in this segment improved $55 or
7%, led by a 17% increase in the sales of contact lenses. These results include
the adverse impact of foreign currency rate fluctuations which reduced sales in
U.S. dollars by 2% from 1995. Strong gains for planned replacement and
disposable (collectively PRP) lenses, such as Optima FW and SofLens66, in all
regions and incremental sales of one-day disposable lenses by Award plc more
than offset the decline in sales of traditional lenses. Revenues from rigid gas
permeable (RGP) lenses were even with 1995, reflecting a 2% gain in the U.S.,
offset by a 4% decrease in the Asia-Pacific region, primarily attributed to the
negative impact of foreign currency rates in Japan. Soft lens solutions
reflected modest gains, with revenue growth from ReNu products offsetting
declines in traditional solutions such as saline, daily cleaners and enzymatic
tablets. Worldwide revenues from RGP solutions declined 5% from 1995, attributed
to the timing of promotions.
Operating margins in this segment were 21.9% in 1996 compared to 19.9% in
1995. Contact lens earnings were positive for the first time in several years,
driven by increased sales and cost reduction efforts. Segment earnings in 1996
were $191 compared to $162 in 1995, an increase of 18%.
1995 Versus 1994 - Revenues in the vision care segment grew 9% over 1994,
reflecting 14% growth in worldwide contact lens sales. PRP lens revenues
demonstrated significant gains over 1994 levels, most notably in the U.S.,
Europe and Asia-Pacific regions. Overall sales of traditional soft lenses were
relatively even with 1994, reflecting a general market trend and the Company's
strategic shift in focus toward PRP lenses. Worldwide revenues of RGP lenses and
lens materials grew by 10% and included sales of the new Boston 7 and Boston ES
lens materials. RGP solutions registered growth in most geographic regions and
included revenues from new products, including Boston Simplicity and Boston
Advance solutions. The Company's line of soft lens solutions, including the ReNu
brand, advanced more than 10% outside the U.S. Revenues of soft lens solutions
within the U.S. declined 4%, which the Company attributed to a trend toward
lower retail inventory levels and a reduction in dedicated shelf space in the
saline segment of this market.
Operating earnings were $162, a 15% improvement over 1994 levels. This
reflects significantly reduced operating losses for PRP lenses, resulting from
the margin impact of increased sales combined with the decreased spending for
advertising and selling.
page 24 Bausch & Lomb Incorporated and Consolidated Subsidiaries
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<PAGE>
Eyewear Segment Results
1996 Versus 1995 - The eyewear segment includes results of the sunglass and
optical thin film coating services businesses. Segment revenues declined $38 or
7% from 1995. Adverse foreign currency movements contributed 2% to this decline.
New Ray-Ban sunglasses, such as the Sidestreet, Orbs and Inertia styles, and new
offerings in the Killer Loop Street Sport and Revo Shapes collections, as well
as incremental revenues from the first quarter acquisition of the Arnette
sunglass line with products directed toward the sport channel of trade,
contributed significantly to total sunglass sales. These positive results were
more than offset by the erosion in sales of more traditional product designs,
particularly in the Ray-Ban line, by new product supply issues and by a
second-half reduction in orders, primarily in the U.S., from the segment's
largest customer, Sunglass Hut International. Revenues for thin film coating
services declined 30% due primarily to significant competitive challenges
outside the U.S.
The sunglass category is continuing to transition to more contemporary and
sport designs, areas where the Company is expanding its market presence. Being
successful in this evolving category requires innovative design and marketing
expertise to satisfy changing consumer preferences, combined with flexible
product delivery capabilities. As a result, efforts began early in the year to
reconfigure the manufacturing process to swiftly respond to changing consumer
demands and to lower costs.
Eyewear segment losses of $1 were $62 lower than the 1995 earnings amount.
Operating margins were (0.1%) in 1996 and 10.8% in 1995. These results reflect
the adverse impacts of the sales shortfalls, the continued shift to lower-margin
new products, unfavorable manufacturing variances due to reduced production
volumes and increased provisions for obsolescence. Margins are expected to
rebound in 1997 as restructuring efforts are expected to improve operating
efficiencies and reduce fixed costs.
1995 Versus 1994 - Eyewear segment revenues grew $24 or 4% in 1995 to $563 as
compared with 1994. Almost 15% of sunglass revenues resulted from new products.
Sales of these products more than offset a decline in demand for certain Ray-Ban
sunglasses with more traditional designs. These positive results were attained
during a period in which this business was actively engaged in programs to
develop flexible manufacturing processes for its new products. As a result, the
Company was not able to fully meet the demand created by strong global consumer
acceptance of new designs.
Eyewear segment earnings of $61 in 1995 were $1 or 2% lower than comparable
1994 results, and eyewear segment margins were 10.8% in 1995 and 11.5% in 1994.
These results reflect the shift in product mix toward lower-margin new sunglass
styles. Additionally, advertising expenses increased in response to the
Company's intensified efforts to build consumer awareness of Ray-Ban and other
brand names around the world. Segment results also included earnings declines in
the thin film coating business, which resulted from increased competition and
lower sales to European customers.
Pharmaceuticals Segment Results
1996 Versus 1995 - The pharmaceuticals segment consists of results of the
prescription pharmaceuticals and OTC pharmaceuticals businesses. Revenues for
this segment increased 4% over the prior year. Adverse currency movements
impacted worldwide sales in U.S. dollars by 3% as compared to 1995.
Within the U.S., sales advanced 17%, largely attributed to the success of
recently introduced products including Ocutricin, an antibiotic solution used to
treat superficial eye infections, and Minoxidil, a generic version of Rogaine.
Crolom, introduced in 1995 to treat vernal conjunctivitis, witnessed
double-digit growth for the year. Tobramycin, a generic version of Tobrex,
experienced a significant decline in revenues due to heavy competition and a
resulting loss in market share, combined with price reductions. Revenues for
prescription pharmaceuticals in Europe advanced 5% over 1995 despite uncertainty
in the fourth quarter regarding proposed government cutbacks on prescription
reimbursements. The Company's line of European OTC pharmaceuticals experienced a
7% decline in revenues versus 1995, 5% of which was due to adverse currency
effects. Sales shortfalls were partially attributable to pharmacy inventory
reductions brought about by the aforementioned prescription budget regulations.
OTC products in the U.S. attained a 5% increase in revenues, benefiting from
increased sales of Opcon-A, an antihistamine/decongestant which reflected 16%
growth over 1995, and Duolube, a preservative-free ointment used for nighttime
relief of dry eyes.
Bausch & Lomb Incorporated and Consolidated Subsidiaries page 25
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<PAGE>
Segment earnings of $29 declined $10 or 26% from the 1995 level. Operating
margins in the pharmaceuticals segment were 15.1% in 1996 compared to 21.2% in
1995. Favorable margin impacts of price and volume increases for many of the
U.S. generic products were more than offset by increased spending for
advertising, selling and research and development in 1996, combined with the
impact of unfavorable currency movements in Europe. Research and development
spending increased 45% versus prior year levels as the Company moved forward
with its growth plan for generic and proprietary ophthalmic products.
1995 Versus 1994 - Worldwide segment revenues improved 28%, led by results for
products in the U.S., including Tobramycin, Levobunolol, a generic version of
Betagan, Crolom and growth for prescription pharmaceuticals in Europe. Improved
results were also achieved for the Company's line of European OTC
pharmaceuticals. Contributing to the double-digit increase over 1994 was the
strong performance of hayfever medications and sleeping aids, as well as
analgesic and nutraceutical products, including the fourth quarter launch of
Vivivit Multi. Eye care products in the U.S. attained a 22% increase in sales,
reflecting improved sales of Opcon-A, which achieved a significant market
position.
Segment earnings of $39 improved $14 as compared to the 1994 level of $25
and operating margins increased from 17.4% to 21.2%. The favorable results
display the improvement in U.S. prescription pharmaceutical operations brought
about by strong sales growth of new products and cost savings realized through
restructuring actions taken in 1994. Partially offsetting these positive factors
were increased expenditures for research and development as the Company
continued to invest in this key product segment.
Healthcare Segment Results
1996 Versus 1995 - The healthcare segment experienced 6% revenue growth over
1995 with gains in all ongoing product lines. This segment includes results for
biomedical products, hearing aids and skin care products, with those products
contributing 68%, 17% and 15%, respectively, of 1996 segment revenues. Revenues
increased 6% for the Company's biomedical business, reflecting the impact of
incremental sales of purpose-bred laboratory animals and other product line
extensions. Results in this segment were negatively impacted by foreign currency
rate fluctuations which reduced sales in U.S. dollars by 5% from 1995. Revenues
for the Miracle-Ear line of hearing aids rose 9% due to sales of new in-the-ear
products and increased sales in Company-owned stores. Skin care revenues
advanced 5% for the year, led by 15% growth in the Curel product line, including
Alpha Hydroxy and Nutrient Rich products, offset by a 12% decline in the Soft
Sense line due to reduced consumer demand.
Healthcare segment earnings rose 9% with improvements in the hearing aid,
skin care and biomedical businesses resulting from the margin impact of sales
increases, slightly offset by higher operating expenses. While the hearing aid
business showed a slight loss in 1996, this business continues to show
improvement in operating results.
1995 Versus 1994 - Healthcare segment revenues rose 6% as a result of gains in
all ongoing product lines. A 7% improvement in sales of biomedical products
reflected increased shipments of specific pathogen-free eggs and contract
research products and services, as well as the favorable impact of foreign
currency rate fluctuations on animal operations outside the U.S. Hearing aid
revenues rose 20% in response to improved overall market conditions and
encouraging consumer demand for the Mirage completely in-the-canal product and a
new line of programmable hearing aids. Skin care revenues advanced 6% and
included results from the Curel Alpha Hydroxy product line introduced in 1995.
Healthcare segment earnings more than doubled over 1994, reflecting
significant gains in both the biomedical and hearing aid product lines, the
latter due to the sales increase and decreased spending for advertising and
selling.
Costs And Expenses The ratio of cost of products sold to sales was 45.0% in
1996, compared to 43.9% in 1995 and 46.2% in 1994. The unfavorable ratio in 1996
resulted from a decline in sunglass sales, combined with a shift in sales mix
toward lower-margin sunglass styles and PRP lenses.
The favorable ratio in 1995 reflected sales of higher-margin hearing aids
and pharmaceuticals products, which more than offset the reduced margins on new
sunglass styles and PRP lenses.
page 26 Bausch & Lomb Incorporated and Consolidated Subsidiaries
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<PAGE>
Selling, general and administrative expenses, including corporate
administration, were 39.8% of sales in 1996, 39.7% in 1995 and 38.8% in 1994.
Increases in advertising and marketing expenses in 1996 were offset by an
overall decrease in general and corporate administration. General and
administrative expenses included one-time period costs, which were more than
offset by the benefit of restructuring efforts undertaken during 1996 and 1995.
Increased levels of advertising and promotional activities during 1996 and 1995
included additional support for contact lenses and sunglasses, primarily outside
the U.S.
Corporate administration expenses totaled $48 in 1996, compared with $58 in
1995 and $44 in 1994. This represented 2.5% of sales in 1996, 3.2% in 1995 and
2.6% in 1994. The 1995 expense included $7 for retirement and other benefits for
the Company's former Chief Executive Officer. When this charge is excluded, 1995
corporate administration expenses represented 2.8% of sales. The improvement in
1996 includes the benefit of restructuring efforts.
Research and development expenses totaled $71 in 1996, an increase of $10
or 16% over 1995. In 1994, these costs were $55. The increase in the 1996 levels
of research and development reflected significant investments in the vision care
and pharmaceuticals businesses.
Operating Results By Geographic Region The Company's reported results by
geographic region for all three periods were affected by the significant events
described previously. A summary of sales and earnings by geographic region and
comparable results which exclude the divested sports optics, dental implant and
oral care businesses and the costs associated with restructuring and goodwill
impairment charges are summarized below:
<TABLE>
<CAPTION>
1996 1995 1994
---------------------------------------------------------------------------------------------
Comparable Comparable Comparable
As Reported Basis As Reported Basis As Reported Basis
- - ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net Sales
Europe, Middle East
& Africa $ 494.8 $ 483.8 $ 471.0 $ 457.4 $ 414.2 $ 395.6
Asia-Pacific 341.0 336.5 345.3 337.2 303.7 297.8
Canada & Latin
America 114.3 110.5 119.0 112.3 129.5 111.2
U.S. 976.7 946.3 997.6 929.6 1,045.3 887.6
---------------------------------------------------------------------------------------------
Total $1,926.8 $1,877.1 $1,932.9 $1,836.5 $1,892.7 $1,692.2
=============================================================================================
Operating Earnings
Europe, Middle East
& Africa $ 74.3 $ 80.6 $ 93.2 $ 98.1 $ 91.9 $ 95.3
Asia-Pacific 35.8 37.2 43.6 42.7 29.9 32.6
Canada & Latin
America 3.6 3.7 (2.0) (1.2) 6.5 6.7
U.S. 77.1 92.1 75.8 102.6 (8.5) 65.9
---------------------------------------------------------------------------------------------
Total $ 190.8 $ 213.6 $ 210.6 $ 242.2 $ 119.8 $ 200.5
=============================================================================================
</TABLE>
Bausch & Lomb Incorporated and Consolidated Subsidiaries page 27
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<PAGE>
The following discussion addresses trends noted on a comparable basis.
Sales outside the U.S. totaled $931 in 1996, an increase of $24 or 3% over
1995. Non-U.S. sales represented 50% of consolidated revenues in 1996, 49% in
1995 and 48% in 1994. European revenues in 1996 increased $26 or 6% from 1995.
Strong contact lens performance, led by PRP lenses and incremental sales of
one-day disposable lenses by Award plc, drove these results, as increases in
shipments of solutions were somewhat offset by declines in price. Sales in the
Asia-Pacific region declined $1 or less than 1%, reflecting the unfavorable
impact of currency exchange rate changes in Japan. Excluding Japan, Asia-Pacific
showed double-digit sales growth in both contact lenses and lens care solutions.
Sunglass sales were below prior year due primarily to significant competitive
pressure. In Latin America and Canada sales declined $2 or 1% from 1995 levels.
Moderate growth for soft lens solutions and PRP lenses in Canada were offset by
decreased sunglass sales throughout most of the region.
U.S. revenues totaled $946, an increase of $17 or 2%, including incremental
sales from Arnette. Vision care sales showed improvement over 1995 with growth
in the Optima FW, Gold Medalist Toric and SofLens66 contact lens lines. Skin
care also showed improvement due primarily to an increase in Curel lotion sales.
Sunglass sales were 7% below 1995 as significant shortfalls in traditional
styles were only partially offset by the success of new products. In addition,
reduced second-half orders from Sunglass Hut International contributed
significantly to the decline in U.S. sales.
Sales in markets outside the U.S. totaled $907 in 1995, an increase of $102
or 13% over 1994. European revenues increased 16% and benefited from the
favorable impact of currency movements, particularly in Germany. This progress
also reflected improved demand for sunglasses, OTC medications, PRP lenses and
lens care products. The Asia-Pacific region reported an increase in sales of 13%
over 1994, primarily due to results in Japan attributable to favorable currency
exchange rates, as well as increased sales of sunglasses, contact lenses and
lens care products. Elsewhere in the region, revenues were essentially even with
1994, as sales increases for PRP lenses and lens care solutions and favorable
foreign currency fluctuations were offset by declines for sunglasses. In Canada
and Latin America, 1995 revenues decreased $1 or 1% as compared to 1994, due
primarily to shortfalls in Mexico, which more than offset improvements in Brazil
and Canada.
U.S. sales totaled $930 in 1995, an increase of $42 or 5% from 1994.
Revenue increases for PRP lenses, sunglasses, pharmaceuticals and hearing aids
were reduced by shortfalls for soft lens care solutions. The improvement
reflected the impact of new product introductions as well as a closer alignment
of the Company's sales to consumer purchasing patterns.
