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<SEC-DOCUMENT>0000950117-04-000415.txt : 20040128
<SEC-HEADER>0000950117-04-000415.hdr.sgml : 20040128
<ACCEPTANCE-DATETIME>20040128131110
ACCESSION NUMBER: 0000950117-04-000415
CONFORMED SUBMISSION TYPE: 10-K
PUBLIC DOCUMENT COUNT: 13
CONFORMED PERIOD OF REPORT: 20031031
FILED AS OF DATE: 20040128
FILER:
COMPANY DATA:
COMPANY CONFORMED NAME: COOPER COMPANIES INC
CENTRAL INDEX KEY: 0000711404
STANDARD INDUSTRIAL CLASSIFICATION: OPHTHALMIC GOODS [3851]
IRS NUMBER: 942657368
STATE OF INCORPORATION: DE
FISCAL YEAR END: 1031
FILING VALUES:
FORM TYPE: 10-K
SEC ACT: 1934 Act
SEC FILE NUMBER: 001-08597
FILM NUMBER: 04548569
BUSINESS ADDRESS:
STREET 1: 6140 STONERIDGE MALL RD
STREET 2: STE 590
CITY: PLEASANTON
STATE: CA
ZIP: 94588
BUSINESS PHONE: 9254603600
FORMER COMPANY:
FORMER CONFORMED NAME: COOPERVISION INC
DATE OF NAME CHANGE: 19870701
</SEC-HEADER>
<DOCUMENT>
<TYPE>10-K
<SEQUENCE>1
<FILENAME>a36926.txt
<DESCRIPTION>THE COOPER COMPANIES, INC.
<TEXT>
<PAGE>
================================================================================
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 OCTOBER 31, 2003 COMMISSION FILE NO. 1-8597
----------
THE COOPER COMPANIES, INC.
(Exact name of registrant as specified in its charter)
----------
Delaware 94-2657368
(State or other jurisdiction (I.R.S. Employer
of incorporation) Identification No.)
6140 Stoneridge Mall Road, Suite 590
Pleasanton, California 94588
(Address of principal executive offices) (Zip Code)
925-460-3600
(Registrant's telephone number, including area code)
----------
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
------------------- -------------------
Common Stock, $.10 par value, and New York Stock Exchange
associated rights
Securities registered pursuant to Section 12(g) of the Act:
None
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, 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]
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Act). Yes [X] No [ ]
On December 31, 2003, there were 31,914,540 shares of the registrant's
common stock held by non-affiliates with aggregate market value of $893,607,120
on April 30, 2003, the last day of the registrant's most recently completed
second fiscal quarter.
Number of shares outstanding of the registrant's common stock, as of
December 31, 2003: 32,103,480.
Documents Incorporated by Reference:
<TABLE>
Document Part of Form 10-K
-------- -----------------
<S> <C>
Portions of the 2003 Annual Report to Stockholders for Parts I and II
the fiscal year ended October 31, 2003
Portions of the Proxy Statement for the Annual Part III
Meeting of Stockholders scheduled to be held
March 23, 2004
</TABLE>
================================================================================
<PAGE>
PART I
Item 1. Business.
Introduction
The Cooper Companies, Inc. (the "Company," "Cooper" or "we" and similar
pronouns), through its principal business units, develops, manufactures and
markets healthcare products. Cooper is a Delaware corporation that was organized
in 1980.
CooperVision (CVI) develops, manufactures and markets a broad range of
contact lenses for the worldwide vision care market. It specializes in toric
lenses that correct astigmatism, cosmetic lenses that change the appearance of
the color of the eye, and other lenses, primarily high growth, specialty and
value-added market segments around the world. Its leading products are
disposable and planned replacement toric and spherical lenses. CooperSurgical
(CSI) develops, manufactures and markets medical devices, diagnostic products
and surgical instruments and accessories used primarily by gynecologists and
obstetricians.
Forward-Looking Statements
Some of the information included in this Form 10-K contains
"forward-looking statements" as defined by the Private Securities Litigation
Reform Act of 1995. The forward-looking statements include certain statements
pertaining to our capital resources, performance and results of operations. In
addition, all statements regarding anticipated growth in our revenue, market
conditions and results of operations are forward-looking statements. To identify
forward-looking statements look for words like "believes," "expects," "may,"
"will," "should," "seeks," "intends," "plans," "estimates" or "anticipates" and
similar words or phrases. Discussions of strategy, plans or intentions often
contain forward-looking statements. These, and all forward-looking statements,
necessarily depend on assumptions, data or methods that may be incorrect or
imprecise.
Events, among others, that could cause actual results and future actions to
differ materially from those described in forward-looking statements include
major changes in business conditions, a major disruption in the operations of
our manufacturing facilities, new competitors or technologies, significant
delays in new product introductions, the impact of an undetected virus on our
computer systems, acquisition integration delays or costs, increases in interest
rates, foreign currency exchange exposure, investments in research and
development and other start-up projects, dilution to earnings per share from
acquisitions or issuing stock, worldwide regulatory issues, including product
recalls and the effect of healthcare reform legislation, cost of complying with
new corporate governance requirements, changes in tax laws or their
interpretation, changes in geographical profit mix effecting tax rates,
significant environmental cleanup costs above those already accrued, litigation
costs including any related settlements or judgments, cost of business
divestitures, the requirement to provide for a significant liability or to write
off a significant asset, including impaired goodwill, changes in accounting
principles or estimates, including the potential cost of expensing stock
options, and other events described in our Securities and Exchange Commission
filings, including the "Business" section in this Form 10-K for the year ended
October 31, 2003 and the related portions of the Company's 2003 Annual Report to
Stockholders (2003 Annual Report) incorporated herein by reference. We caution
investors that forward-looking statements reflect our analysis only on their
stated date. We disclaim any intent to update them except as required by law.
2
<PAGE>
General Description and Development of Businesses
The information required by this item is incorporated by reference to the
captions "CooperVision" and "CooperSurgical" under "Business Review" in the 2003
Annual Report.