Operating earnings in 1996 in markets outside the U.S. were $121, a
decrease of $18 or 13% from 1995, and represented 57% of total operating
earnings in 1996, 58% in 1995 and 67% in 1994. The decline in earnings in 1996
was attributed to sales of lower-margin new sunglass styles, adverse currency
impacts and an increase in advertising expenditures.
U.S. operating earnings were $92 in 1996. This represents a $10 or 10%
decrease from 1995, due primarily to the margin impact of decreased sunglass and
solutions sales, partially offset by improved profitability in contact lenses.
Operating earnings in 1995 in markets outside the U.S. were $140, an
increase of $5 or 4% over 1994. The increase reflected improvements in Japan
resulting from sales increases for sunglasses and contact lenses, partially
offset by earnings shortfalls elsewhere in the Asia-Pacific region for
traditional contact lenses and sunglasses.
U.S. operating earnings of $103 in 1995 increased $37 or 56% over 1994.
This progress was led by improved results for sunglasses, hearing aids, PRP
lenses and pharmaceuticals. These positive factors more than offset earnings
shortfalls for soft lens solutions resulting from lower sales levels and
increased spending to support ReNu products in 1995.
page 28 Bausch & Lomb Incorporated and Consolidated Subsidiaries
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<PAGE>
Other Income And Expense Interest and investment income was $43 in 1996, $39 in
1995 and $35 in 1994. In 1996, the increase over 1995 was primarily due to
interest received on an income tax refund and to higher income generated from
interest rate swaps, partially offset by lower overall interest rates. The 1995
increase over 1994 was attributable to higher investment levels and interest
rates, partially reduced by lower income generated by an interest rate swap
agreement.
Interest expense was $52 in 1996, $46 in 1995 and $41 in 1994. The 1996
increase over 1995 was primarily attributable to higher debt levels offset by
lower interest rates. The increase in 1995 over 1994 was driven primarily by
higher interest rates.
The Company pursues a neutral strategy with respect to interest rate
movements. Its policy is to maintain, within reasonable parameters, a balance
between floating-rate investments, which are predominately held outside the
U.S., and floating-rate debt, which represents primarily U.S. obligations. To
the extent this natural hedge position becomes unbalanced, the Company may enter
into interest rate swap agreements or undertake long-term fixed-rate borrowings,
the proceeds from which may repay short-term debt. As a result of this practice,
the Company's exposure to the normal rise and fall of U.S. interest rates is
mitigated.
The Company does not engage in foreign currency speculation. Its objective
is to effectively hedge all identified transaction exposures on an after-tax
basis to minimize the impact of exchange rate movements on operating results.
The Company selectively hedges exposures arising in countries with
hyperinflationary economies. In 1996, net foreign currency gains of $2 reflected
transaction gains of $3 offset by translation losses of $1. In 1995, net losses
were $6 ($2 transaction losses and $4 translation losses) and in 1994 net gains
were $3 ($16 transaction gains offset by $13 translation losses). The
favorability in 1996 was primarily due to premium income on foreign exchange
contracts hedging investments in selected subsidiaries and reduced translation
losses resulting from increased economic stability in hyperinflationary
economies, primarily Mexico and Brazil. The unfavorability in 1995 compared to
1994 was due to lower premium income on Irish pound contracts partially offset
by lower translation losses in hyperinflationary economies, primarily Brazil.
The Company's assessment of the probable financial impact of certain legal
matters described in Note 15 -- Litigation led the Company to record pre-tax
litigation provisions of $16 and $22 in 1996 and 1995, respectively.
Income Taxes The Company's reported tax rate was 37.7% in 1996 as compared to
36.9% for 1995 and 52.6% for 1994. Excluding the goodwill impairment charge for
which there was no associated tax benefit, the 1994 reported rate would have
been 32.0%. The higher 1996 and 1995 rates reflect shifts in geographic earnings
and the inability to fully utilize foreign tax credits in each of those years.
The loss on divestiture of the oral care business and gain on divestiture of the
dental implant business also impacted the 1996 reported tax rate.
Net Earnings And Earnings Per Share Reported net earnings were $83 or $1.47 per
share in 1996, compared to $112 or $1.94 per share in 1995 and $31 or $0.52 per
share in 1994. Excluding the loss on sale of the oral care business, the gain on
sale of the dental implant business and restructuring expense, 1996 net earnings
would have been $92 or $1.62 per share. Comparable results of $109 or $1.88 per
share in 1995 and $106 or $1.78 per share in 1994 exclude the after-tax gain on
sale of the Sports Optics Division, restructuring charges in 1995 and the 1994
goodwill impairment charge. Litigation provisions further reduced earnings by
$10 or $0.18 per share after taxes in 1996 and $14 or $0.24 per share after
taxes in 1995. In addition, expenses related to retirement and benefit costs for
the Company's former Chief Executive Officer reduced 1995 earnings by $4 or
$0.08 per share after taxes. Excluding these results from comparisons, 1996
earnings would have been $102 or $1.80 per share, a decrease of $25 or $0.40 per
share from 1995.
Bausch & Lomb Incorporated and Consolidated Subsidiaries page 29
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<PAGE>
Liquidity And Financial Resources
The Company evaluates its liquidity from several perspectives, including its
ability to generate earnings, positive cash flows and free cash flow, its
financial position, its access to financial markets and the adequacy of working
capital levels.
Cash Flows From Operating Activities Cash provided by operating activities
totaled $89 in 1996, a significant decrease from 1995. The change was primarily
attributable to lower earnings, an increase in inventory primarily due to
reduced sunglass sales, an increase in accounts receivable primarily due to
timing of collections and reduced levels of accounts payable and income taxes
due to timing of payments. The Company has a stated goal to maximize free cash
flow, which is defined as cash generated before the payment of dividends, the
borrowing or repayment of debt, stock repurchases and the acquisition or
divestiture of businesses. Free cash flow for 1996 was negative $47, versus a
positive $201 for 1995. This decrease was attributable primarily to the
operating factors cited above and increased capital expenditures in 1996.
In 1995, operating activities generated $290 in cash flow, a $23 increase
from the prior year. The modest improvement from 1994, a year which also
generated strong operating cash flow, was primarily attributable to cash
realized from the net settlement of foreign currency hedge contracts in 1995 and
the comparison against cash used to complete restructuring actions in 1994.
These factors were moderated by the positive cash flow in 1994 generated by
collections on receivables.
Cash Flows From Investing Activities Cash used in investing activities was $142
in 1996, a reduction of $22 from 1995. Capital expenditures totaled $130 in 1996
and included spending for new contact lens technology and enhanced sunglass
manufacturing processes. Cash outflows for acquisitions, which were $2 in 1995,
increased to $86 and included the purchase of Arnette Optic Illusions, a
U.S.-based company marketing sunglasses to the sport market, and Award plc, a
manufacturer of a high-water content daily disposable lens, based in Scotland.
The divestitures of the Company's oral care and dental implant businesses
increased cash flow by $78.
In 1995, cash used in investing activities was $165. Capital expenditures
were $95 with major projects including new contact lens cast molding capacity
and sunglass manufacturing improvements. Other investing activities included the
purchase of $136 in securities of a triple-A rated financial institution and the
divestiture of the Sports Optics Division, which generated cash after taxes of
$61.
Cash Flows From Financing Activities In 1996, $29 in cash was provided by
financing activities. Cash paid for dividends, repayment of long-term debt and
repurchases of Common shares was more than offset by net proceeds from notes
payable and the issuances of long-term debt under the Company's medium-term note
program. During 1996, the Company repurchased 1,836,200 Common shares,
exhausting all share repurchases previously authorized by the board of
directors. In December 1996, the board of directors authorized the repurchase of
an additional 250,000 Common shares, none of which had been purchased prior to
year end.
Net cash used for financing activities in 1995 was $161. Funds were used to
repurchase Common shares, pay dividends and repay long-term debt. Proceeds from
debt, primarily due to an increase in U.S. net short-term borrowings, and
inflows related to employee stock activity partially offset cash used for other
financing activities.
Financial Position The Company's objective of maximizing its return on
shareholders' equity requires the cost of capital to be minimized. The effective
use of debt financing, which the Company uses to lower the cost of capital, has
increased in importance since the transfer of $561 of liquid funds into
long-term investments during 1995 and 1994. These transfers resulted in the
Company's net debt, or borrowings less cash, cash equivalents and short-term
investments, to rise significantly.
In total, short- and long-term borrowings increased by $144 to $718 in
1996. The ratio of total debt to equity stood at 81.5% and 61.8% at year end
1996 and 1995, respectively. Cash and short-term investments totaled $168 in
1996 and $195 in 1995.
page 30 Bausch & Lomb Incorporated and Consolidated Subsidiaries
- - -------
<PAGE>
Access To Financial Markets Bausch & Lomb's reputation, coupled with its
financial position and cash flows, assures access to financing in markets around
the world. The Company's commercial paper has been rated A-2 by Standard &
Poor's and P-2 by Moody's Investor Services. On March 3, 1997, Standard & Poor's
downgraded the Company's long-term debt rating from A to A minus, thereby
bringing it in line with the Moody's A-3 rating. The Company believes that this
does not change its ability to raise money in the capital markets at reasonable
costs. To support its liquidity requirements, the Company maintains U.S.
revolving credit agreements, typically with 364-day credit terms totaling $290.
No debt was outstanding under these agreements at December 28, 1996. The
availability of adequate credit facilities provides the Company with flexibility
to meet its obligations, fund capital expenditures and invest in growth
opportunities.
Working Capital Working capital was $19 at year end 1996 as compared to $71 at
year end 1995. The current ratio was 1.0 and 1.1 at year end 1996 and 1995,
respectively.
Dividends The annual dividend declared on Common stock was $1.04 per share in
1996, $1.01 per share in 1995 and $0.955 per share in 1994. Quarterly dividends
declared on Common stock were raised 6% to $0.26 per share in July 1995 and were
raised 11% to $0.245 per share in March 1994. The Company has a goal of
maintaining a payout rate of between 30% and 35% of the previous year's earnings
before non-recurring charges. Future dividend increases are not certain.
Return On Equity And Capital Return on average shareholders' equity was 9.2% in
1996, compared with 11.9% in 1995 and 3.2% in 1994. These results include the
impact of non-recurring charges. Excluding these amounts, return on equity would
have been 10.3% in 1996, 11.7% in 1995 and 11.0% in 1994. The decrease in 1996
reflected lower earnings in the eyewear segment. The improvement in 1995
reflected improved operating performance in the healthcare, pharmaceuticals and
vision care segments.
Return on average capital employed was 7.2% in 1996, 9.2% in 1995 and 3.8%
in 1994. Excluding non-recurring charges, return on capital would have been 7.8%
in 1996, 9.1% in 1995 and 8.4% in 1994. The changes for both 1996 and 1995 were
due primarily to the operating results discussed above, as well as to increases
in the levels of debt on a year-over-year basis.
Environment The Company believes it is in compliance in all material respects
with applicable environmental laws and regulations. The Company is presently
involved in remediation efforts at certain locations, some of which are
Company-owned. At all such locations, the Company believes such efforts will not
have a materially adverse effect on its results of operations or financial
position.
Outlook
Bausch & Lomb expects its sales and operating earnings performance in 1997 to
move forward consistent with its stated multi-year financial goals.
Sales in the vision care segment are expected to benefit from continued
growth in contact lenses, particularly PRP lenses, as the Company continues to
increase product supply and expand its marketing efforts in the U.S., Europe and
Asia-Pacific regions. International sales of lens care products are expected to
increase, while sales in the U.S. are expected to remain relatively flat due to
increased private label competition. The Company will continue to reduce
structural and product costs in an effort to improve margins as the market
continues to migrate toward lower-margin PRP lenses.
Bausch & Lomb Incorporated and Consolidated Subsidiaries page 31
-------
<PAGE>
1997 will be an important year for the eyewear segment. In an industry
where consumer preferences are rapidly changing, it has become increasingly
difficult to predict short-term trends and the shift in preference from
traditional to newer styles occurred more rapidly than anticipated. Efforts
began early in 1996 to reconfigure the manufacturing process in order to swiftly
respond to changing consumer demands and to lower costs. The establishment of
three vertically-integrated product delivery centers to serve the Company's
major global markets is expected to be finalized during 1997. Once this
manufacturing strategy is operational, it should improve the Company's speed to
market, flexibility and profitability. The Company plans to grow this segment
through the continued international expansion of the Revo, Killer Loop, Arnette
and Liz Claiborne lines and the launch of Porsche Design sunglasses. Efforts in
1997 will include stabilizing the Ray-Ban product line by revitalizing its image
and retail presence. Revenues in the Ray-Ban product line are expected to be
relatively consistent with 1996 levels, with the growth of new styles such as
Orbs and Sidestreet and the launch of new products in 1997 offsetting the
continued decline in traditional styles. Operating earnings in this segment are
expected to be positive, reflecting the margin impact of incremental sunglass
sales as well as the benefits of restructuring efforts undertaken during 1996.
Within the pharmaceuticals segment, the Company is projecting to increase
revenues worldwide, through introduction of new products such as Lotemax. This
growth will be contingent upon receipt of required regulatory approvals and the
Company's ability to shift its product portfolio from generics toward a greater
percentage of higher-margin proprietary pharmaceuticals. Operating earnings are
expected to improve during 1997; an increase in research and development
expenses is expected to be more than offset by a planned reduction of fixed
operating expenses within the U.S. and Europe.
Revenues in the healthcare segment also are forecasted to grow during 1997
through product line extensions in the biomedical business and projected growth
in hearing aid revenues due to increased direct sales from Company-owned stores.
Operating earnings are projected to improve moderately, due to the margin impact
of the increased biomedical sales. Earnings in the hearing aid business are
forecasted to be slightly positive in 1997.
Consolidated earnings should continue to benefit from the restructuring
efforts announced during 1996 and 1995, as the Company strives to reduce
annualized costs in 1997 and 1998. In addition, the Company announced the
retention of a consulting firm to assist in identifying further cost reduction
opportunities and organizational efficiencies during the first half of 1997.
These efforts will be critical to reducing the overall cost structure and
supporting the Company's strategy to become a globally managed eye care
business.
Net financing expenses are expected to be comparable with 1996 after
excluding the impact of the interest received on the income tax refund. Interest
expense is contingent on the level of debt, which increased during 1996, and on
interest rates. Currency gains and losses are also dependent on trends in
interest rates, primarily in Ireland, Japan, Germany and the U.S. and on
exchange rate changes in certain hyperinflationary economies, including Mexico
and Brazil. The Company makes no attempts to predict changes in exchange rates.
The Company is projecting to generate positive cash flow, with free cash
flow approximating earnings, as the Company will aggressively manage operating
assets. An important element of this is the effective management of sunglass
inventories. Capital expenditures are forecasted to total approximately $125 in
1997, with more than half of this amount being invested in projects to improve
manufacturing technologies and increase capacity within the contact lens
business.
Information Concerning Forward-Looking Statements
The statements in this financial review which are not historical facts are
forward-looking statements that involve risks and uncertainties. The Company
operates in a rapidly changing environment that involves a number of risks, some
of which are beyond the Company's control. The following discussion highlights
some of the risks and uncertainties and the possible impact of these factors on
future results of operations. Actual results, performance or achievements of the
Company may be materially different from the projected results, per formance or
achievements expressed or implied by such risks. Among the key factors that may
have a direct bearing on the Company's results are:
page 32 Bausch & Lomb Incorporated and Consolidated Subsidiaries
- - -------
<PAGE>
Global Economic And Political Conditions The Company experiences fluctuations in
operating results due to seasonality and general economic conditions in the
global market place. Fluctuating exchange rates between the U.S. and foreign
currencies, particularly in those countries in Europe and Asia where the Company
has several principal manufacturing plants, may have a material adverse effect
on the Company's future international sales and consolidated results of
operations. Additionally, there is uncertainty in the economic outlook in the
Asia-Pacific region, particularly due to Hong Kong reverting to China rule, as
the Company has its North Asia headquarters, the Asia Distribution Center and a
sunglass manufacturing facility in Hong Kong.