Research and Development
Our Company-sponsored research and development expenditures during the
fiscal years ended October 31, 2003, 2002 and 2001 were $5.6 million, $4.3
million and $3.7 million, respectively. During fiscal 2003, CooperVision spent
68% and CooperSurgical spent 32% of the total. We did not participate in any
customer-sponsored research and development programs.
Cooper employs 28 people in its research and development and manufacturing
engineering departments. Outside specialists in lens design, formulation
science, polymer chemistry, microbiology and biochemistry support product
development and clinical research for CVI products. CSI conducts research and
development in-house and also employs outside surgical specialists, including
members of its surgical advisory board.
Additional information under the caption "Research and Development Expense"
under "Management's Discussion and Analysis of Financial Condition and Results
of Operations" in the 2003 Annual Report is incorporated by reference.
Government Regulation
The U.S. Food and Drug Administration (FDA), other federal agencies and
various foreign ministries of health regulate the development, testing,
production and marketing of the Company's products. The Federal Food, Drug and
Cosmetic Act and other statutes and regulations govern the testing,
manufacturing, labeling, storage, advertising and promotion of these products.
If applicable regulations are not followed, companies may be subject to fines,
product recall or seizure, suspension of production and criminal prosecution.
Both CVI and CSI develop and market medical devices under different levels
of FDA regulation depending on the classification of the device. Class III
devices, such as flexible and extended wear contact lenses, require extensive
premarket testing and approval, while Class I and II devices require
substantially lower levels of regulation.
Before a new contact lens can be sold commercially, CVI must complete these
steps: (1) compile data on its chemistry and toxicology, (2) determine its
microbiological profile and (3) define the proposed manufacturing process. This
data must be submitted to the FDA to support an application for an
Investigational Device Exemption. Once this is granted, clinical trials can
begin. These are subject to review and approval by an Institutional Review Board
and, where a lens is determined to have a significant risk, the FDA. After the
clinical trials are completed, a Premarket Approval Application must be
submitted to and approved by the FDA.
In connection with some of Cooper's new products, we can submit an
expedited procedure known as a 510(k) application for premarket notification to
the FDA. Any product that can demonstrate that it is substantially equivalent to
another device marketed before May 28, 1976 can use this procedure. If the new
product is not substantially equivalent to a preexisting device or if the FDA
rejects a claim of substantial equivalence, FDA marketing clearance requires
extensive preclinical and clinical testing, substantially increasing the cost
and delaying the time to market.
3
<PAGE>
FDA and state regulations also require the Company to adhere to applicable
"good manufacturing practices" (GMP). They require detailed quality assurance
and record keeping and make periodic unscheduled regulatory inspections. The
Company believes it is in compliance with GMP regulations.
Health authorities in foreign countries regulate Cooper's clinical trials
and medical device sales. The regulations vary widely from country to country.
Even if the FDA has approved a product, the regulatory agencies in each country
must approve new products before they may be marketed there.
These regulatory procedures require a considerable investment in time and
resources and usually result in a substantial delay between new product
development and marketing. Cooper cannot assure that all necessary approvals
will be obtained, or obtained in a timely manner. If the Company does not
maintain compliance with regulatory standards or if problems occur after
marketing, product approval may be withdrawn.
All of Cooper's currently marketed products have been cleared by all
appropriate regulatory agencies, and none are being marketed under an
Investigative Device Exemption.
In addition to FDA regulatory requirements, the Company also maintains ISO
9000 certification and CE mark approvals for its products. A CE mark is an
international symbol of adherence to certain standards and compliance with
applicable European medical device requirements. These quality programs and
approvals are required by the European Medical Device Directive and must be
maintained for all products intended to be sold in the European market. In order
to maintain these quality benchmarks, the Company is subjected to rigorous
biannual reassessment audits of its quality systems and procedures.
Raw Materials
CVI's raw materials primarily consist of various chemicals and packaging
materials. There are alternative supply sources for each of them. Raw materials
used by CSI are generally available from more than one source. However, because
some products require specialized manufacturing procedures, CSI could experience
inventory shortages if it were required to use an alternative manufacturer on
short notice.
Marketing and Distribution
In the United States, Canada, United Kingdom, Brazil, Portugal, Italy,
Spain, France, Holland, Sweden, Finland, Norway, Australia and South Africa, CVI
markets its products through its field sales representatives, who call on
optometrists, ophthalmologists, opticians and optical chains. In the United
States, field sales representatives also call on distributors. In Japan and
other countries outside North America, CVI uses distributors and has given most
of them the exclusive right to market our products. In the United States, CVI
augments its sales and marketing efforts with e-commerce, telemarketing and
advertising in professional journals.
CSI's products are marketed by a network of field sales representatives and
distributors. In the United States, CSI augments its sales and marketing
activities with e-commerce, telemarketing, direct mail and advertising in
professional journals.
Patents, Trademarks and Licensing Agreements
Cooper owns or licenses a variety of domestic and foreign patents, which,
in total, are material to its overall business. The names of certain of Cooper's
products are protected by trademark registrations in the United States Patent
and Trademark Office and, in some cases, also in foreign trademark offices.
4
<PAGE>
Applications are pending for additional trademark registrations. Cooper
aggressively defends its intellectual property rights.
No individual patent or license is material to the Company or either of its
principal business units other than:
o Our non-exclusive Patent License Agreement dated as of December 2, 1997,
between Cooper and Geoffrey Galley, Albert Moreland, Barry Bevis and Ivor
Atkinson entered into in connection with the Company's acquisition of
Aspect Vision Care Limited (the "Edge Patent License"). This agreement
expires in January 2010 and relates to patents used by CVI to produce a
contact lens edge that provides superior comfort to the wearer. The edge
forms a part of CVI's products (both spherical and toric lenses) that are
manufactured using a cast molding technology in the Company's Hamble,
England, and Norfolk, Virginia, facilities.
o Our license related to products manufactured by CVI using the proprietary
phosphorylcholine (PC) technology patents that we received in connection
with the Company's acquisition of Biocompatibles Eye Care, Inc. Our
Proclear Compatibles brand of spherical and toric soft contact lenses are
manufactured using this PC technology.
In addition to trademarks and patent licenses, the Company owns certain
trade secrets, copyrights, know-how and other intellectual property.