Customer Concentration The Company's two largest customers together comprised
almost 10% of the Company's revenues in 1996, and one of these customers,
Sunglass Hut International, comprised over 15% of the Company's eyewear segment
revenues. A reduction in orders from these or other of the Company's major
customers could have a material adverse effect on the Company's businesses in
future periods.
Product Development And Introduction The vision care and eyewear industries are
characterized by rapid changes in technology and consumer preference. The
Company believes that its future results will depend largely upon its ability to
offer products that compete favorably with respect to price, demand, performance
and innovative design. This in turn is affected by the Company's ability to
develop new manufacturing technologies and to timely develop new products and
gain acceptance of those products.
The Company has observed a trend among contact lens wearers to switch from
traditional lenses to lower-margin products, such as planned replacement and
disposable lenses. The Company's ability to improve profitability in 1997 and
beyond will depend heavily on the ability to reduce the cost of producing these
lenses.
Success in the eyewear area will require innovative design, marketing
expertise and flexible delivery and logistical capabilities. An inability to
reduce high levels of inventory of certain eyewear styles or delays or
difficulties with new product introductions or product enhancements could have a
material adverse effect on the Company's future business results.
Product Concentration The Company derives a substantial portion of its revenues
from sales of vision care solutions and eyewear. Any factor adversely affecting
sales of vision care solutions and eyewear, including such factors as product
performance, changing trends in consumer preferences and tastes, consumer
demand, price competition and growth of private label competition for solutions,
could have a material adverse effect on the Company's future business results.
Regulatory Approval The Company is subject to risks associated with future
adverse changes in the laws and regulations affecting products, taxes, the
environment and other gove-+
rnmentally regulated areas. In particular, growth in
the pharmaceuticals business is contingent upon obtaining necessary regulatory
approvals. In addition, this business anticipates shifting its current product
portfolio toward a more even balance between higher-margin proprietary
pharmaceuticals and lower-margin generic pharmaceuticals. Failure to shift the
portfolio to a more even balance, delay in regulatory approval and increased
competition in the generic pharmaceuticals business could have a material
adverse impact on the Company's future business results.
General Litigation The cost of legal proceedings instituted by or against the
Company could negatively impact future results of operations.
Costs And Expenses Risks associated with the Company's cost of manufacturing
products and operating and administrative expenses could be material to the
Company's consolidated financial results. In particular, expenses such as
pricing and the availability of equipment, material and supplies and the cost of
capital could have a significant adverse effect on results of operations.
Bausch & Lomb Incorporated and Consolidated Subsidiaries page 33
-------
<PAGE>
Quarterly Information
Quarterly Results The following table presents reported net sales, gross profit
(net sales less cost of products sold), net earnings (loss) and net earnings
(loss) per share for each quarter during the past three years:
<TABLE>
<CAPTION>
Net Earnings
Net Gross Net Earnings (Loss)
Sales Profit (Loss) Per Share
- - ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1996
First $ 469.3 $ 261.4 $ 22.5 $ 0.39
Second 545.5 311.8 30.3(1) 0.54(1)
Third 477.2 257.4 14.4(2) 0.25(2)
Fourth 434.8 223.9 15.9(3) 0.29(3)
-------------------------------------------------------------------------------------
Total $1,926.8 $1,054.5 $ 83.1 $ 1.47
=====================================================================================
1995
First $ 465.6 $ 247.2 $ 20.3 $ 0.34
Second 535.4 301.4 51.6(4) 0.89(4)
Third 476.8 271.3 43.5 0.75
Fourth 455.1 253.0 (3.4)(5) (0.04)(5)
-------------------------------------------------------------------------------------
Total $1,932.9 $1,072.9 $ 112.0 $ 1.94
=====================================================================================
1994
First $ 439.4 $ 234.7 $ 35.9 $ 0.60
Second 485.6 262.4 33.9 0.57
Third 486.1 238.0 23.4 0.39
Fourth 481.6 244.3 (62.1)(6) (1.04)(6)
-------------------------------------------------------------------------------------
Total $1,892.7 $ 979.4 $ 31.1 $ 0.52
=====================================================================================
</TABLE>
(1) Includes the after-tax effect of restructuring charges of $10.9 or $0.19
per share.
(2) Includes the after-tax effect of a litigation provision of $10.0 or $0.18
per share and the after-tax loss on sale of the Oral Care Division of $6.3
or $0.11 per share.
(3) Includes the after-tax gain on sale of the dental implant business of $8.5
or $0.15 per share.
(4) Includes the after-tax gain on sale of the Sports Optics Division of $20.8
or $0.36 per share and the after-tax charge of a litigation provision of
$10.6 or $0.18 per share.
(5) Includes the after-tax effect of restructuring charges of $17.4 or $0.30
per share, after-tax effect of a litigation provision of $3.6 or $0.06 per
share and the after-tax effect of CEO retirement charge of $4.4 or $0.08
per share.
(6) Includes goodwill impairment charge, with no associated tax benefit, of
$75.0 or $1.26 per share.
Quarterly Stock Prices Bausch & Lomb Common stock is listed on the New York
Stock Exchange and is traded under the symbol BOL. The following table shows the
price range of the Common stock for each quarter for the past three years:
<TABLE>
<CAPTION>
1996 1995 1994
Price Per Share Price Per Share Price Per Share
--------------------------------------------------------------------------------------------
High Low High Low High Low
- - --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
First $41 3/8 $37 $36 1/4 $30 7/8 $53 7/8 $47 1/2
Second 44 1/2 36 1/8 42 1/4 35 1/4 52 37 1/8
Third 43 1/8 32 1/2 44 1/2 39 1/2 39 3/4 34 1/4
Fourth 38 1/4 32 1/2 41 1/8 32 1/4 39 3/8 30 5/8
====================================================================================================================
</TABLE>
page 34 Bausch & Lomb Incorporated and Consolidated Subsidiaries
- - -------
<PAGE>
Statement Of Earnings
----------------------------------------------------------------------
<TABLE>
<CAPTION>
For The Years Ended
December 28, 1996, December 30, 1995 and December 31, 1994
Dollar Amounts In Millions-- Except Per Share Data 1996 1995 1994
- - ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net Sales $1,926.8 $1,932.9 $1,892.7
Costs And Expenses
Cost of products sold 872.3 860.0 913.3
Selling, administrative and general 773.1 770.0 724.2
Research and development 75.5 65.6 60.4
Restructuring charges 15.1 26.7 --
Goodwill impairment charge -- -- 75.0
--------------------------------------------
1,736.0 1,722.3 1,772.9
--------------------------------------------
Operating Earnings 190.8 210.6 119.8
--------------------------------------------
Other Expense (Income)
Interest and investment income (42.8) (39.0) (35.3)
Interest expense 51.7 45.8 41.4
(Gain) loss from foreign currency, net (1.6) 6.2 (2.6)
Gain on divestitures (1.5) (35.9) --
Litigation provision 16.1 21.7 --
--------------------------------------------
21.9 (1.2) 3.5
--------------------------------------------
Earnings Before Income Taxes And Minority Interest 168.9 211.8 116.3
Provision for income taxes 63.7 78.1 61.1
--------------------------------------------
Earnings Before Minority Interest 105.2 133.7 55.2
Minority interest 22.1 21.7 24.1
--------------------------------------------
Net Earnings 83.1 112.0 31.1
Retained Earnings At Beginning Of Year 900.1 846.2 871.7
Cash Dividends Declared -- Common Stock,
$1.04 per share for 1996 ($1.01 for 1995 and $0.955 for 1994) (58.5) (58.1) (56.6)
--------------------------------------------
Retained Earnings At End Of Year $ 924.7 $ 900.1 $ 846.2
============================================
Earnings Per Common Share $ 1.47 $ 1.94 $ 0.52
============================================
Average Shares Outstanding (000s) 56,552 57,852 59,739
===================================================================================================================================
See Notes To Financial Statements
</TABLE>
Bausch & Lomb Incorporated and Consolidated Subsidiaries page 35
-------
<PAGE>
Balance Sheet
----------------------------------------------------------------------
<TABLE>
<CAPTION>
December 28, 1996 and December 30, 1995
Dollar Amounts In Millions -- Except Per Share Data 1996 1995
- - ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Assets
Current Assets
Cash, cash equivalents and short-term investments $ 167.8 $ 194.6
Trade receivables, less allowances of $13.3 and $11.2, respectively 268.4 250.6
Inventories, net 339.8 304.3
Recoverable income taxes 6.0 --
Deferred taxes, net 48.6 82.6
Other current assets 117.0 98.3
------------------------------
947.6 930.4
Property, Plant And Equipment, net 566.7 550.4
Goodwill And Other Intangibles, less accumulated amortization
of $83.8 and $96.6, respectively 390.9 381.5
Other Investments 560.3 561.2
Other Assets 137.9 126.6
------------------------------
Total Assets $ 2,603.4 $ 2,550.1
==============================
Liabilities And Shareholders' Equity
Current Liabilities
Notes payable $ 394.1 $ 284.5
Current portion of long-term debt 88.0 99.0
Accounts payable 71.1 81.9
Accrued compensation 82.2 79.8
Accrued liabilities 293.7 275.9
Federal and foreign income taxes payable -- 38.4
------------------------------
929.1 859.5
Long-Term Debt, less current portion 236.3 191.0
Other Long-Term Liabilities 124.0 139.9
Minority Interest 432.1 430.4
------------------------------
Total Liabilities 1,721.5 1,620.8
------------------------------
Shareholders' Equity
4% Cumulative Preferred stock, par value $100 per share -- --
Class A Preferred stock, par value $1 per share -- --
Common stock, par value $0.40 per share, 60,198,322 shares issued 24.1 24.1
Class B stock, par value $0.08 per share, 1,150,409 shares issued
(1,268,578 shares in 1995) 0.1 0.1
Capital in excess of par value 96.1 107.8
Retained earnings 924.7 900.1
Common and Class B stock in treasury, at cost, 5,944,982 shares
(4,525,844 shares in 1995) (230.5) (178.7)
Other shareholders' equity 67.4 75.9
------------------------------
Total Shareholders' Equity 881.9 929.3
------------------------------
Total Liabilities And Shareholders' Equity $2,603.4 $2,550.1
===================================================================================================================================
See Notes To Financial Statements
</TABLE>
page 36 Bausch & Lomb Incorporated and Consolidated Subsidiaries
- - -------
<PAGE>
Statement Of Cash Flows
----------------------------------------------------------------------
<TABLE>
<CAPTION>
For The Years Ended
December 28, 1996, December 30, 1995 and December 31, 1994
Dollar Amounts In Millions 1996 1995 1994
- - ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash Flows From Operating Activities
Net earnings $ 83.1 $112.0 $ 31.1
Adjustments to reconcile net earnings to net cash provided by operating activities:
Depreciation 92.6 89.2 82.4
Amortization 20.7 16.1 16.9
Goodwill impairment charge -- -- 75.0
Change in deferred income taxes 23.2 (44.8) 36.8
Gain on divestitures, net of taxes (2.2) (20.8) --
Stock compensation expense 1.3 5.6 1.4
Provision for litigation expense, net of taxes 10.0 14.2 --
Restructuring charges, net of taxes 10.9 17.4 --
Loss on retirement of fixed assets 2.9 3.2 13.0
Exchange (gain) loss (6.4) 8.2 (0.2)
Changes in assets and liabilities:
Trade receivables (22.4) 8.6 82.4
Inventories (45.1) (18.2) 7.7
Other current assets (23.9) 16.6 3.8
Accounts payable and accrued liabilities (7.2) 41.8 (50.2)
Income taxes (40.8) 40.6 (55.2)
Other long-term liabilities (7.4) 0.3 22.4
------------------------------
Net cash provided by operating activities 89.3 290.0 267.3
------------------------------
Cash Flows From Investing Activities
Payments for purchases of property, plant and equipment (130.3) (95.5) (84.8)
Proceeds from sale of equipment 9.6 -- --
Net cash paid for acquisition of businesses (85.7) (1.9) (29.1)
Net cash received from divestitures 77.7 60.5 --
Other investments -- (136.0) (425.0)
Other (13.8) 8.0 (13.2)
------------------------------
Net cash used in investing activities (142.5) (164.9) (552.1)
------------------------------
Cash Flows From Financing Activities
Repurchases of Common and Class B shares (67.8) (94.1) (20.6)
Exercise of stock options 5.2 5.4 8.1
Net proceeds from notes payable 111.4 32.3 29.6
Proceeds from issuance of long-term debt 135.2 0.6 11.1
Repayment of long-term debt (96.4) (47.8) (24.3)
Payment of dividends (58.9) (57.8) (55.2)
------------------------------
Net cash provided by (used in) financing activities 28.7 (161.4) (51.3)
------------------------------
Effect of exchange rate changes on cash, cash equivalents and short-term investments (2.3) (1.6) 22.6
------------------------------
Net decrease in cash, cash equivalents and short-term investments (26.8) (37.9) (313.5)
------------------------------
Cash, Cash Equivalents And Short-Term Investments, Beginning Of Year 194.6 232.5 546.0
------------------------------
Cash, Cash Equivalents And Short-Term Investments, End Of Year $167.8 $194.6 $232.5
===================================================================================================================================
See Notes To Financial Statements
</TABLE>
Bausch & Lomb Incorporated and Consolidated Subsidiaries page 37
-------
<PAGE>
Notes To Financial Statements
----------------------------------------------------------------------
Dollar Amounts In Millions -- Except Per Share Data
Note 1: Accounting Policies
Principles Of Consolidation The financial statements include all
majority-owned U.S. and non-U.S. subsidiaries. Intercompany accounts,
transactions and profits are eliminated. The fiscal year is the 52- or
53-week period ending the last Saturday in December. Certain amounts
in the prior years' financial statements have been reclassified to
conform with the current year's presentation.
Use Of Estimates The financial statements have been prepared in
conformity with generally accepted accounting principles and, as such,
include amounts based on informed estimates and judgments of
management with consideration given to materiality. For example,
estimates are used in determining valuation allowances for
uncollectible accounts receivable, obsolete inventory and deferred
income taxes. Actual results could differ from those estimates.
Cash And Cash Equivalents Cash equivalents include time deposits and
highly liquid investments with original maturities of three months or
less.
Inventories Inventories are valued at the lower of cost or market,
generally using the first-in, first-out (FIFO) method. However, cost
is determined by using the last-in, first-out (LIFO) method for
certain U.S. inventories.
Property, Plant And Equipment Property, plant and equipment, including
improvements that significantly add to productive capacity or extend
useful life, are recorded at cost, while maintenance and repairs are
expensed currently. Depreciation is calculated for financial reporting
purposes using the straight-line method based on the estimated useful
lives of the assets as follows: buildings, 30 to 40 years; machinery
and equipment, 2 to 10 years; and leasehold improvements, the lease
periods.
Goodwill Goodwill is amortized on a straight-line basis over periods
ranging from 10 to 40 years. The Company evaluates goodwill for
impairment at least annually. In completing this evaluation, the
Company compares its best estimate of future cash flows, excluding
interest costs, with the carrying value of goodwill.
Revenue Recognition Revenues are generally recognized when products
are shipped. The Company has established programs which, under
specified conditions, enable customers to return product. The Company
establishes liabilities for estimated returns and allowances at the
time of shipment. In addition, accruals for customer discounts and
rebates are recorded when revenues are recognized.
Stock-Based Compensation The Company measures compensation cost for
its stock-based compensation plans under the provisions of Accounting
Principles Board (APB) Opinion No. 25, "Accounting for Stock Issued to
Employees." In accordance with Statement of Financial Accounting
Standards (SFAS) No. 123, "Accounting for Stock-Based Compensation,"
disclosure of compensation costs on the basis of fair value is
presented in Note 14 -- Stock Compensation Plans.
Advertising Expense External costs incurred in producing media
advertising are expensed the first time the advertising takes place.
Promotional or advertising costs associated with customer support
programs are accrued when the related revenues are recognized.
At December 28, 1996 and December 30, 1995, $5.8 and $6.4 of
deferred advertising costs representing production and design costs
for advertising to be run in the subsequent fiscal year, were reported
as other current assets. Advertising expenses of $241.8, $232.5 and
$211.0 were included in the Company's results of operations for 1996,
1995 and 1994, respectively.
page 38 Bausch & Lomb Incorporated and Consolidated Subsidiaries
- - -------
<PAGE>
Start-Up Costs One-time, incremental out-of-pocket expenditures
directly related to and incurred during the start-up phase of major
internal projects are deferred and amortized over future periods. Upon
conclusion of the start-up period, these costs are amortized on a
straight-line basis over periods of no more than three years.
Recoverability of these costs is assessed on an ongoing basis and
writedowns to net realizable value are recorded as necessary. At
December 28, 1996 and December 30, 1995, $4.3 and $9.5 of start-up
costs were reported as other assets.
Investments In Debt And Equity Securities Certain of the Company's
other investments are classified as available-for-sale under the terms
of SFAS No. 115, "Accounting for Certain Investments in Debt and
Equity Securities," and accordingly, any unrealized holding gains and
losses, net of taxes, are excluded from income and recognized as a
component of other shareholders' equity until realized. Fair value of
the securities is determined based on market prices or using
discounted cash flows and investment risk.
Foreign Currency Translation Assets and liabilities of certain
non-U.S. subsidiaries are translated at current exchange rates, and
related revenues and expenses are translated at average exchange rates
in effect during the period. Resulting translation adjustments are
recorded in shareholders' equity. Financial results of non-U.S.
subsidiaries in countries with highly inflationary economies are
translated using a combination of current and historical exchange
rates and any translation adjustments are included in net earnings,
along with all transaction gains and losses for the period.
Derivative Financial Instruments Derivative financial instruments are
utilized to hedge interest rate and foreign exchange risks and are not
held or issued for trading purposes.
Gains and losses on hedges of transaction exposures are included
in income in the period in which exchange rates change; those related
to hedges of foreign currency firm commitments are deferred and
recognized in the basis of the transaction when completed while those
on forward contracts hedging non-U.S. equity investments are offset
against the currency component in shareholders' equity. The Company
also periodically enters into interest rate swap and cap agreements to
effectively limit interest rate exposure. Net payments or receipts are
accrued into other current assets and accrued liabilities and recorded
as adjustments to interest expense or as interest income.
The Company amortizes premium income or expense incurred by
buying or selling foreign exchange and interest rate instruments over
the life of the agreements as non-operating income and expense. Gains
and losses on terminated swaps are recognized over the remaining life
of the underlying obligation as an adjustment to interest income or
interest expense.
Earnings Per Share Earnings per Common share are based on the weighted
average number of Common and Class B shares outstanding during the
year, adjusted for the assumed conversion of dilutive stock options.
In computing the per share effect of assumed conversion, funds which
would have been received from the exercise of options are considered
to have been used to purchase Common shares at current market prices,
and the resulting net additional Common shares are included in the
calculation of average Common shares outstanding.
Note 2: Restructuring Charges
In June 1996, the Company's board of directors approved plans to
restructure portions of the vision care and eyewear operations and
certain corporate administration functions. Accordingly, a pre-tax
restructuring charge of $15.1 was recorded, the major components of
which are summarized in the table following:
Bausch & Lomb Incorporated and Consolidated Subsidiaries page 39
-------
<PAGE>
<TABLE>
<CAPTION>
Corporate
Eyewear Vision Care Administration Total
--------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Employee separations $2.5 $4.5 $1.5 $8.5
Asset writedowns 0.6 1.1 -- 1.7
Other 1.9 3.0 -- 4.9
-----------------------------------------------------
$5.0 $8.6 $1.5 $15.1
=====================================================
</TABLE>
A portion of the vision care charge provided for a streamlining of
U.S. operations. The remainder of the charge, along with the eyewear
charge, provided for the reorganization of European and Asia-Pacific
operations, primarily warehousing and logistics. The corporate
administration charge provided for the streamlining of certain
functions.
In December 1995, the Company's board of directors approved plans
to restructure portions of the eyewear, healthcare and vision care
operations, as well as certain corporate administration functions and
a pre-tax restructuring charge of $26.7 was recorded. The major
components of the restructuring charge are set forth in the table
below:
<TABLE>
<CAPTION>
Corporate
Eyewear Healthcare Vision Care Administration Total
--------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Employee separations $11.8 $2.1 $ -- $ 2.0 $15.9
Asset writedowns 3.4 2.2 3.1 1.0 9.7
Other 0.6 0.5 -- -- 1.1
---------------------------------------------------------
$15.8 $4.8 $3.1 $ 3.0 $26.7
=========================================================
</TABLE>
The eyewear charge provided for the closure of certain U.S. sunglass
manufacturing operations and consolidation of administrative functions
in the U.S. commercial business. The healthcare charge provided for
the closure of certain animal production facilities in the biomedical
operations in North America and Europe, as well as the consolidation
of certain administrative functions. The vision care charge provided
for costs associated with losses on disposition of assets related to
elective strategy changes for the traditional contact lens business.
The corporate administration charge provided for the streamlining of
corporate operations.
Asset writedowns primarily related to facilities being closed and
losses on disposition of equipment. Other charges included losses
under lease and other commitments.
The following table sets forth the activity in the restructuring
reserves through December 28, 1996:
<TABLE>
<CAPTION>
Corporate
Eyewear Healthcare Vision Care Administration Total
--------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Restructuring provisions:
1995 $15.8 $4.8 $3.1 $3.0 $26.7
1996 5.0 -- 8.6 1.5 15.1
Less charges against 1995 reserve:
Non-cash items 3.4 2.2 3.1 1.0 9.7
Cash payments 5.2 2.6 -- 1.0 8.8
Less charges against 1996 reserve:
Non-cash items 0.9 -- 1.0 -- 1.9
Cash payments 0.8 -- 2.0 0.7 3.5
------------------------------------------------------------
Balance at December 28, 1996 $10.5 $ -- $5.6 $1.8 $17.9
============================================================
</TABLE>
All actions contemplated at the time of establishing the reserves have
been initiated and are expected to be fully completed by June 1997.
Reserves remaining at December 28, 1996 primarily represent
liabilities for continuing severance payments and are considered to be
adequate.
page 40 Bausch & Lomb Incorporated and Consolidated Subsidiaries
- - -------
<PAGE>
Note 3: Geographic Region And Business Segment Information
During 1996, the Company realigned its business segments to reflect
its strategic emphasis on eye care products.
The Company's operating results are now reported in four
segments: vision care, eyewear, pharmaceuticals and healthcare. The
vision care segment includes contact lenses, lens materials and lens
care products. The eyewear segment includes sunglasses, optical thin
film coating services and products and the sports optics business
which was divested in 1995. The pharmaceuticals segment includes
prescription pharmaceuticals and over-the-counter (OTC) medications.
The healthcare segment includes purpose-bred laboratory animals,
specific pathogen-free eggs, skin care products, hearing aids and the
oral care and dental implant businesses which were divested in 1996.
The majority of the Company's products are marketed globally
through optical shops, distributors, healthcare practitioners or
retailers. Ophthalmic pharmaceuticals and OTC medications are marketed
primarily in the U.S. and Europe.
Inter-area sales to affiliates represent products which are
transferred between geographic regions on a basis intended to reflect
the market value of the products as nearly as possible.
Identifiable assets are those assets used exclusively in the
operations of each business segment or geographic region, or which are
allocated when used jointly. Corporate assets are principally cash and
cash equivalents, short-term investments, other investments and
certain property, plant and equipment.
The following tables present sales and other financial
information by geographic region and business segment for the years
1996, 1995 and 1994:
<TABLE>
<CAPTION>
Geographic Region Europe,
Middle East Asia- Canada &
U.S. & Africa Pacific Latin America Consolidated
-------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1996
Sales to unaffiliated customers $ 976.7 $ 494.8 $341.0 $114.3 $1,926.8
Inter-area sales to affiliates 162.4 75.5 19.7 3.1 260.7
Operating earnings 77.1 74.3 35.8 3.6 190.8(1)
Identifiable assets 1,204.2 1,090.5 238.3 70.4 2,603.4
========================================================================
1995
Sales to unaffiliated customers $ 997.6 $ 471.0 $345.3 $119.0 $1,932.9
Inter-area sales to affiliates 151.6 79.7 13.0 4.2 248.5
Operating earnings 75.8 93.2 43.6 (2.0) 210.6(2)
Identifiable assets 1,152.6 1,078.4 244.1 75.0 2,550.1
========================================================================
1994
Sales to unaffiliated customers $1,045.3 $ 414.2 $303.7 $129.5 $1,892.7
Inter-area sales to affiliates 135.6 101.6 1.6 4.4 243.2
Operating earnings (8.5) 91.9 29.9 6.5 119.8(3)
Identifiable assets 1,187.6 918.9 269.3 81.9 2,457.7
========================================================================
</TABLE>
(1) Includes restructuring charges of $15.1 as follows: U.S., $6.3;
Europe, Middle East & Africa, $6.5; Asia-Pacific, $1.9 and Canada
& Latin America, $0.4.
(2) Includes restructuring charges of $26.7 as follows: U.S., $22.9;
Europe, Middle East & Africa, $3.3 and Canada & Latin America,
$0.5.
(3) Includes goodwill impairment charge of $75.0 in the U.S. related
to the oral care business divested in 1996.
Bausch & Lomb Incorporated and Consolidated Subsidiaries page 41
-------
<PAGE>
The amounts in the table below have been restated to coincide
with the new business segments. Individual product line results
comprising each segment have not been restated, and the Company has
applied consistent allocation methodologies to determine those
results.
Business Segment
<TABLE>
<CAPTION>
Operating Identifiable Capital
Net Sales Earnings Depreciation Assets Expenditures
-----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1996
Vision care $ 869.1 $182.1 $38.2 $ 646.1 $ 61.9
Eyewear 525.1 (5.6) 23.4 461.0 28.6
Pharmaceuticals 189.0 28.6 8.4 200.5 14.2
Healthcare 343.6 34.8 16.9 417.6 21.5
Corporate administration -- (49.1) 5.7 878.2 4.1
------------------------------------------------------------------------------
$1,926.8 $190.8(1) $92.6 $2,603.4 $130.3
==============================================================================
1995
Vision care $ 813.7 $158.5 $34.2 $ 593.2 $ 38.7
Eyewear 581.4 43.7 25.7 410.1 19.9
Pharmaceuticals 181.5 38.5 8.5 196.1 12.7
Healthcare 356.3 30.8 17.9 430.1 14.4
Corporate administration -- (60.9) 2.9 920.6 9.8
------------------------------------------------------------------------------
$1,932.9 $ 210.6(2) $89.2 $2,550.1 $ 95.5
==============================================================================
1994
Vision care $ 749.5 $140.7 $31.3 $ 601.7 $ 45.3
Eyewear 649.9 72.6 23.0 471.8 20.4
Pharmaceuticals 142.3 24.7 7.4 186.0 5.3
Healthcare 351.0 (74.4)(3) 17.8 423.4 13.3
Corporate administration -- (43.8) 2.9 774.8 0.5
------------------------------------------------------------------------------
$1,892.7 $119.8 $82.4 $2,457.7 $ 84.8
==============================================================================
</TABLE>
(1) Includes restructuring charges of $15.1 as follows: vision care,
$8.6; eyewear, $5.0; corporate administration, $1.5.
(2) Includes restructuring charges of $26.7 as follows: vision care,
$3.1; eyewear, $15.8; healthcare, $4.8; corporate administration,
$3.0.
(3) Includes goodwill impairment charge of $75.0.
Note 4: Supplemental Balance Sheet And Cash Flow Information
Accounts Receivable The Company has entered into two agreements to
sell undivided interests in designated pools of trade accounts
receivable. A U.S. agreement for up to $75.0 which originally expired
in July 1996 was extended to July 1997. A non-U.S. agreement for up to
3 billion Japanese yen expires in December 1997. At December 28, 1996
and December 30, 1995, approximately $86.8 and $94.5 of receivables,
respectively, were sold under these agreements and were reflected as
reductions of trade accounts receivable. Fees and discounting expense
related to the U.S. agreement were recorded as interest expense and
totaled approximately $3.8 in 1996, $4.5 in 1995 and $3.7 in 1994.
Concentrations of credit risk with respect to trade receivables
are limited due to the large number of customers comprising the
Company's customer base, and their dispersion across different
businesses and geographic areas.
page 42 Bausch & Lomb Incorporated and Consolidated Subsidiaries
- - -------
<PAGE>
Inventories
December 28, December 30,
1996 1995
---------------------------------------------------------------------
Raw materials and supplies $ 89.4 $ 76.8
Work in process 20.1 21.9
Finished products 238.3 214.9
---------------------
347.8 313.6
Less allowance for valuation of certain U.S.
inventories at LIFO 8.0 9.3
---------------------
$339.8 $304.3
=====================
Inventories valued using LIFO $ 74.9 $ 69.1
=====================
Property, Plant And Equipment
December 28, December 30,
1996 1995
----------------------------------------------------------------------
Land $ 22.1 $ 22.1
Leasehold improvements 33.1 33.7
Buildings 403.7 397.0
Machinery and equipment 689.7 630.0
---------------------
1,148.6 1,082.8
Less accumulated depreciation 581.9 532.4
---------------------
$ 566.7 $ 550.4
=====================
Cash Flow Information Payments of interest in 1996, 1995 and 1994 were
$48.6, $44.6 and $39.8, respectively. Payments of income taxes during
those years were $89.9, $96.7 and $69.8, respectively.
Note 5: Other Investments
In 1995, the Company invested 219 million Netherlands guilders (NLG)
approximating $136.0 in securities issued by a subsidiary of a
triple-A rated financial institution. The issuer's investments are
restricted to high quality short-term investments and government
obligations and the issuer reinvests all of its income. At December
28, 1996, the average U.S. dollar rate of return was 5.38%, including
the effects of foreign currency transactions which effectively hedge
the currency risk and convert the NLG income to a U.S. dollar rate of
return. The Company has the right to call for redemption of the shares
held each quarter at net asset value. In the event this right is not
exercised, the triple-A rated financial institution has the right to
put the shares it owns to the Company in March and June 2003.
In 1994, the Company invested $425.0 in securities issued by a
subsidiary of a double-A rated financial institution. The securities
rank senior to all other classes of the issuer's equity and rank
junior to the secured and unsecured liabilities of the issuer,
including subordinated debt obligations, and are neither payable upon
demand nor have a fixed maturity. The securities pay quarterly
cumulative dividends at a variable LIBOR-based rate. At December 28,
1996, this rate was 5.00%. The issuer holds a call option on the
Bausch & Lomb Incorporated and Consolidated Subsidiaries page 43
-------
<PAGE>
securities, exercisable upon 180 days notice. The securities will
become freely transferable in approximately seven years. At that time,
the dividend rate will be reset, if necessary, to ensure that the
market value of the securities is equal to par value. As of December
28, 1996, an $11.8 net unrealized foreign currency loss related to
this investment has been recorded in equity.
Management believes that overall the investments are fully
recoverable, based on the high quality and stability of the
institutions, however, the investments are subject to equity risks.