Dependence on Customers
Neither of Cooper's business segments depends to any material extent on any
one customer or any one affiliated group of customers.
Government Contracts
Neither of our business units is materially subject to profit renegotiation
or termination of contracts or subcontracts at the election of the United States
government.
Competition
CVI and CSI each operate in a highly competitive environment. Competition
in the medical device industry involves the search for technological and
therapeutic innovations in the prevention, diagnosis and treatment of disease.
Both of Cooper's businesses compete primarily on the basis of product quality
and differentiation, technological benefit, service and reliability.
CVI
A number of manufacturers compete in the worldwide market for contact
lenses, which was approximately $3.5 billion in 2003. The three largest are
Johnson & Johnson's Vistakon division, CIBA Vision/Wesley Jessen (owned by
Novartis AG) and Bausch & Lomb Incorporated.
The contact lens market has two major segments. The larger "commodity"
segment, about $2.5 billion in 2003, is comprised of lenses that only correct
near- and farsightedness. The smaller "specialty" segment, about $1 billion in
2003, is comprised of lenses that address special needs of contact lens
patients, which includes toric, cosmetic, multifocal and premium lenses.
CooperVision competes successfully in the contact lens market primarily by
offering specialty lenses, and secondarily by offering commodity lenses. About
62% of CVI's sales are specialty lenses.
5
<PAGE>
To compete successfully in the contact lens market, companies must market
differentiated products priced competitively and, therefore, manufactured
efficiently. CVI believes that it is the only contact lens manufacturer to use
three different manufacturing processes to produce its lenses (lathing, cast
molding and FIPS, a cost effective combination of lathing and molding). This
manufacturing flexibility means that CVI can:
o Develop more lens types for patients than competitors (two week, monthly
and quarterly disposable and custom toric products, the latter for patients
with a high amount of astigmatism); and
o Offer a wider range of lens parameters, leading to a more successful
fitting with better visual acuity.
In addition, CVI believes that its lenses provide superior comfort through
its use of the lens edge technology provided under the patents covered by its
Edge Patent License described under "Patents, Trademarks and Licensing
Agreement." CVI also sponsors clinical studies to generate medical information
to improve its lenses.
In order to enhance its competitiveness in the specialty market, Cooper
completed the acquisition of Biocompatibles Eye Care, Inc. (Biocompatibles) the
contact lens business of Biocompatibles plc., in February 2002. Biocompatibles'
Proclear line spherical and toric lenses, are manufactured with omafilcon A, a
material that incorporates the proprietary phosphorylcholine technology that
helps enhance tissue-device compatibility. Proclear is the only lens with FDA
clearance for the claim "... may provide improved comfort for contact lens
wearers who experience mild discomfort or symptoms relating to dryness during
lens wear." Mild discomfort relating to dryness during lens wear is a condition
that often causes patients to discontinue contact lens wear.
Toric contact lenses correct astigmatism (irregularities of the cornea) and
accounted for about 13% of the total worldwide contact lens market in 2003.
CVI's toric lens sales represented about 30% of this market segment in 2003.
The toric market segment is highly competitive. CVI's primary toric
competitors are CIBA Vision/Wesley Jessen (owned by Novartis AG), Bausch & Lomb
Incorporated, Johnson & Johnson's Vistakon division and Ocular Sciences, Inc.
Toric lens manufacturers compete to provide the highest possible level of visual
acuity and patient satisfaction by offering a wide range of lens parameters,
superior wearing comfort and a high level of customer service, both for patients
and contact lens practitioners. CVI believes that its three manufacturing
processes yield a wider range of toric lens parameters than its competitors,
providing greater patient and practitioner satisfaction and better visual
acuity, and that it offers superior customer services, including high standards
of on-time product delivery.
Major competitors have greater financial resources and larger research and
development budgets and sales forces than CVI. Nevertheless, CVI offers a high
level of customer service through its several direct sales organizations around
the world and through telephone sales and technical service representatives who
consult with eyecare professionals about the use of the Company's lens products.
CVI believes that its sales force is particularly well equipped through
extensive training to meet the need of contact lens practitioners and their
customers.
CVI also competes with manufacturers of eyeglasses and with refractive
surgical procedures that correct visual defects. The Company believes that CVI
will continue to compete favorably against eyeglasses, particularly in markets
where the penetration of contact lenses in the vision correction market is low,
offering lens manufacturers an opportunity to gain market share. The Company
also believes that laser vision correction is not a material threat to its sales
of contact lenses because each modality serves a different demographic group.
Almost all new contact lens wearers are in their teens or twenties, while
refractive surgical procedures are performed primarily on patients in their late
thirties or early forties.
6
<PAGE>
CSI
CSI focuses on selected segments of the women's healthcare market,
supplying high quality diagnostic products and surgical instruments and
accessories. In some instances, CSI offers all of the products needed for a
complete procedure. The market segments in which CSI competes continue to be
fragmented, typified by smaller technology-driven firms that generally offer
only one or two product lines. Most are privately owned or divisions of public
companies including some owned by companies with greater financial resources
than Cooper. Competitive factors in these segments include technological and
scientific advances, product quality, price, customer service and effective
communication of product information to physicians and hospitals. CSI believes
that it competes successfully against these companies with its superior sales
and marketing, the technological advantages of its products and by developing
and acquiring new products, including those used in new medical procedures. In
addition, as CSI expands its product line, it offers to train medical
professionals how to use them.
Backlog
Backlog is not a material factor in either of Cooper's business units.
Seasonality
CVI's contact lens sales in its first fiscal quarter, which runs from
November 1 through January 31, are typically lower than subsequent quarters, as
patient traffic to practitioners' offices is relatively light during the holiday
season.
Compliance with Environmental Laws
Federal, state and local provisions that regulate the discharge of
materials into the environment, or relate to the protection of the environment,
do not currently materially affect Cooper's capital expenditures, earnings or
competitive position.
Working Capital
Cooper has not required any material working capital arrangements in the
past five years.