Note 6: Provision For Income Taxes
An analysis of the components of earnings before income taxes and
minority interest and the related provision for income taxes is
presented below:
<TABLE>
<CAPTION>
1996 1995 1994
------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Earnings before income taxes and minority interest:
U.S $ 42.0 $ 64.4 $ (3.6)
Non-U.S 126.9 147.4 119.9
---------------------------------
$168.9 $211.8 $116.3
=================================
Provision for income taxes:
Federal
Current $ (3.2) $ 57.1 $ (7.3)
Deferred 13.9 (27.5) 28.3
State
Current 4.4 12.3 (2.1)
Deferred 2.0 (6.2) 5.6
Foreign
Current 48.4 47.1 27.5
Deferred (1.8) (4.7) 9.1
---------------------------------
$ 63.7 $ 78.1 $ 61.1
=================================
</TABLE>
Deferred taxes recognize the impact of temporary differences between
the amounts of assets and liabilities recorded for financial statement
purposes and such amounts measured in accordance with tax laws and are
detailed below. Realization of the tax loss and credit carryforwards,
which expire between 1997 and 2011, is contingent on future taxable
earnings. Valuation allowances have been recorded for these and other
asset items which may not be realized.
page 44 Bausch & Lomb Incorporated and Consolidated Subsidiaries
- - -------
<PAGE>
<TABLE>
<CAPTION>
December 28, 1996 December 30, 1995
- - ------------------------------------------------------------------------------------------------------------
Assets Liabilities Assets Liabilitie
--------------------------------------------
<S> <C> <C> <C> <C>
Current:
Employee benefits and compensation $ 17.6 $ -- $ 19.8 $ --
Inventories 28.0 -- 34.3 --
Tax loss and credit carryforwards 1.2 -- 1.5 --
Restructuring accruals 6.6 -- 11.4 --
Sales and allowance accruals 19.6 -- 20.1 --
Legal/litigation accruals 8.6 -- 8.4 --
Unrealized foreign exchange transactions 1.8 8.6 1.4 --
State and local income tax 0.4 7.4 1.0 7.0
Other accruals 9.4 -- 8.0 --
-------------------------------------------
Total current 93.2 16.0 105.9 7.0
-------------------------------------------
Non-current:
Depreciation and amortization 0.6 56.7 0.2 62.0
Employee benefits 40.0 0.6 42.5 --
Unrealized foreign exchange transactions -- 8.4 4.0 --
Other accruals -- 4.2 -- 4.4
Tax loss and credit carryforwards 29.8 -- 31.8 --
State and local income tax -- 1.8 -- 1.9
Valuation allowance (27.3) -- (26.5) --
-------------------------------------------
Total non-current 43.1 71.7 52.0 68.3
-------------------------------------------
Deferred income taxes $136.3 $87.7 $157.9 $75.3
===========================================
</TABLE>
Reconciliations of the statutory U.S. federal income tax rate to
effective tax rates were as follows:
<TABLE>
<CAPTION>
1996 1995 1994
--------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Statutory U.S. tax rate 35.0% 35.0% 35.0%
Goodwill impairment charge with no income tax benefit -- -- 22.6
Goodwill amortization 1.0 1.0 2.2
Rate differential for Subpart F income 5.3 5.3 2.4
State income taxes, net of federal tax benefit 2.5 1.9 2.0
Difference between non-U.S. and U.S. tax rates (2.4) (4.4) (2.9)
Effect of enacted changes in non-U.S. tax rates -- -- (1.7)
Foreign Sales Corporation tax benefit (1.8) (1.2) (2.2)
Other (1.9) (0.7) (4.8)
----------------------------------------
Effective tax rate 37.7% 36.9% 52.6%
========================================
</TABLE>
At December 28, 1996, earnings considered to be permanently reinvested
in non-U.S. subsidiaries totaled approximately $749.0. Deferred income
taxes have not been provided on these earnings, as the Company does
not plan to initiate any action that would require the payment of
income taxes. It is not practicable to estimate the amount of
additional tax that might be payable on these undistributed foreign
earnings.
Bausch & Lomb Incorporated and Consolidated Subsidiaries page 45
-------
<PAGE>
Note 7: Debt
Short-term debt at December 28, 1996 and December 30, 1995 consisted
of $366.3 and $262.0 in U.S. commercial paper and promissory notes
issued to banks and $27.8 and $22.5 in non-U.S. borrowings,
respectively. To support its liquidity requirements, the Company
maintains U.S. revolving credit agreements with 364-day credit terms
totaling $290.0, however, no debt was outstanding under these
agreements at December 28, 1996. A commitment fee at a rate of 0.05%
was charged on the unused portion in 1995 and 1996. The interest rate
under the agreements is at the prime rate, or, at the Company's
option, a mutually acceptable market rate. The Company also currently
maintains unused U.S. bank lines of credit amounting to approximately
$32.0. Compensating balance arrangements are not material.
The Company has entered into two seven-year interest rate swap
agreements, each in notional amounts of $100.0, which convert $200.0
of U.S. commercial paper into fixed-rate obligations with an effective
interest rate of 6.48%. The swaps will terminate on January 1, 2002.
Average short-term interest rates, which include the effect of
the interest rate swap agreements, were 5.8% and 6.3% at year end 1996
and 1995, respectively. The maximum amount of short-term debt at the
end of any month was $472.0 in 1996 and $297.2 in 1995. Average
month-end borrowings were $405.8 in 1996 and $252.4 in 1995. The
components of long-term debt were:
<TABLE>
<CAPTION>
December 28, December 30,
1996 1995
-----------------------------------------------------------------------------------------------------
<S> <C> <C>
Fixed-rate notes payable:
Notes due in 1996 $ -- $ 94.8
Notes due in 1997 85.0 85.0
Notes due in 1999 26.3 --
Notes due in 2001 or 2026 100.0 --
Notes due in 2003 85.0 85.0
Other 12.2 9.2
Industrial Development Bonds due in 2015 8.5 8.5
Other 7.3 7.5
------------------------
324.3 290.0
Less current portion 88.0 99.0
------------------------
$236.3 $191.0
========================
</TABLE>
During 1996, $100.0 notes were issued under the Company's $300.0
medium-term note program at a fixed rate of 6.56%. The holders, at
their option, may put these notes back to the Company in 2001;
otherwise the notes mature in 2026. The notes maturing in 1999 relate
to borrowings of 3 billion Japanese yen at interest rates ranging from
2.21% to 2.28%.
Interest rate swap agreements on the $85.0 notes due in each of
the years 1997 and 2003 effectively convert the notes to floating-rate
obligations with an interest rate based on the one-month U.S.
composite commercial paper rate. At December 28, 1996 this rate was
5.7%. The interest rate on the Industrial Development Bonds, which was
4.7% at December 28, 1996, varies based on the prime rate and
prevailing market conditions.
Interest rate swap agreements on long-term debt issues resulted
in a reduction in the long-term effective interest rate from 6.0% to
5.5% in 1996 and from 6.0% to 5.4% in 1995. Long-term borrowing
maturities during the next five years are $88.0 in 1997, $1.7 in 1998,
$27.9 in 1999, $1.6 in 2000 and $108.3 in 2001.
page 46 Bausch & Lomb Incorporated and Consolidated Subsidiaries
- - -------
<PAGE>
Note 8: Operating Leases
The Company leases land, buildings, machinery and equipment under
noncancelable operating leases. Total annual rental expense for 1996,
1995 and 1994 amounted to $26.8, $28.0 and $27.1, respectively.
Minimum future rental commitments having noncancelable lease
terms in excess of one year aggregate $136.9 as of December 1996 and
are payable as follows: 1997, $21.1; 1998, $16.4; 1999, $11.7; 2000,
$9.0; 2001, $8.6 and beyond, $70.1.
During 1995, the Company entered into a seven-year variable rate
operating lease on an office facility in Rochester, New York, with an
associated residual value guarantee in an amount not to exceed $54.6.
At December 1996, estimated annual rent payments under the agreement
approximated $4.9.
Note 9: Employee Benefits
The Company sponsors several retirement plans which, in the aggregate,
cover substantially all U.S. employees and employees in certain other
countries. In general, retirement benefits are based on years of
service and the employee's compensation near retirement. Certain
non-U.S. pension arrangements also provide termination indemnity
payments. Contributions to the Company's major U.S. plan meet ERISA
minimum funding requirements. The plan's investments consist primarily
of equity securities, corporate bonds, U.S. government issues and cash
and cash equivalents. The Company also sponsors defined contribution
plans and participates in government-sponsored programs in certain
non-U.S. locations.
In addition to retirement plans, the Company sponsors a
participatory defined benefit postretirement plan providing medical
and life insurance benefits to a majority of its U.S. employees. The
plan provides benefits to retirees who have attained age 55 with ten
years of service, their spouses and certain employees on disability.
The Company has established a Voluntary Employee Benefit Association
trust to provide for payment of these benefits. Annual contributions
of $5.0 were made to the trust in 1996, 1995 and 1994. The trust's
investments consist primarily of participating insurance contracts.
The Company intends to continue a program of prefunding for these
benefits on an annual basis, but the amount of any future
contributions is discretionary. The Company also provides
postretirement benefits to employees at a number of its non-U.S.
locations in accordance with local statutory requirements. Such
benefits are generally provided through government-sponsored plans.
In addition, the Company sponsors supplemental defined benefits
retirement plans for certain key employees. These plans are unfunded.
The pension liability associated with these plans has generally been
determined using the same actuarial methods and assumptions as those
used for the Company's qualified plans. The annual cost of these plans
has been included in the net periodic pension cost shown below and
totaled $1.2 in 1996, $0.9 in 1995 and $0.9 in 1994. The projected
benefit obligation relating to these unfunded plans at year end was
$7.7 in 1996 and $6.1 in 1995.
Plan assets and the projected benefit obligations have been
measured as of December for each period. Net periodic pension and
postretirement benefit costs have been determined using assumptions as
of the beginning of each year. The overall increase in net periodic
pension costs was attributable to a curtailment charge incurred as a
result of the Company's restructuring efforts, and a discretionary
increase in benefits, offset by a reduction in participants and
favorable plan experience. The decrease in postretirement benefit
expense was attributable to changes in assumptions for discount and
medical care cost trend rates, population experience and favorable
medical claims experience, as well as a curtailment credit.
Bausch & Lomb Incorporated and Consolidated Subsidiaries page 47
-------
<PAGE>
The components of net periodic pension cost and U.S. net periodic
postretirement cost are presented below:
<TABLE>
<CAPTION>
1996 1995 1994
------------------------------------------------------------------------------
U.S. Non-U.S. U.S. Non-U.S. U.S. Non-U.S.
Plans Plans Plans Plans Plans Plans
-------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Retirement Plans
Service cost -- benefits earned
during the period $ 6.5 $ 2.1 $ 5.4 $ 2.1 $ 6.8 $ 2.0
Interest cost on projected
benefit obligation 11.8 1.9 10.9 1.8 10.3 1.6
Actual return on plan assets (20.6) (2.7) (26.3) (1.9) 0.7 0.7
Charges due to curtailment 1.0 -- -- -- -- --
Net amortization and deferral 10.0 1.4 17.7 1.0 (9.7) (1.7)
------------------------------------------------------------------------------
Net periodic pension cost $ 8.7 $ 2.7 $ 7.7 $ 3.0 $ 8.1 $ 2.6
==============================================================================
Other Postretirement Benefits
Service cost -- benefits earned
during the period $ 1.9 $ 1.9 $ 2.6
Interest cost on accumulated
benefit obligation 6.0 6.0 6.5
Actual return on plan assets (1.9) (2.9) 1.1
Credits due to curtailment (0.9) -- --
Net amortization and deferral (2.0) (0.3) (2.5)
------------------------------------------------------------------------------
Net periodic postretirement
benefit cost $ 3.1 $ 4.7 $ 7.7
==============================================================================
</TABLE>
Key economic assumptions used in developing the projected benefit
obligations for the Company's major U.S. and non-U.S. retirement plans
and U.S. postretirement plans at year end were as follows:
<TABLE>
<CAPTION>
1996 1995 1994
------------------------------------------------------------------------------
U.S. Non-U.S. U.S. Non-U.S. U.S. Non-U.S.
Plans Plans Plans Plans Plans Plans
-------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Discount rate 7.75% 5.5-8.0% 7.75% 5.5-8.0% 8.25% 5.5-8.0%
Rate of increase in
compensation levels 5.0% 3.7-6.5% 5.0% 4.2-6.5% 5.0% 4.2-6.5%
Expected long-term rate
of return on plan assets 9.0-10.0% 2.5-9.0% 9.0-10.0% 5.5-9.0% 9.0-10.0% 5.5-9.0%
Medical care cost trend rate 10.0% 11.0% 12.0%
==============================================================================
</TABLE>
In December 1995, the Company elected to revise its assumptions for
all U.S. plans in recognition of lower long-term interest rates. The
discount rate was lowered from 8.25% to 7.75%. The medical care cost
trend rate will decrease one percent per year to 6.0% in the year 2000
for future valuations, and has a significant effect on the expense
reported. For example, a 1% increase in the medical care cost trend
rate would have increased the aggregate of the service and the
interest cost components of net periodic postretirement benefit cost
by approximately $1.0 or 13% in 1996.
page 48 Bausch & Lomb Incorporated and Consolidated Subsidiaries
- - -------
<PAGE>
The following tables set forth the funded status and amounts
recognized in the Company's consolidated balance sheet:
Retirement Plans
<TABLE>
<CAPTION>
December 28, 1996 December 30, 1995
----------------------------------------------------------
Over Under Over Under
Funded Funded Funded Funded
-------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Actuarial present value of benefit obligations:
Vested benefits $22.2 $144.8 $17.6 $136.6
Non-vested benefits 0.6 3.5 0.7 3.9
----------------------------------------------------------
Accumulated benefit obligation 22.8 148.3 18.3 140.5
Effect of projected future salary increases 13.2 12.4 9.5 15.7
----------------------------------------------------------
Projected benefit obligation 36.0 160.7 27.8 156.2
Plan assets at fair value 43.1 129.5 32.7 119.4
----------------------------------------------------------
Projected benefit obligation (less than)
in excess of plan assets (7.1) 31.2 (4.9) 36.8
Unrecognized net gain (loss) from past
experience different from that assumed 10.4 (1.4) 3.2 (6.4)
Unrecognized prior service costs (0.2) (15.0) -- (13.4)
Unrecognized net transition obligation (1.7) (3.4) -- (6.4)
Additional liability -- 7.4 -- 11.3
----------------------------------------------------------
Accrued pension liability $ 1.4 $ 18.8 $(1.7) $ 21.9
==========================================================
Other Postretirement Benefits
<CAPTION>
December 28, December 30,
1996 1995
--------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Actuarial present value of postretirement benefit obligations:
Retirees $54.2 $54.3
Active, eligible participants 9.0 6.8
Other active participants 18.2 21.5
-------------------
Accumulated benefit obligation 81.4 82.6
Plan assets at fair value 23.3 16.5
-------------------
Accumulated benefit obligation in excess of plan assets 58.1 66.1
Unrecognized prior service cost 1.8 2.0
Unrecognized net gain 33.1 31.8
-------------------
Accrued postretirement benefit liability $93.0 $99.9
===================
</TABLE>
The unrecognized projected pension benefit obligation in excess of
plan assets for retirement plans is being amortized against net
periodic pension cost over the remaining service lives of the plan
participants. The Company has recorded an additional liability to give
recognition to the underfunded plan positions. An intangible asset
reflecting the related unrecognized prior service cost has also been
recorded.
Increasing the assumed medical care cost trend rates by one
percentage point would have increased the accrued postretirement
benefit liability as of December 28, 1996 by approximately $8.5 or
10%. This reflects the significant effect this assumption has on the
calculation of the obligation.
Bausch & Lomb Incorporated and Consolidated Subsidiaries page 49
-------
<PAGE>
Note 10: Minority Interest
Four wholly-owned subsidiaries of the Company have contributed
operating and financial assets with an estimated market value of
$1,006.0 to a limited partnership, in exchange for an aggregate 72%
general and limited partnership interest. An outside investor
contributed $400.0 in cash to the partnership in exchange for a 28%
limited partnership interest. A wholly-owned subsidiary of the Company
manages the activities of the partnership. This transaction did not
result in any gain or loss for the Company.