Financial Information about Business Segments, Geographic Areas, Foreign
Operations and Export Sales
The information required by this item is incorporated by reference to Note
12 "Business Segment Information" of Notes to Consolidated Financial Statements
of the Company included in the 2003 Annual Report.
Employees
On October 31, 2003, Cooper had approximately 3,700 employees. The Company
believes that its relations with its employees are good.
7
<PAGE>
Available Information
The Cooper Companies, Inc. Internet address is http://www.coopercos.com.
Our annual reports on Form 10-K, along with all other reports and amendments
filed with or furnished to the Securities and Exchange Commission (SEC) are
publicly available free of charge on our Web site as soon as reasonably
practicable after the Company furnishes it to the SEC. The Company's Corporate
Governance Principles, Business Conduct and Ethics Policy and Board of
Directors' committee charters are also posted on the Web site. The information
on the Company's Web site is not part of this or any other report we file with,
or furnish to, the SEC.
8
<PAGE>
Item 2. Properties.
The following are Cooper's principal facilities as of October 31, 2003:
<TABLE>
<CAPTION>
Approximate Owned
Floor Area or Lease
Location Operations (Sq. Ft.) Leased Expiration
- ----------------------- -------------------------------------------- ----------- ------ ----------
<S> <C> <C> <C> <C>
United States
Pleasanton, CA Executive Offices 13,700 Leased Sept. 2005
Lake Forest, CA Executive Offices and CVI Offices 8,100 Leased Jan. 2005
Huntington Beach, CA CVI Manufacturing & Technical Offices 20,600 Leased Sept. 2007
Fairport, NY CVI Administrative Offices & Marketing 31,000 Leased April 2004
Scottsville, NY CVI Manufacturing and Research 49,500 Owned N/A
Henrietta, NY CVI Distribution and Warehouse Facility 68,000 Leased Feb. 2008
Norfolk, VA CVI Manufacturing, Offices and Warehouse
Facilities 39,000 Owned N/A
Trumbull, CT CSI Manufacturing, Research and
Development, Marketing, Distribution and
Warehouse Facilities 92,000 Leased May 2011
Canada
Markham, Ont. CVI Offices, Manufacturing
Distribution and Warehouse Facilities 23,000 Leased Feb. 2005
St. Liboire, QC CSI Manufacturing and Administrative 24,273 Owned N/A
United Kingdom
Hamble, Hampshire, CVI Manufacturing, Research and Development,
England Marketing and Admin. Offices 91,400 Owned N/A
Fareham, Hampshire, CVI Manufacturing and Administrative 29,600 Leased Jan. 2018
England
Fareham, Hampshire, CVI Manufacturing and Warehouse
England 35,000 Leased June 2013
Fareham, Hampshire, CVI Manufacturing
England 33,300 Leased Sept. 2023
Italy
Milan CVI Warehouse and Administrative 29,700 Leased Sept. 2008
Australia
South Australia CVI Manufacturing, Distribution and
Administration 14,800 Leased June 2004
</TABLE>
The Company believes its properties are suitable and adequate for its
businesses.
9
<PAGE>
Item 3. Legal Proceedings.
None.
Item 4. Submission of Matters to a Vote of Security Holders.
During the fourth quarter of fiscal 2003, the Company did not submit any
matters to a vote of the Company's security holders.
10
<PAGE>
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters.
The information required by this item is incorporated by reference to
"Quarterly Common Stock Price Range," "Corporate Information," and the heading
"Cash Dividends" in Note 8 "Stockholders' Equity" of "Notes to Consolidated
Financial Statements" in the 2003 Annual Report.
Item 6. Selected Financial Data.
The information set forth under "Five-Year Financial Highlights," on page
30, and "Contractual Obligations and Commercial Commitments" in the 2003 Annual
Report is incorporated by reference.
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
The information required by this item is incorporated by reference to
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" in the 2003 Annual Report.
Item 7A. Quantitative and Qualitative Disclosure about Market Risk.
The Company is exposed to market risks that relate principally to changes
in interest rates and foreign currency fluctuations. The Company's policy is to
minimize, to the extent reasonable and practical, its exposure to the impact of
changing interest rates and foreign currency fluctuations by entering into
interest rate swaps and foreign currency forward exchange contracts,
respectively. The Company does not enter into derivative financial instrument
transactions for speculative purposes. Additional information for this item is
incorporated by reference to "Derivatives" in Note 1 "Summary of Significant
Accounting Policies" and in Note 7 "Financial Instruments" to the Financial
Statements in the 2003 Annual Report.
Long-term Debt
Total debt increased to $185.9 million at October 31, 2003 from $163.6
million at October 31, 2002. We issued $115 million of convertible senior
debentures (see caption "Convertible Senior Debentures" in Note 6 "Debt" in the
2003 Annual Report, which is incorporated by reference) and the proceeds were
used to reduce amounts drawn under our revolving credit facility and for
additional funding requirements.
<TABLE>
<CAPTION>
October 31, 2003 October 31, 2002
---------------- ----------------
(In millions)
<S> <C> <C>
Short-term debt $ 20.7 $ 36.3
Long-term debt 165.2 127.3
------ ------
Total $185.9 $163.6
====== ======
</TABLE>
11
<PAGE>
As of October 31, 2003, the scheduled maturities of the Company's fixed and
variable rate long-term debt obligations (excluding capitalized leases), their
weighted average interest rates and their estimated fair values were as follows:
<TABLE>
<CAPTION>
Expected Maturity Date - Fiscal Year
--------------------------------------------------------------
There- Fair
2004 2005 2006 2007 2008 after Total Value
----- ----- ----- ---- ---- ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
($ in Millions)
Long-term debt:
Fixed interest rate $ -- $ -- $ -- $ -- $ -- $112.2 $112.2 $138.0
Average interest rate 2.625%
Variable interest rate $19.1 $22.7 $19.0 $9.6 $0.1 $ 0.2 $ 70.7 $ 70.7
Average interest rate 2.9% 2.9% 2.9% 2.9% 2.9% 2.9%
</TABLE>
Item 8. Financial Statements and Supplementary Data.