The partnership is a separate legal entity from the Company whose
purpose is to own and manage a portfolio of assets. Those assets
include portions of the Company's biomedical operations, those used
for the manufacture and sale of rigid gas permeable contact lens
materials and lens care solutions, cash and cash equivalents, a
long-term note guaranteed by the Company and certain floating-rate
demand notes due from certain of the Company's subsidiaries. For
financial reporting purposes, the assets, liabilities and earnings of
the partnership entities have continued to be included in the
Company's consolidated financial statements. The outside investor's
limited partnership interest in the partnership has been recorded as
minority interest.
Note 11: Shareholders' Equity
At December 28, 1996, 10,000 shares of 4% Cumulative Preferred stock,
25 million shares of Class A Preferred stock, 15 million shares of
Class B stock and 200 million shares of Common stock were authorized.
The Company issues treasury shares to fulfill its obligations under
its stock option plans. The difference between the cost of treasury
shares issued and the option price is charged to capital in excess of
par value.
page 50 Bausch & Lomb Incorporated and Consolidated Subsidiaries
- - -------
<PAGE>
Changes in shareholders equity accounts are sumarized below:
<TABLE>
<CAPTION>
Common And Class B Treasury Other Shareholders' Equity
------------------------------------------------------------------------------------
Net
Capital In Unrealized Cumulative
Shares Excess Of Shares Unearned Losses On Translation
(000s) Amount Par Value (000s) Amount Compensation Investments Adjustment
- - ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at December 25, 1993 61,135 $ 24.2 $ 88.1 (2,016) $ (83.7) $ -- $ -- $ 8.9
Shares issued under stock option
plans and restricted stock awards 136 -- 5.8 298 10.0 (3.2) -- --
Repurchase of Common and
Class B stock -- -- -- (561) (20.6) -- -- --
Foreign currency
translation adjustment -- -- -- -- -- -- -- 38.7
--------------------------------------------------------------------------------------
Balance at December 31, 1994 61,271 24.2 93.9 (2,279) (94.3) (3.2) -- 47.6
Shares issued under stock option
plans and restricted stock awards 196 -- 13.9 298 9.7 (10.3) -- --
Repurchase of Common
and Class B stock -- -- -- (2,545) (94.1) -- -- --
Amortization of unearned
compensation -- -- -- -- -- 4.3 -- --
Foreign currency
translation adjustment -- -- -- -- -- -- -- 37.5
--------------------------------------------------------------------------------------
Balance at December 30, 1995 61,467 24.2 107.8 (4,526) (178.7) (9.2) -- 85.1
Net shares (canceled) issued
under stock option plans
and restricted stock awards (118) -- (11.7) 428 15.5 (1.6) -- --
Repurchase of Common
and Class B stock -- -- -- (1,847) (67.3) -- -- --
Foreign currency
translation adjustment -- -- -- -- -- -- -- 4.9
Unrealized holding loss on
other investments -- -- -- -- -- -- (11.8) --
--------------------------------------------------------------------------------------
Balance at December 28, 1996 61,349 $ 24.2 $ 96.1 (5,945) $(230.5) $ (10.8) $ (11.8) $90.0
======================================================================================
</TABLE>
From 1987 to 1995, the board of directors authorized the repurchase,
at management's discretion, up to a total of 8 million of the
Company's issued shares of Common stock. Through 1996, the total
number of shares authorized for repurchase under this program has been
purchased. In December 1996, the board of directors authorized the
repurchase of an additional 250,000 shares, none of which were
purchased prior to year end.
Unearned compensation relates to awards of restricted stock and
is recorded at the date of award based on the market value of the
shares and is amortized to expense as stock performance goals are met
over the applicable vesting period.
Bausch & Lomb Incorporated and Consolidated Subsidiaries page 51
-------
<PAGE>
In 1988, the Company's board of directors approved the adoption
of a shareholder rights plan, in which preferred share purchase rights
were distributed as a dividend at the rate of one right for each
outstanding share of the Company's Common and Class B stock. Common
and Class B shares issued subsequent to the adoption of the rights
plan automatically have preferred share purchase rights attached to
them. Under certain circumstances each right entitles shareholders to
purchase one two-hundredth of a share of Series A Preferred stock, par
value $1.00 per share. The rights may become exercisable under certain
circumstances involving actual or potential acquisitions of 20% or
more of the outstanding Common and Class B stock by a person or group.
The board of directors may substitute common stock equivalent
preferred shares for Common shares for the exercise of stock purchase
rights. Until the rights become exercisable, they have no dilutive
effect on earnings per Common share. The rights, which are non-voting,
expire on July 1, 1998 and may be redeemed by the Company at a price
of one-half cent per right at any time prior to the acquisition by a
person or group of 20% of the outstanding shares of the Company's
Common and Class B stock. In the event a person or group has acquired
20%, but not more than 50%, of such shares, the Company may redeem the
rights of each holder, other than the acquirer, in exchange for either
one share of Common stock or one two-hundredth of a share of Series A
Preferred stock.
Note 12: Fair Value Of Financial Instruments
The carrying amount of cash, cash equivalents and short-term
investments and notes payable approximates fair value because their
maturity is generally less than one year in duration. The Company
places its cash, cash equivalents and short-term investments with
financial institutions and limits the amount of credit exposure with
any one financial institution to between $25.0 and $50.0, based on the
credit rating and asset size of the institution. The Company's
remaining financial instruments consisted of the following:
<TABLE>
<CAPTION>
December 28, 1996 December 30, 1995
-----------------------------------------------
Carrying Fair Carrying Fair
Value Value Value Value
--------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Nonderivatives:
Other investments $ 560.3 $560.3 $ 561.2 $ 561.2
Long-term debt, including current portion $(324.3) $(320.9) $(289.9) $(298.2)
===============================================
Derivatives held for purposes other than trading:
Foreign exchange instruments:
Other current assets $ 28.3 $ 7.9
Accrued liabilities (10.4) (11.8)
-----------------------------------------------
Net foreign exchange instruments $ 17.9 $ 26.9 $ (3.9) $ (0.4)
===============================================
Interest rate instruments:
Other current assets $ 14.9 $ 10.2
Accrued liabilities (12.9) (10.6)
-----------------------------------------------
Net interest rate instruments $ 2.0 $ 5.4 $ (0.4) $ (13.6)
===============================================
</TABLE>
Fair value of other investments was determined based on contract terms
and an evaluation of expected cash flows and investment risk. Fair
value for long-term debt was estimated using either quoted market
prices for the same or similar issues or the current rates offered to
the Company for debt with similar maturities. The fair value for
foreign exchange and interest rate instruments was determined based
upon a model which estimates the fair value of these items using
market rates at year end or was based upon quoted market prices for
similar instruments with similar maturities.
page 52 Bausch & Lomb Incorporated and Consolidated Subsidiaries
- - -------
<PAGE>
Note 13: Derivative Financial Instruments
Foreign Exchange Risk Management The Company enters into foreign
exchange forward and purchased option contracts primarily to hedge
foreign currency transactions and equity investments in non-U.S.
subsidiaries. To a much lesser extent, the Company hedges firm
commitments, primarily for purchases of inventory. Gains and losses on
the contracts offset exposures being hedged. Deferred gains and losses
totaled less than $0.5 at December 28, 1996 and December 30, 1995 and
are expected to be recognized within one year. Until recognized, the
amounts have been recorded as other current assets or accrued
liabilities.
At December 28, 1996 the Company hedged exposures aggregating
$1,434.1 by entering into forward exchange and option contracts
requiring purchases of $818.0 U.S. dollar equivalent currencies and
sales of $616.1 U.S. dollar equivalent currencies. At December 30,
1995 the aggregate exposures hedged were $1,239.0 with hedging
accomplished through buying and selling $989.0 and $250.0,
respectively, of U.S. dollar equivalent currencies. For both 1996 and
1995, the foreign currencies purchased were primarily Irish pounds,
Singapore dollars and Swiss francs; the currencies sold were, for
1996, primarily German marks, Netherlands guilders and Singapore
dollars, and for 1995, Singapore dollars and German marks. The
percentage of hedging activity related to assets and liabilities was
57% and 63% at year end 1996 and 1995, respectively. Hedges of equity
investments in non-U.S. subsidiaries comprised a majority of the
remaining hedging activity. The forward exchange contracts have
varying maturities with none exceeding two years. Net settlements are
generally made at contract maturity based on rates agreed to at
contract inception.
The Company selectively hedges foreign currency transaction and
commitment exposures arising in countries with hyperinflationary
economies, restrictive exchange controls or underdeveloped currency
markets because hedging all such exposures is not cost effective. The
estimated notional amount of such exposures that remained unhedged at
December 28, 1996 was $5.6.
Amortization of premiums or discounts on foreign exchange
instruments, primarily Irish pound contracts, resulted in income of
approximately $3.6 and $0.7 for 1996 and 1995, respectively. The
increase in 1996 reflects the impact of new hedges of investments in
certain subsidiaries offset by lower premiums on Irish pound contracts
caused by the narrowing differential between U.S. and Irish interest
rates. The Company estimates that a 50 basis point net move in either
U.S. or Irish interest rates would have impacted annualized pre-tax
income in 1996 by approximately $2.8.
Carrying value as presented in the table in Note 12 -- Fair Value
Of Financial Instruments does not reflect unrecognized net premium
income totaling $5.4 in 1996 and $0.8 in 1995. Including these
amounts, outstanding foreign exchange contracts were in a net
unrealized positive cash flow position of approximately $23.3 at
December 28, 1996 and a net unrealized negative cash flow position of
$3.2 at December 30, 1995. The Company estimates that for 1996 this
net cash flow position, which is highly sensitive to movements in
exchange rates, would change by approximately $40.0 for each ten-cent
move in the U.S. dollar to Irish pound exchange rate. The potential
for periodic cash outflows from maturing or terminated foreign
exchange and option contracts are not of sufficient magnitude to
adversely impact the Company's liquidity requirements.
Interest Rate Risk Management The Company uses interest rate swap
agreements to balance its floating-rate assets and floating-rate
liabilities and commitments. To the extent this strategy is successful
the Company effectively insulates itself from interest rate risk since
the net effect on financial results would be negligible. The following
is a summary of the Company's interest rate swap agreements by major
type:
Bausch & Lomb Incorporated and Consolidated Subsidiaries page 53
-------
<PAGE>
<TABLE>
<CAPTION>
December 28, December 30, Maturities
1996 1995 Through
---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Receive fixed swaps--notional amount $550.0 $550.0 2003
Average receive rate 5.60-6.58% 5.60-6.58%
Average pay rate 5.63-5.68% 5.69-5.84%
Pay fixed swaps--notional amount $265.0 $265.0 2002
Average pay rate 6.48-7.29% 6.48-7.25%
Average receive rate 5.59-5.68% 5.63-5.84%
Floating/floating swap--notional amount $132.0 $126.3 2000
Pay rate (NLG) 2.65% 3.45%
Receive rate (USD) 5.34% 5.47%
===================================================
</TABLE>
The variable-rate portions of the swaps in the above table are based
on either three-month LIBOR or the one-month U.S. composite commercial
paper rate at December 28, 1996 and December 30, 1995. Changes in
these rates would change the above disclosures and future cash flows.
At December 28, 1996 and December 30, 1995 the Company had
outstanding an interest rate cap with a notional amount of NLG 15.5
million which protects the Company from exposures to rising NLG
interest rates.
Credit Risk The Company is exposed to credit risk to the extent of
non-performance by counterparties to the foreign currency contracts
and interest rate swaps discussed above. The credit ratings of the
counterparties, which consist of a diversified group of major
financial institutions, are regularly monitored and thus credit loss
arising from counterparty non-performance is not anticipated.
Note 14: Stock Compensation Plans
The Company sponsors several stock-based compensation plans, all of
which are accounted for under the provisions of APB Opinion No. 25.
Accordingly, no compensation cost has been recognized for the
Company's fixed stock option plans or its employee stock purchase
plan. The compensation expense relating to stock awards in 1996, 1995
and 1994 was $1.3, $5.6 and $1.4, respectively. Had compensation
expense for all types of the Company's stock-based compensation been
determined consistent with SFAS No. 123, the Company's net income
would have been $78.9 and $110.5 in 1996 and 1995, respectively,
compared with the reported earnings of $83.1 and $112.0. Earnings per
share would have been $1.40 and $1.91 in 1996 and 1995, as compared to
reported earnings per share of $1.47 and $1.94.
Stock Options The Company issues stock options which vest ratably over
three years and expire ten years from the grant date. Vesting is
contingent upon continued employment with the Company.
For purposes of this disclosure, the fair value of each fixed
option grant was estimated on the date of grant using the
Black-Scholes option-pricing model with the following weighted average
assumptions used for grants in 1996 and 1995, respectively: expected
option terms of five years for both periods; expected stock volatility
of approximately 25.0% for both periods; expected dividend yields of
2.42% and 2.17% and risk-free interest rates of 6.11% and 5.39%. The
weighted average fair value of options granted was $9.34 in 1996 and
$10.45 in 1995.
page 54 Bausch & Lomb Incorporated and Consolidated Subsidiaries
- - -------
<PAGE>
A summary of the status of the Company's fixed stock option plans
at year end 1996, 1995 and 1994 is presented below:
<TABLE>
<CAPTION>
1996 1995 1994
---------------------------------------------------------------------------------------------
Weighted Weighted Weighted
Average Average Average
Number Of Exercise Price Number Of Exercise Price Number Of Exercise Price
Shares Per Share Shares Per Share Shares Per Share
-------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Outstanding at
beginning of year 4,425,599 $40.84 3,891,276 $40.50 3,905,553 $40.87
Granted 1,253,323 35.86 1,181,585 40.98 432,485 34.55
Exercised (204,418) 27.40 (207,184) 26.26 (197,882) 26.75
Forfeited (444,928) 43.60 (440,078) 44.92 (248,880) 46.13
---------------------------------------------------------------------------------------------
Outstanding at
year end 5,029,576 $39.90 4,425,599 $40.84 3,891,276 $40.50
=============================================================================================
Options exercisable
at year end 3,028,610 2,661,110 2,529,108
=============================================================================================
</TABLE>
The following represents additional information about fixed stock
options outstanding at December 28, 1996:
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
----------------------------------------------------------------------------------------------------------------------
Weighted Average
Range Of Number Remaining Weighted Average Number Weighted Average
Exercise Prices Outstanding At Contractual Life Exercise Price Exercisable At Exercise Price
Per Share December 28, 1996 Years Per Share December 28, 1996 Per Share
----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$16 to 25 208,787 1.2 $21.72 208,787 $21.72
26 to 35 1,840,228 7.6 34.60 690,955 33.48
36 to 45 1,601,653 7.2 41.31 749,960 42.07
46 to 55 1,378,908 6.2 48.10 1,378,908 48.10
----------------------------------------------------------------------------------------------------------------------
$16 to 55 5,029,576 6.8 $39.90 3,028,610 $41.15
----------------------------------------------------------------------------------------------------------------------
</TABLE>
Stock Awards The Company issues restricted stock awards to directors,
officers and other key personnel. These awards have vesting periods up
to three years with vesting criteria including attainment of certain
stock price performance goals, satisfactory job performance and
continued employment until applicable vesting dates. Compensation
expense is recorded based on the applicable vesting criteria and, for
those awards with performance goals, as such goals are met. In 1996,
1995 and 1994, 139,052, 401,522 and 87,205 such awards were granted at
weighted average market values of $38.43, $45.02 and $37.35 per share,
respectively.