The information required by this item is incorporated by reference to
"Consolidated Balance Sheets," "Consolidated Statements of Income,"
"Consolidated Statements of Cash Flows," "Consolidated Statements of
Comprehensive Income," "Notes to Consolidated Financial Statements,"
"Independent Auditors' Report" and "Two-Year Quarterly Financial Data" in the
2003 Annual Report.
Item 9. Changes In and Disagreements With Accountants on Accounting and
Financial Disclosure.
None.
Item 9A. Controls and Procedures.
The Company has established and currently maintains disclosure controls and
procedures designed to ensure that material information required to be disclosed
in its reports filed under the Securities Exchange Act of 1934 is recorded,
processed, summarized and reported, within the time periods specified by the
Securities and Exchange Commission and that any material information relating to
the Company is recorded, processed, summarized and reported to its principal
officers to allow timely decisions regarding required disclosures. In designing
and evaluating the disclosure controls and procedures, management recognized
that any controls and procedures, no matter how well designed and operated, can
provide only reasonable assurance of achieving the desired control objectives,
and in reaching a reasonable level of assurance, management necessarily was
required to apply its judgment in evaluating the cost-benefit relationship of
possible controls and procedures.
In conjunction with the close of each fiscal quarter, the Company conducts
a review and evaluation, under the supervision and with the participation of the
Company's management, including the Chief Executive Officer and the Chief
Financial Officer, of the effectiveness of the design and operation of the
Company's disclosure controls and procedures. The Company's Chief Executive
Officer and Chief Financial Officer, based upon such an evaluation as of October
31, 2003, the end of the fiscal year covered by this report, concluded that the
Company's disclosure controls and procedures were effective at the reasonable
assurance level.
There has been no change in the Company's internal control over financial
reporting during the Company's most recent fiscal quarter that has materially
affected, or is reasonably likely to materially affect, the Company's internal
controls over financial reporting.
12
<PAGE>
PART III
Item 10. Directors and Executive Officers of the Registrant.
The information required by this item is incorporated by reference to
"Proposal 1 - Election of Directors" in the Company's Proxy Statement for the
Annual Meeting of Stockholders to be held on March 23, 2004 (the "2004 Proxy
Statement").
Item 11. Executive Compensation.
The information required by this item is incorporated by reference to the
subheadings "Executive Compensation" and "Board Committees, Meetings and
Compensation" of the "Proposal 1 - Election of Directors" section of the 2004
Proxy Statement.
Item 12. Security Ownership of Certain Beneficial Owners and Management.
The information required by this item is incorporated by reference to the
subheadings "Securities Held by Management" and "Principal Securityholders" of
the "Proposal 1 - Election of Directors" section and the "Equity Compensation
Plan Information" subheading of "Proposal 3 - Approval of the Amendment of
Amended and Restated 2001 Long Term Incentive Plan" of the 2004 Proxy Statement.
Item 13. Certain Relationships and Related Transactions.
None.
Item 14. Principal Accounting Fees and Services.
The information required by this item is incorporated by reference to
"Report of the Audit and Finance Committee" of the "Proposal 1 - Election of
Directors" section of the 2004 Proxy Statement.
13
<PAGE>
PART IV
Item 15. Exhibits, Financial Statement Schedules, and Reports on Form 8-K.
(a) Documents filed as part of this report:
1. Accountants' Consent and Report on Schedule.
2. Financial Statement Schedules of the Company.
Schedule
Number Description
-------- -----------
Schedule II Valuation and Qualifying Accounts
3. Exhibits.
The exhibits listed on the accompanying Exhibit Index are filed
as part of this report.
All other schedules which are included in the applicable
accounting regulations of the Securities and Exchange Commission are
not required here because they are not applicable.
(b) Reports filed on Form 8-K:
Cooper filed on Form 8-K dated October 28, 2003 a report of Item
5 - Other Events, during the period August 1, 2003 through October 31,
2003. Cooper furnished on Form 8-K dated September 3, 2003 a report of
Item 12 - Results of Operations and Financial Condition, during the
period August 1, 2003 through October 31, 2003.
14
<PAGE>
SCHEDULE II
THE COOPER COMPANIES, INC. AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
Three Years Ended October 31, 2003
<TABLE>
<CAPTION>
Additions
Balance at Charged to (Deductions)/ Balance
Beginning Costs and Recoveries/ at End
of Year Expenses Other (1) of Year
---------- ---------- ------------- -------
(In thousands)
<S> <C> <C> <C> <C>
Allowance for doubtful accounts:
Year ended October 31, 2003 $3,883 $1,598 $ 443 $5,924
====== ====== ===== ======
Year ended October 31, 2002 $1,966 $ 944 $ 973 $3,883
====== ====== ===== ======
Year Ended October 31, 2001 $2,440 $ 251 $(725) $1,966
====== ====== ===== ======
</TABLE>
(1) Consists of additions representing acquired allowances and recoveries, less
deductions representing receivables written off as uncollectible.
<TABLE>
<CAPTION>
Balance at Balance
Beginning Reductions/ at End
of Year Additions Charges of Year
---------- --------- ----------- -------
(In thousands)
<S> <C> <C> <C> <C>
Income tax valuation allowance:
Year ended October 31, 2003 $ 4,795 $ -- $ 507 $4,288
======== ==== ====== ======
Year ended October 31, 2002 $ 5,540 $ -- $ 745 $4,795
======== ==== ====== ======
Year Ended October 31, 2001 $ 6,488 $558 $1,506 $5,540
======== ==== ====== ======
</TABLE>
15
<PAGE>
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, on January 28, 2004.
THE COOPER COMPANIES, INC.
By: /s/ A. THOMAS BENDER
---------------------------------
A. Thomas Bender
Chairman of the Board, President
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 indicated on the dates set forth opposite their
respective names.
<TABLE>
<CAPTION>
Signature Capacity Date
--------- -------- ----
<S> <C> <C>
/s/ A. THOMAS BENDER Chairman of the Board, President January 28, 2004
- -----------------------------
(A. Thomas Bender) and Chief Executive Officer
/s/ ALLAN E. RUBENSTEIN, M.D. Vice Chairman of the Board and January 28, 2004
- -----------------------------
(Allan E. Rubenstein) Lead Director
/s/ ROBERT S. WEISS Executive Vice President, January 28, 2004
- -----------------------------
(Robert S. Weiss) Chief Financial Officer and Director
/s/ STEPHEN C. WHITEFORD Vice President and Corporate January 28, 2004
- -----------------------------
(Stephen C. Whiteford) Controller
/s/ MICHAEL H. KALKSTEIN Director January 28, 2004
- -----------------------------
(Michael H. Kalkstein)
/s/ MOSES MARX Director January 28, 2004
- -----------------------------
(Moses Marx)
/s/ DONALD PRESS Director January 28, 2004
- -----------------------------
(Donald Press)
/s/ STEVEN ROSENBERG Director January 28, 2004
- -----------------------------
(Steven Rosenberg)
/s/ STANLEY ZINBERG, M.D. Director January 28, 2004
- -----------------------------
(Stanley Zinberg)
</TABLE>
16
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Location of
Exhibit in
Exhibit Sequential
Number Description of Document Number System
- ------- ----------------------- -------------
<S> <C> <C>
2.1 - International Share Sale Agreement among Biocompatibles International plc.,
Aspect Vision Holdings Limited and The Cooper Companies, Inc., incorporated by
reference to Exhibit 2.1 to the Company's Current Report on Form 8-K dated
February 27, 2002.................................................................
3.1 - Restated Certificate of Incorporation, as partially amended, incorporated by
reference to Exhibit 4(a) to the Company's Registration Statement on Form S-3
(No. 33-17330) and Exhibits 19(a) and 19(c) to the Company's Quarterly Report on
Form 10-Q for the fiscal quarter ended April 30, 1988.............................
3.2 - Certificate of Amendment of Restated Certificate of Incorporation dated
September 21, 1995 incorporated by reference to Exhibit 3.2 to the Company's
Annual Report on Form 10-K for the fiscal year ended October 31, 1995.............
3.3 - Amended and Restated By-Laws dated December 16, 1999, incorporated by reference
to Exhibit 3.3 to the Company's Annual Report on Form 10-K for the fiscal year
ended October 31, 1999............................................................
3.4 - Certificate of Amendment of Certificate of Incorporation dated May 24, 2000,
incorporated by reference to Exhibit 3.4 to the Company's Annual Report on Form
10-K for the fiscal year ended October 31, 2000...................................
3.5 Fourth Certificate of Amendment of Restated Certificate of Incorporation filed
with the Delaware Secretary of State on March 26, 2003, incorporated by
reference to Exhibit 4.5 to our Registration Statement on Form S-8 filed with
the Securities and Exchange Commission on April 7, 2003...........................
4.1 - Certificate of Elimination of Series A Junior Participating Preferred Stock of
The Cooper Companies, Inc. filed with the Delaware Secretary of State on October
30, 1997, incorporated by reference to Exhibit 4.1 on Form 10-K for fiscal year
ended October 31, 1997............................................................
4.2 - Rights Agreement, dated as of October 29, 1997, between the Company and American
Stock Transfer & Trust Company, incorporated by reference to Exhibit 4 to the
Company's Current Report on Form 8-K dated October 29, 1997.......................
4.3 - Amendment No. 1 to Rights Agreement dated September 26, 1998, incorporated by
reference to Exhibit 99.1 of the Company's Current Report on Form 8-K dated
September 25, 1998................................................................
4.4 - Certificate of Designations of Series A Junior Participating Preferred Stock of
The Cooper Companies, Inc., incorporated by reference to Exhibit 4.0 of the
Company's Current Report on Form 8-K dated October 29, 1997.......................
4.5 Indenture dated as of June 25, 2003, between The Cooper Companies, Inc. and
Wells Fargo Bank, National Association, incorporated by reference to Exhibit 4.1
of the Company's Quarterly Report on Form 10-Q for the fiscal quarter ended on
April 30, 2003....................................................................
10.1 - 2001 Long-term Incentive Plan, incorporated by reference to Exhibit 10.8 of the
Company's Annual Report on Form 10-K for the fiscal year ended October 31, 2000...
10.2 - Severance Agreement entered into as of June 10, 1991, by and between
CooperVision, Inc. and A. Thomas Bender, incorporated by reference to Exhibit
10.26 to Amendment No. 1 to the Company's Annual Report on Form 10-K for the
fiscal year ended October 31, 1992................................................
10.3 - Letter dated March 25, 1994, to A. Thomas Bender from the Chairman of the
Compensation Committee of the Company's Board of Directors, incorporated by
reference to Exhibit 10.4 to the Company's Annual Report on Form 10-K for the
fiscal year ended October 31, 1994................................................
</TABLE>
17
<PAGE>
<TABLE>
<CAPTION>
Location of
Exhibit in
Exhibit Sequential
Number Description of Document Number System
- ------- ----------------------- -------------
<S> <C> <C>
10.4 - Severance Agreement entered into as of April 26, 1990, by and between Nicholas
J. Pichotta and the Company incorporated by reference to Exhibit 10.8 to the
Company's Annual Report on Form 10-K for fiscal year ended October 31, 1995.......
10.5 - Letter Agreement dated November 1, 1992, by and between Nicholas J. Pichotta and
the Company incorporated by reference to Exhibit 10.9 to the Company's Annual
Report on Form 10-K for the fiscal year ended October 31, 1995....................
10.6 - Severance Agreement entered into as of August 21, 1989, by and between Robert S.
Weiss and the Company, incorporated by reference to Exhibit 10.28 to Amendment
No. 1 to the Company's Annual Report on Form 10-K for the fiscal year ended
October 31, 1992..................................................................
10.7 - Change in Control Agreement dated as of October 14, 1999, between The Cooper
Companies, Inc. and Carol R. Kaufman, incorporated by reference to Exhibit 10.13
to the Company's Annual Report on Form 10-K for the fiscal year ended October
31, 1999..........................................................................
10.8 - 1996 Long-term Incentive Plan for Non-Employee Directors of The Cooper
Companies, Inc., incorporated by reference to Appendix A to the Company's Proxy
Statement for its 1996 Annual Meeting of Stockholders.............................