Bausch & Lomb Incorporated and Consolidated Subsidiaries page 55
-------
<PAGE>
Note 15: Litigation
In June 1994, five separate shareholder actions against the Company
and its former Chief Executive Officer and Chairman, Daniel Gill, were
filed in the Western and Southern Districts of New York and an
additional action, naming the Company, Mr. Gill and four other
officers was filed in January 1995, alleging that the Company
artificially inflated the value of its stock by making false and
misleading statements about expected financial results. In September
1995, the parties agreed to consolidate the actions and plaintiffs
have filed a third-amended consolidated complaint. Plaintiffs seek to
represent two classes, including all persons who purchased stock
during a nine-month period prior to a June 3, 1994 announcement that
the Company was undertaking efforts to rebalance distributor
inventories, and all shareholders who purchased shares between June 4,
1994 and January 25, 1995. In October 1996, the court denied in
substantial part the Company's and the individual officers' motions to
dismiss. The Company and individual officers have filed motions for
reconsideration of the October 1996 order or, in the alternative,
certification of the order pursuant to 28 U.S.C. ss. 1292 (b).
Discovery has not yet commenced in this consolidated action. A motion
by plaintiffs to certify the alleged class is pending. The Company is
vigorously defending itself against these claims.
On December 28, 1994, following an article in Business Week
magazine questioning the Company's accounting treatment of a fourth
quarter 1993 sales program initiated by the Contact Lens Division, the
Company received a request from the Securities and Exchange Commission
(SEC) for information in connection with an inquiry being conducted by
the SEC. Since then, the Company has received additional requests for
information from the SEC staff, including those with respect to the
Company's accounting for sunglass sales in its Asia-Pacific Division
in the period from late 1992 through early 1994. The Company has
provided documents and Company personnel have testified. The Company
is cooperating with the SEC's continuing investigation and is unable
to predict the outcome of this proceeding. An adverse outcome could
result in the filing of civil proceedings by the SEC against the
Company seeking injunctive relief, or administrative proceedings
seeking a cease and desist order.
In November 1994, the United States District Court for the
Northern District of Alabama certified a nationwide class of
purchasers of Optima FW and Medalist lenses during the period January
1, 1991 through November 1, 1994 to pursue claims relating to the
Company's marketing and sale of the Optima FW, Medalist and SeeQuence2
contact lens systems. Plaintiffs allege that the Company misled
consumers by packaging the same lens under three different names for
three different prices. On November 26, 1996, the court gave final
approval to a settlement, under which consumers who purchased Medalist
lenses between January 1, 1991 through December 31, 1995, Optima FW
lenses between November 1, 1990 through December 31, 1995 and
Criterion Ultra FW lenses between November 1, 1990 through April 30,
1996 were eligible to participate. The Company recorded a charge
against third quarter earnings which, in addition to existing
litigation reserves, is deemed adequate to satisfy the costs of the
settlement. Additionally, on May 2, 1996 and October 3, 1996, the
Company was served with statements of claim filed in Ontario and
British Columbia, Canada, respectively, naming the Company and Bausch
& Lomb Canada. The plaintiffs seek to represent a class of Canadian
consumers alleging similar claims. Another action filed in California
state court in October 1994 raising substantially similar claims has
been resolved. A working group of state attorneys general,
representing the interests of eighteen states, also requested
documents regarding the Company's pricing, labeling and advertising of
these lenses. The Attorney General for the State of Florida has served
a subpoena seeking documents relating to the marketing and sale of
contact lenses and contact lens solutions. Management continues to
vigorously defend the marketing of these products.
In May and June 1995, the Company was served with several
proposed class action complaints in New York, New Jersey, Pennsylvania
and California, alleging that the Company misled consumers in its
marketing and sale of Sensitive Eyes Rewetting Drops and Saline
Solution and Bausch & Lomb Eyewash. The Company stipulated to
certification of a nationwide class of purchasers of Sensitive Eyes
Rewetting Drops, Boston Rewetting Drops, ReNu Rewetting Drops and
Bausch & Lomb Eyewash between May 1, 1989 and June 30, 1995 in the New
York action. In exchange plaintiffs dismissed their actions in other
states. Another action, which was filed by a separate group of
plaintiffs' attorneys in state court in California, was voluntarily
dismissed. Management vigorously defends the marketing of these
products.
page 56 Bausch & Lomb Incorporated and Consolidated Subsidiaries
- - -------
<PAGE>
In June 1994, the Florida Attorney General, acting on behalf of
disposable contact lens consumers in the State of Florida, filed an
antitrust action against the Company and others in the United States
District Court for the Middle District of Florida. The complaint
challenges the Company's long-standing policy of selling contact
lenses only to licensed professionals. Plaintiffs allege that the
policy was adopted in conspiracy with others to eliminate alternative
channels of trade from the disposable lens market. The Florida
Attorney General seeks treble damages on behalf of all purchasers of
contact lenses, whether from the Company or others, a $1.0 penalty and
injunctive relief. A number of consumer class actions have been
consolidated in the Middle District of Florida and actions are pending
in California and Tennessee state courts. The complaints make similar
allegations and seek similar relief on behalf of consumers outside the
State of Florida. In December 1996, the New York State Attorney
General, on behalf of itself and approximately twenty-one other
states, filed a substantially similar action in the United States
District Court for the Eastern District of New York and have sought
consolidation with the pending action. The Company defends its policy
as a lawfully adopted means of insuring effective distribution of its
products and safeguarding consumers' health.
Report Of Independent Accountants
----------------------------------------------------------------------
To the Shareholders and Board of Directors of Bausch & Lomb
Incorporated
In our opinion, the accompanying consolidated financial statements
appearing on pages 35 through 57 of this 1996 annual report of Bausch
& Lomb Incorporated present fairly, in all material respects, the
financial position of Bausch & Lomb Incorporated and its subsidiaries
at December 28, 1996 and December 30, 1995, and the results of their
operations and their cash flows for each of the three years in the
period ended December 28, 1996, in conformity with generally accepted
accounting principles. These financial statements are the
responsibility of the Company's management; our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits of these statements in accordance with
generally accepted auditing standards which require that we plan and
perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts
and disclosures in the financial statements, assessing the accounting
principles used and significant estimates made by management and
evaluating the overall financial statement presentation. We believe
that our audits provide a reasonable basis for the opinion expressed
above.
/s/Price Waterhouse LLP
-----------------------
Rochester, New York
January 24, 1997
Bausch & Lomb Incorporated and Consolidated Subsidiaries page 57
-------
<PAGE>
Selected Financial Data
----------------------------------------------------------------------
<TABLE>
<CAPTION>
Dollar Amounts In Millions-- Except Per Share Data 1996 1995 1994 1993 1992 1991
- - ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Results For The Year
Net sales $1,926.8 $1,932.9 $1,892.7 $1,830.1 $1,709.1 $1,520.1
Net earnings 83.1 112.0 31.1 138.9 171.4 27.6
Net earnings from continuing operations
before cumulative effect of change in
accounting principle and non-recurring
charges* 91.7 108.6 106.1 175.4 171.4 149.2
Net earnings per share 1.47 1.94 0.52 2.31 2.84 0.46
Earnings per share before cumulative
effect of change in accounting principle
and non-recurring charges* 1.62 1.88 1.78 2.92 2.84 2.47
Dividends 1.04 1.01 0.955 0.88 0.80 0.72
============================================================================
Year-End Position
Working capital $ 18.5 $ 70.9 $ 277.4 $ 669.6 $ 514.9 $ 405.3
Total assets 2,603.4 2,550.1 2,457.7 2,493.0 1,873.7 1,738.5
Short-term debt 482.1 383.5 300.6 244.6 208.9 256.1
Long-term debt 236.3 191.0 289.5 321.0 277.7 195.7
Shareholders' equity 881.9 929.3 914.4 909.2 898.2 819.3
============================================================================
Other Ratios And Statistics
Return on sales 4.3% 5.8% 1.6% 7.6% 10.0% 1.8%
Return on average shareholders' equity 9.2% 11.9% 3.2% 15.5% 20.3% 3.5%
Return on average total assets 3.1% 4.5% 1.2% 6.8% 9.5% 1.6%
Average income tax rate 37.7% 36.9% 52.6% 33.5% 32.4% 39.7%
Current ratio 1.0 1.1 1.4 1.9 1.9 1.7
Total debt to shareholders' equity 81.5% 61.8% 64.5% 62.2% 54.2% 55.1%
Total debt to capital 44.9% 38.2% 39.2% 38.3% 35.1% 35.5%
Capital expenditures $ 130.3 $ 95.5 $ 84.8 $ 107.2 $ 119.3 $ 88.6
==================================================================================================================================
</TABLE>
* The cumulative effect of change in accounting principle is the 1991
adoption of SFAS No. 106, "Employers' Accounting for Postretirement
Benefits Other than Pensions" ($58.3 after taxes, $0.96 per share).
Non-recurring charges include restructuring charges, gains and losses on
divestitures of businesses and goodwill impairment charges.
page 58 Bausch & Lomb Incorporated and Consolidated Subsidiaries
- - -------
<PAGE>
Directors And Officers
----------------------------------------------------------------------
Directors
Franklin E. Agnew(1)(3)
Business Consultant
Pittsburgh, Pennsylvania
Director since 1982
William Balderston III(1)(4)
Retired Executive Vice President
The Chase Manhattan Bank
Rochester, New York
Director since 1989
William M. Carpenter(1)
President and Chief Executive Officer
Bausch & Lomb
Director since 1996
Domenico DeSole
President and Chief Executive Officer
Gucci Group N.V.
Florence, Italy
Director since 1996
Jonathan S. Linen
Vice Chairman
American Express Company
New York, New York
Director since 1996
Ruth R. McMullin(3)
Business Consultant
Boston, Massachusetts
Director since 1987
John R. Purcell(1)(4)
Chairman and Chief Executive Officer
Grenadier Associates, Ltd.
(a venture banking firm)
Juno Beach, Florida
Director since 1976
Linda Johnson Rice(2)
President and Chief Operating Officer
Johnson Publishing Company, Inc.
Chicago, Illinois
Director since 1990
Alvin W. Trivelpiece, Ph.D.(2)(4)
Director
Oak Ridge National Laboratory and
President
Lockheed Martin Energy Research Corporation
(a science and energy research laboratory)
Oak Ridge, Tennessee
Director since 1989
William H. Waltrip(1)
Chairman
Bausch & Lomb
Director since 1985
Kenneth L. Wolfe(2)
Chairman of the Board and Chief Executive Officer
Hershey Foods Corporation
(a food products manufacturing company)
Hershey, Pennsylvania
Director since 1989
Committee Memberships:
1 Executive Committee
2 Audit Committee
3 Committee on Management
4 Committee on Directors
Officers
William H. Waltrip
Chairman
1 year of service with the Company
Named to current position: 12/95
William M. Carpenter
President and Chief Executive Officer
2 years of service with the Company
Named to current position: 1/97
Carl E. Sassano
Executive Vice President and President -- Vision Care
24 years of service with the Company
Named to current position: 12/96
Senior Vice Presidents
Daryl M. Dickson
Human Resources
less than 1 year of service with the Company
Named to current position: 11/96
James C. Foster
Charles River Laboratories, Inc.
13 years of service with the Company
Named to current position: 12/94
Dwain L. Hahs
International Operations
20 years of service with the Company
Named to current position: 9/96
Stephen A. Hellrung
Secretary and General Counsel
15 years of service with the Company
Named to current position: 3/95
James E. Kanaley*
North American Vision Care
19 years of service with the Company
Named to current position: 6/96
Stephen C. McCluski
Finance
9 years of service with the Company
Named to current position: 1/95
Thomas M. Riedhammer, Ph.D.
Worldwide Pharmaceutical, Surgical and Hearing Care Products
15 years of service with the Company
Named to current position: 11/94
Vice Presidents
Alan P. Dozier
North American Vision Care
12 years of service with the Company
Named to current position: 2/97
Michael T. Gillen
U.S. Eyewear
3 years of service with the Company
Named to current position: 7/96
James T. Horn
Global Product Supply -- Eyewear
5 years of service with the Company
Named to current position: 5/96
Barbara M. Kelley
Public Affairs
14 years of service with the Company
Named to current position: 4/93
Jurij Z. Kushner
Controller
16 years of service with the Company
Named to current position: 1/95
James F. Milton
Japan
26 years of service with the Company
Named to current position: 12/94
Stephen J. Osbaldeston
North American Vision Care
11 years of service with the Company
Named to current position: 7/96
W.J. Pontius
Global Business Manager -- Eyewear
2 years of service with the Company
Named to current position: 8/95
Alan H. Resnick
Treasurer
24 years of service with the Company
Named to current position: 5/86
Robert F. Thompson
U.S. Lens Care
14 years of service with the Company
Named to current position: 6/96
James J. Ward
Audit Services
20 years of service with the Company
Named to current position: 2/93
Assistant Secretary
Jean F. Geisel
21 years of service with the Company
Named to current position: 6/86
* Mr. Kanaley has announced his plans to retire in the first half of 1997. We
gratefully acknowledge the significant contributions he made to Bausch
& Lomb over his 19 years of service.
page 59
-------
<PAGE>
Divisions And Subsidiaries
----------------------------------------------------------------------
The Americas
United States
Arnette Optic Illusions, Inc.
San Clemente, California(2)
Bausch & Lomb
Lamex, Inc.
Miami, Florida(2)
Bausch & Lomb Pharmaceutical Division
Tampa, Florida(1)
Charles River Laboratories, Inc.
Hollister, California(1)
Summerland Key, Florida(1)
Windham, Maine(1)
Wilmington, Massachusetts(1)
Portage, Michigan(1)
O'Fallon, Missouri(1)
Omaha, Nebraska(1)
Pittsfield, New Hampshire(1)
Newfield, New Jersey(1)
Stone Ridge, New York(1)
Raleigh, North Carolina(1)
Charleston, South Carolina(1)
Oregon, Wisconsin(1)
Dahlberg, Inc.
Golden Valley, Minnesota(1)
East Acres Biologicals
Southbridge, Massachusetts(1)
Eyewear Division
Oakland, Maryland(1)
Rochester, New York(1)
San Antonio, Texas(1)
Polymer Technology Corporation
Wilmington, Massachusetts(1)
Revo, Inc.
Sunnyvale, California(1)
SPAFAS
Preston, Connecticut(1)
Storrs, Connecticut(1)
Gainsville, Georgia(1)
Roanoke, Illinois(1)
Reinholds, Pennsylvania(1)
Thin Film Technology Division
Rochester, New York(1)
Vision Care Division
Sarasota, Florida(1)
Rochester, New York(1)
Greenville, South Carolina(1)
Lynchburg, Virginia(1)
Wilmington Partners, L.P.
Wilmington, Massachusetts
Canada
Bausch & Lomb Canada, Inc.
Toronto, Ontario(2)
Montreal, Quebec(2)
Charles River Canada, Inc.
St. Constant, Quebec(1)
Latin America & Caribbean Basin
Bermuda
Bausch & Lomb (Bermuda) Limited
Hamilton
Brazil
BL Industria Otica, Ltda.
Rio de Janeiro(2)
Colombia
Bausch & Lomb de Colombia S.A.
Bogota(2)
Mexico
Operadora de Contactlogia,
S.A. de C.V.
Mexico City(1)
Aves Libres de Patogenos
Especiaficios SA
Puebla(1)
Puerto Rico
Bausch & Lomb Puerto Rico, Inc.
San Juan(2)
Venezuela
Bausch & Lomb Venezuela, C.A.
Caracas(2)
(1) Manufacturing and Production
(2) Direct Marketing and Sales
page 60
- - -------
<PAGE>
Europe
and Africa
Austria
Bausch & Lomb G.m.b.H.
Vienna(2)
Denmark
Bausch & Lomb Danmark A/S
Copenhagen(2)
England
Europe, Middle East & Africa Division
London(2)
Bausch & Lomb U.K., Ltd.
London(2)
Charles River U.K., Ltd.