10.9 - Amendment No. 1 to 1996 Long-term Incentive Plan for Non-Employee Directors of
The Cooper Companies, Inc., dated October 10, 1996, incorporated by reference to
Exhibit 10.14 to the Company's Annual Report on Form 10-K for the fiscal year
ended October 31, 1996............................................................
10.10 - Amendment No. 2 to 1996 Long-term Incentive Plan for Non-Employee Directors of
The Cooper Companies, Inc., dated October 29, 1997, incorporated by reference to
Exhibit 10.15 to the Company's Annual Report on Form 10-K for the fiscal year
ended October 31, 1997............................................................
10.11 - Amendment No. 3 to 1996 Long-term Incentive Plan for Non-Employee Directors of
The Cooper Companies, Inc., dated October 29, 1999, incorporated by reference to
Exhibit 10.15 to the Company's Annual Report on Form 10-K for the fiscal year
ended October 31, 2001............................................................
10.12 - Amendment No. 4 to 1996 Long-term Incentive Plan for Non-Employee Directors of
The Cooper Companies, Inc., dated October 24, 2000, incorporated by reference to
Exhibit 10.16 to the Company's Annual Report on Form 10-K for the fiscal year
ended October 31, 2001............................................................
10.13 - Amendment No. 5 to the 1996 Long-term Incentive Plan for Non-employee Directors
of The Cooper Companies, Inc., incorporated by reference to Exhibit 10.17 to the
Company's Annual Report on Form 10-K for the fiscal year ended October 31,
2001..............................................................................
10.14 - Amendment No. 6 to the 1996 Long-term Incentive Plan for Non-employee Directors
of The Cooper Companies, Inc., incorporated by reference to Exhibit 4.15 to the
Company's Registration Statement on form S-8 dated November 21,
2002..............................................................................
10.15 - Amendment No. 7 to the 1996 Long-term Incentive Plan for Non-employee Directors
of The Cooper Companies, Inc. dated November 4, 2002, incorporated by reference
to Exhibit 10.16 to the Company's Annual Report on Form 10-K for the fiscal year
ended October 31, 2002............................................................
10.16 - Amendment No. 8 to 1996 Long-term Incentive Plan for Non-Employee Directors of
The Cooper Companies, Inc. dated October 29, 2003.................................
10.17(a)- Patent License Agreement dated February 13, 2002 between Geoffrey H. Galley and
others and CooperVision, Inc., incorporated by reference to Exhibit 10.11 of the
Company's Quarterly Report on Form 10-Q for the fiscal quarter ended January 31,
2002..............................................................................
</TABLE>
18
<PAGE>
<TABLE>
<CAPTION>
Location of
Exhibit in
Exhibit Sequential
Number Description of Document Number System
- ------- ----------------------- -------------
<S> <C> <C>
10.18 The Cooper Companies, Inc. Amended and Restated 2001 Long Term Incentive Plan,
incorporated by reference to Exhibit 10.1 of the Company's Quarterly Report on
Form 10-Q for the fiscal quarter ended April 30, 2003.............................
10.19 Amendment No. 1 to the Amended and Restated 2001 Long Term Incentive Plan,
incorporated by reference to Exhibit 10.2 of the Company's Quarterly Report on
Form 10-Q for the fiscal quarter ended April 30, 2003.............................
10.20 Patent and Trade Mark License Agreement dated February 28, 2002 between
Biocompatibles Limited and CooperVision International Holding Company LP and The
Cooper Companies, Inc.............................................................
10.21 Patent and Trade Mark License Agreement dated February 28, 2002 between
Biocompatibles Limited and CooperVision Technology Inc. and The Cooper
Companies, Inc....................................................................
10.22 Deed of Novation dated March 3, 2003 between Abbott Vascular Devices Limited
(formerly known as Biocompatibles Limited) and CooperVision International
Holding Company LP and The Cooper Companies, Inc. and Biocompatibles UK Limited...
10.23 Deed of Novation dated March 3, 2003 between Abbott Vascular Devices Limited
(formerly known as Biocompatibles Limited) and CooperVision Technology, Inc. and
The Cooper Companies, Inc. and Biocompatibles UK Limited..........................
11(b) Calculation of earnings per share.................................................
13 2003 Annual Report to Stockholders................................................
21 Subsidiaries......................................................................
23 Accountants' Consent and Report on Schedule.......................................
31.1 Certification of the Chief Executive Officer, pursuant to Rule 13a-14(a) of the
Securities Exchange Act of 1934...................................................
31.2 Certification of the Chief Financial Officer pursuant to Rule 13a-14(a) of the
Securities Exchange Act of 1934...................................................
32.1 Certification of the Chief Executive Officer, pursuant to 18 U.S.C. Section
1350..............................................................................
32.2 Certification of the Chief Financial Officer, pursuant to 18 U.S.C. Section
1350..............................................................................
</TABLE>
(a) The agreement received confidential treatment from the Securities and
Exchange Commission with respect to certain portions of this Exhibit.
Omitted portions have been filed separately with The Commission
(b) The information required in this exhibit is incorporated by reference to
Note 4, "Earnings Per Share," in the 2003 Annual Report
19
STATEMENT OF DIFFERENCES
------------------------
The British pound sterling sign shall be expressed as..................... 'L'
The section symbol shall be expressed as.................................. 'SS'
The trademark symbol shall be expressed as................................ 'TM'
The registered trademark symbol shall be expressed as..................... 'r'
The copyright symbol shall be expressed as................................ 'c'
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10
<SEQUENCE>3
<FILENAME>ex10-16.txt
<DESCRIPTION>EXHIBIT 10.16
<TEXT>
<PAGE>
Exhibit 10.16
AMENDMENT NO. 8
TO
THE 1996 LONG TERM INCENTIVE PLAN FOR NON-EMPLOYEE DIRECTORS
OF
THE COOPER COMPANIES, INC.