Margate(1)
Madden & Layman Limited
St. Leonards-on-Sea(1)
Finland
OY Bausch & Lomb Finland A.B.
Helsinki(2)
France
Bausch & Lomb France S.A.
Le Mesnil St. Denis(2)
Charles River France S.A.
Lyons(1)
St. Aubin-les-Elbeuf(1)
Iffa Credo S.A.
L'Arbresle Cedex(1)
Germany
Charles River WIGA G.m.b.H.
Extertal Bosingfeld(1)
Kisslegg(1)
Sulzfeld(1)
Dr. Gerhard Mann,
Chem.-Pharm, Fabrik G.m.b.H.
Berlin(1)
Greece
Bausch & Lomb International, Inc.
Athens(2)
Italy
Bausch & Lomb-IOM S.p.A.
Milan(1)
Rome(2)
Charles River Italia S.p.A.
Calco(1)
Killer Loop S.p.A.
Pederobba(1)
Netherlands
Bausch & Lomb B.V.
Heemstede(2)
Bausch & Lomb Holdings B.V.
Norway
Bausch & Lomb Norway A/S
Oslo(2)
Portugal
Bausch & Lomb Espana S.A.
Lisbon(2)
Republic of Ireland
Bausch & Lomb Ireland
Waterford(1)
Republic of South Africa
Bausch & Lomb South Africa Pty. Ltd.
Randburg(2)
Scotland
Award plc
Livingston(1)
Spain
Bausch & Lomb Espana S.A.
Barcelona(1)
Madrid(2)
Criffa, S.A.
Barcelona(1)
Sweden
Bausch & Lomb Svenska A.B.
Stockholm(2)
Switzerland
Bausch & Lomb A.G.
Bern(2)
Bausch & Lomb Distops S.A.
Geneva(2)
Bausch & Lomb Fribourg S.A.
Fribourg
Bausch & Lomb Finance S.A.
Lausanne
Turkey
Bausch & Lomb Saglik ve Optik
Urunleri Tic.A.S.
Istanbul(2)
Asia & Pacific
Australia
Bausch & Lomb (Australia) Pty. Ltd.
Sydney(2)
Hong Kong
North Asia Division(2)
Bausch & Lomb
(Hong Kong) Ltd.(1)
Bausch & Lomb-Lord Company
(Hong Kong) Ltd.(2)
India
Bausch & Lomb India Limited
New Delhi(1)
Japan
B.L.J. Company Ltd.
Tokyo(2)
Charles River Japan, Inc.
Atsugi(1)
Hino(1)
Tskuba(1)
Yokohama(2)
Malaysia
South Asia Division
Selangor(2)
Bausch & Lomb (Malaysia)
Sdn. Bhd.
West Malaysia(2)
New Zealand
Bausch & Lomb (New Zealand) Limited
Auckland(2)
People's Republic of China
Bausch & Lomb China, Inc.
Beijing(1)
Guangzhou(1)
Spafas Jinan Poultry Company, Ltd.
Jinan(1)
Republic of China
Bausch & Lomb Taiwan Limited
Taipei, Taiwan(1)
Singapore
Bausch & Lomb (Singapore) Private
Limited(2)
Bausch & Lomb Far East, P.T.E.
South Korea
Bausch & Lomb Korea, Ltd.
Seoul(1)
page 61
-------
<PAGE>
Corporate Information
----------------------------------------------------------------------
Corporate Headquarters
Bausch & Lomb
One Bausch & Lomb Place
Rochester, New York 14604
(716) 338-6000
(800) 344-8815
Bausch & Lomb on the Internet
Corporate, product, financial and
shareholder information, including
news releases and earnings
announcements, are available
at Bausch & Lomb's worldwide
web site.
www.bausch.com
Bausch & Lomb News on Demand
Bausch & Lomb's news releases are
available toll-free by calling:
(800) 758-5804 ext. 109877
Financial Literature
Copies of Bausch & Lomb's annual
report, proxy statement and Form
10-K are available to shareholders
at no charge by calling:
(716) 338-5757 or by writing to
Staff Vice President, Investor
Relations at the corporate
headquarters address listed above.
Investor Relations
Security analysts and shareholders
seeking information concerning
Company operations, shareholder
programs or dividend policy may
contact:
Staff Vice President, Investor
Relations
(716) 338-6025
Media Inquiries
News media representatives and
others seeking general information
may contact:
Director, Media Relations
(716) 338-8064
Transfer Agent
Shareholders seeking information
regarding their individual accounts
or dividend payments may contact our
stock transfer agent:
The First National Bank of Boston
c/o Boston Equiserve
P.O. Box 8040
Boston, MA 02266-8040
(800) 730-4001
Dividend
Reinvestment Plan
The plan is available to all
shareholders of Bausch & Lomb stock.
Under the plan, shareholders may
elect to have their cash dividends
automatically invested in additional
shares of the Company's common
stock. Shareholders may also elect
to make cash contributions of up to
$60,000 per year to purchase
additional shares. For additional
information contact:
The First National Bank of Boston
c/o Boston Equiserve
P.O. Box 8040
Boston, MA 02266-8040
Stock Listing
The common stock of the corporation
is traded under the symbol BOL on
the New York Stock Exchange. Options
on the Company's common stock are
traded on the American Stock
Exchange.
Trademarks
The trademarks of Bausch & Lomb
Incorporated and its subsidiary
companies referred to in this report
are:
Arnette
Award
Bausch & Lomb
Boston
Boston Advance
Boston 7
Boston ES
Boston Simplicity
Charles River
Criterion Ultra FW
Crolom
Curel
Duolube
Gold Medalist
Inertia
Killer Loop
Medalist
Miracle-Ear
Mirage
Opcon-A
Optima FW
Orbs
Ray-Ban
ReNu
Revo
SeeQuence2
Sensitive Eyes
Shapes
Sidestreet
SofLens66
Soft Sense
Vivivit Multi
Wayfarer
Advil is a trademark of
American Home Products Corporation
Betagan is a trademark of
Allergan Elite, Inc.
EVA is a trademark of
Stern Stewart & Co.
Interplak is a trademark of
Conair Corporation
Liz Claiborne is a trademark of
Liz Claiborne, Inc. U.S.A.
Lotemax is a trademark of
Pharmos Corporation
Pert and Secret are trademarks of
The Procter & Gamble Company
Porsche Design is a trademark of
Porsche Design GmbH
Rogaine is a trademark of
Pharmacia & Upjohn Co.
Tobrex is a trademark of
Alcon Laboratories, Inc.
Vaseline Intensive Care is a
trademark of
Chesebrough-Pond's Inc.
Design:
Inc Design, New York City
Executive Photography:
Ted Kawalerski, New York City
Product Photography:
Ron Wu, Rochester, New York
(C)1997 Bausch & Lomb
Incorporated
All Rights Reserved Worldwide
[RECYCLE SYMBOL] 30% Post-Consumer Recycled Fiber
page 62
- - -------
<PAGE>
[TEXT WAS SUPERIMPOSED OVER A GRAPHIC IN THE PRINTED MATERIAL]
Our Operating Principles
-------------------------------------------------------
The consumer drives the business.
New products are our life.
Cost is bad, investment is good.
Plan carefully, execute swiftly.
There is always a better way.
Focus on what's important.
Leverage, leverage, leverage.
We cannot succeed without each other.
Our Commitments
- - --------------------------------
The commitments are the promises
Bausch & Lomb makes to everyone
who has a stake in our business,
including our consumers,
our customers, our partners, our
investors, our community and
each other.
To our investors we commit to
providing long-term economic
returns, recognizing their
confidence in our ability to
achieve sustainable growth.
<PAGE>
Bausch & Lomb
One Bausch & Lomb Place
Rochester, New York 14604
www.bausch.com
Telephone:
(716) 338-6000
(800) 344-8815
Bausch
& Lomb
Printed in U.S.A.
M-1918-96
Exhibit 21
Subsidiaries of Bausch & Lomb Incorporated
as of December 31, 1996
Jurisdiction Under
Name Which Organized
Bausch & Lomb AG Switzerland
Arnette Optic Illusions, Inc. California
Bausch & Lomb (Australia) Pty. Limited Australia
Bausch & Lomb (Bermuda) Finance Company, Ltd. Bermuda
Bausch & Lomb (Bermuda) Limited Bermuda
Bausch & Lomb B.V. Netherlands
Bausch & Lomb Canada Inc. Canada
Charles River Laboratories Inc. Delaware
Bausch & Lomb China, Inc. Delaware
115 Clinton Avenue, Inc. New York
Bausch & Lomb Colombia Colombia
Dahlberg, Inc. Minnesota
Bausch & Lomb Danmark A/S Denmark
Bausch & Lomb Dist Ops S.A. Switzerland
Bausch & Lomb Domestic Finance Corp. Delaware
Bausch & Lomb Domestic Holdings Corp. Delaware
Dr. Mann Pharma Germany
Bausch & Lomb Espana, S.A. Spain
Beijing Bausch & Lomb Eyecare Company, Ltd. China
Bausch & Lomb Far East Pte. Singapore
Bausch & Lomb Finance S.A. Switzerland
OY Bausch & Lomb Finland AB Finland
Bausch & Lomb Foreign Sales Corporation Barbados
Bausch & Lomb Foundation, Inc. New York
Bausch & Lomb France S.A. France
Bausch & Lomb Fribourg SA Switzerland
Bausch & Lomb GmbH Austria
Guangzhou Bausch & Lomb Manufacturing Ltd. China
Bausch & Lomb Holdings B.V. Netherlands
Bausch & Lomb (Hong Kong) Limited Hong Kong
Bausch & Lomb-Lord, Co. (Hong Kong) Limited Hong Kong
Bausch & Lomb India Limited India
BL Industria Otica Ltda. Brazil
Bausch & Lomb International, Inc. New York
Bausch & Lomb International Holdings Corp. Delaware
Bausch & Lomb InVision Institute, Inc. Massachusetts
Bausch & Lomb Ireland Ireland
Bausch & Lomb IOM S.p.A. Italy
B.L.J. Company Limited Japan
Bausch & Lomb Korea, Ltd. Korea
Bausch & Lomb Lamex, Inc. Delaware
Madden & Layman, Ltd. England
Bausch & Lomb (Malaysia) Sdn. Bhd. Malaysia
Miracle-Ear, Inc. Minnesota
Bausch & Lomb (New Zealand) Limited New Zealand
Bausch & Lomb Norway A/S Norway
Operadora de Contactologia, S.A. de C.V. Mexico
Bausch & Lomb Opticare, Inc. New York
Outlook Eyewear Company Delaware
Bausch & Lomb Panama, Inc. Panama
Bausch & Lomb Pharmaceuticals, Inc. Delaware
Polymer Technology Corporation New York
Bausch & Lomb Puerto Rico, Inc. Delaware
Bausch & Lomb Realty Corporation New York
Revo, Inc. Delaware
Revo Europe Limited England
RHC Holdings, Inc. Delaware
Bausch & Lomb Services Corp. New York
Sight Pharmaceuticals Incorporated Delaware
Sight Savers, Inc. Delaware
Bausch & Lomb (Singapore) Pte. Ltd. Singapore
Bausch & Lomb South Africa (Pty.) Ltd. South Africa
Bausch & Lomb South Asia, Inc. Delaware
South Asia Management Company Sdn. Bhd. Malaysia
Bausch & Lomb Svenska, AB Sweden
Bausch & Lomb Taiwan Limited Taiwan
Bausch & Lomb Turkey Turkey
Bausch & Lomb U.K. Limited England
Bausch & Lomb Venezuela, S.A. Venezuela
Wilmington Management Corp. Delaware
Wilmington Partners L.P. Massachusetts
Windmill Investors Ltd. Bermuda
Exhibit 23
Consent of Independent Accountants
We hereby consent to the incorporation by reference in the
Registration Statements on Form S-8 (Nos. 2-56066, 2-85158, 33-
15439 and 33-35667) and in the Prospectus constituting part of
the Registration Statement on Form S-3 (No. 33-51117) of Bausch &
Lomb Incorporated of our report dated January 24, 1997 appearing
in the 1996 Annual Report to Shareholders of Bausch & Lomb
Incorporated which is incorporated in this Annual Report on Form
10-K. We also consent to the incorporation by reference of our
above report on the Financial Statement Schedule.
PRICE WATERHOUSE LLP
Rochester, New York
March 26, 1997
Report of Independent Accountants
on Financial Statement Schedule
To the Board of Directors of
Bausch & Lomb Incorporated
Our audits of the consolidated financial statements referred to
in our report dated January 24, 1997 appearing in the 1996 Annual
Report to Shareholders of Bausch & Lomb Incorporated (which
report and consolidated financial statements are incorporated by
reference in this Annual Report on Form 10-K) also included an
audit of the Financial Statement Schedule listed in Item 14(a)2
of this Form 10-K. In our opinion, this Financial Statement
Schedule presents fairly, in all material respects, the
information set forth therein when read in conjunction with the
related consolidated financial statements.
PRICE WATERHOUSE LLP
Rochester, New York
January 24, 1997
Exhibit 24
POWER OF ATTORNEY
The undersigned directors of Bausch & Lomb Incorporated (the
"Company"), each hereby constitutes and appoints William M.
Carpenter and Stephen A. Hellrung, or either of them, his or her
respective true and lawful attorneys and agents, each with full
power and authority to act as such without the other, to sign for
and on behalf of the undersigned the Company's Annual Report on
Form 10-K for the year ended December 28, 1996, to be filed with
the Securities and Exchange Commission pursuant to the Securities
Exchange Act of 1934 and the related rules and regulations
thereunder, and any amendment or amendments thereto, the
undersigned hereby ratifying and confirming all that said
attorneys and agents, or either one of them, shall do or cause to
be done by virtue hereof.
IN WITNESS WHEREOF, this instrument has been executed by the
undersigned as of this 25th day of February 1997.
/s/Franklin E. Agnew /s/John R. Purcell
/s/William Balderston III /s/Linda Johnson Rice
/s/William M. Carpenter /s/Alvin W. Trivelpiece
/s/Domenico De Sole /s/William H. Waltrip
/s/Jonathan S. Linen /s/Kenneth L. Wolfe
/s/Ruth R. McMullin
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
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<ARTICLE> 5
<S> <C> <C>
<PERIOD-TYPE> 12-MOS QTR-4
<FISCAL-YEAR-END> DEC-28-1996 DEC-28-1996
<PERIOD-END> DEC-28-1996 DEC-28-1996
<CASH> 166,988 166,988
<SECURITIES> 841 841
<RECEIVABLES> 281,639 281,639
<ALLOWANCES> 13,278 13,278
<INVENTORY> 339,782 339,782
<CURRENT-ASSETS> 947,625 947,625
<PP&E> 1,146,927 1,146,927
<DEPRECIATION> (580,184) (580,184)
<TOTAL-ASSETS> 2,603,432 2,603,432
<CURRENT-LIABILITIES> 929,090 929,090
<BONDS> 236,270 236,270
<COMMON> 24,171 24,171
0 0
0 0
<OTHER-SE> 857,734 857,734
<TOTAL-LIABILITY-AND-EQUITY> 2,603,432 2,603,432
<SALES> 1,926,780 434,764
<TOTAL-REVENUES> 1,926,780 434,764
<CGS> 872,328 210,874
<TOTAL-COSTS> 872,328 210,874
<OTHER-EXPENSES> 863,616 203,745
<LOSS-PROVISION> 8,556 1,782
<INTEREST-EXPENSE> 51,718 13,900
<INCOME-PRETAX> 168,897<F1> 49,117<F1>
<INCOME-TAX> 63,721 26,885
<INCOME-CONTINUING> 83,052 15,846
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 83,052 15,846
<EPS-PRIMARY> 1.47 .29
<EPS-DILUTED> 1.47 .29
<FN>
<F1>Income Before Taxes and Minority Interest
</FN>
</TABLE>