WHEREAS, The Cooper Companies, Inc. (the "Company") has adopted The 1996
Long Term Incentive Plan for Non-Employee Directors of The Cooper Companies,
Inc. (the "Plan"); and
WHEREAS, the Company effected a two-for-one stock split on November 25,
2002 which resulted in total stock option awards to the Non-Employee Directors
of 30,000 shares and 32,500 in the case of the Vice-Chairman and Lead Director;
and
WHEREAS, after consideration and consultation with its independent
consultant, the Organization and Compensation Committee has determined that
Annual Stock Option Grants to the Non-Employee Directors should be modified; and
WHEREAS, Section 11 of the Plan permits the Board of Directors of the
Company to amend the Plan, subject to certain limitations; and
WHEREAS, the Board of Directors of the Company desires to amend the Plan in
certain respects as recommended by the Organization and Compensation Committee;
NOW, THEREFORE Plan is hereby amended as follows:
FIRST: The first two paragraphs of Section 7 of the Plan are hereby amended
by deleting the numbers "30,000" and "32,500" wherever they appear and
replacing them with "17,500" and "18,900" throughout.
SECOND: The provisions of the first paragraph hereof shall be effective as
of October 27, 2003;
THIRD: The provisions of the first paragraph shall be understood to refer
to award amounts adjusted to account for the above referenced two-for-one
stock split;
FOURTH: Except to the extent herein above set forth, the Plan shall remain
in full force and effect.
IN WITNESS WHEREOF, the Board of Directors of the Company has caused this
Amendment No. 8 to the Plan to be executed by a duly authorized officer of the
Company as of October 27, 2003.
THE COOPER COMPANIES, INC.
By: /s/ Carol R. Kaufman
------------------------------------
Carol R. Kaufman
Title: Vice President of Legal Affairs,
Secretary, and Chief Administrative
Officer
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10
<SEQUENCE>4
<FILENAME>ex10-20.txt
<DESCRIPTION>EXHIBIT 10.20
<TEXT>
<PAGE>
Exhibit 10.20
Dated 28 February 2002
BIOCOMPATIBLES LIMITED
- and -
COOPERVISION INTERNATIONAL HOLDING COMPANY LP
- and -
THE COOPER COMPANIES, INC.
----------
PATENT AND TRADE MARK LICENCE
----------
TAYLOR JOYNSON GARRETT
Carmelite
50 Victoria Embankment
Blackfriars
London EC4Y 0DX
T:+44(0)20 7300 7000
F:+44(0)20 7300 7100
DX 41 London
Ref:JWR/DVP
<PAGE>
Index
<TABLE>
<CAPTION>
Clause No.
<S> <C> <C>
1. Definitions and interpretation................................ 3
2. Grant......................................................... 5
3. Term.......................................................... 6
4. Marking....................................................... 6
5. Maintenance of Licensed Patents and Trade Marks............... 8
6. Improvements.................................................. 9
7. Infringement.................................................. 10
8. Disclaimer of representations and warranties.................. 11
9. Indemnity..................................................... 12
10. Confidentiality and disclosure of Confidential Information.... 12
11. Termination................................................... 13
12. Effects of termination........................................ 14
13. Force majeure................................................. 15
14. Severability.................................................. 15
15. Variation..................................................... 15
16. Assignment.................................................... 15
17. Relationship between the parties.............................. 16
18. Entire agreement.............................................. 16
19. Notices....................................................... 16
20. Waiver........................................................ 17
21. Cumulative remedies........................................... 17
22. Rights of third parties....................................... 18
23. Publicity..................................................... 18
24. Precedence.................................................... 18
25. Counterparts.................................................. 18
26. Governing law and jurisdiction................................ 18
SCHEDULE 1................................................................. 21
Patents being licensed........................................ 22
SCHEDULE 2................................................................. 23
Trade Marks................................................... 23
SCHEDULE 3................................................................. 24
Existing Agreements........................................... 24
</TABLE>
2
<PAGE>
THIS LICENCE is made on 28 February 2002
BETWEEN
(1) BIOCOMPATIBLES LIMITED an English registered company number 1833264 whose
registered office is at Chapman House, Farnham Business Park, Weydon Lane,
Farnham, Surrey, GD9 8QL ("Licensor"); and
(2) COOPERVISION INTERNATIONAL HOLDING COMPANY LP whose registered office is at
c/o The Cooper Companies, Inc., 6140 Stoneridge Mall Road, Suite 590,
Pleasanton, CA 94588, United States of America ("Licensee"); and
(3) THE COOPER COMPANIES, INC. whose principal office is at 6140 Stoneridge
Mall Road, Suite 590, Pleasanton, CA 94588, United States of America
("Cooper").
INTRODUCTION
(A) Licensor is registered as the proprietor of the patents and the applicant
in respect of the patent applications short particulars of which are set
out in schedule 1. In addition, Licensor is the registered proprietor of
the trade marks and the applicant in respect of the trade mark applications
which are set out in schedule 2.
(B) The parties are willing to enter into a licence under such licensed patents
and trade marks on the terms as set out in this agreement.
AGREED TERMS
1. Definitions and interpretation
1.1 In this agreement the following words and expressions have the following
meanings:
(a) "Confidential Information" means any and all technical information,
data, materials and other information relating to the business of
either of the parties, which one party (the "Disclosing Party")
provides to the other party (the "Receiving Party") hereunder orally,
in writing or in any other tangible form, but shall not include any
portion thereof which:
(i) is known to the Receiving Party, as evidenced by the Receiving
Party's written records, before receipt thereof under this
agreement;
(ii) is disclosed to the Receiving Party by a Third Party having a
right to make such disclosure;
(iii) is or becomes patented, published or otherwise part of the
public domain through no fault of the Receiving Party; or
(iv) is independently developed by or on behalf of the Receiving
Party, as evidenced by the Receiving Party's written records,
without recourse to such Confidential Information disclosed
under this agreement.
(b) "Existing Agreements" means the agreements referred to in schedule 3
and which shall refer to the Existing Agreements in their form as at
the date of this agreement.
3
<PAGE>
(c) "Field" means vision correction, soft contact lens care and cosmetic
applications.
(d) "Group" means in relation to a party, its subsidiaries, its holding
company and any subsidiaries of such holding company. A company is a
"subsidiary" of another company (its "holding company") if that other
company, directly or indirectly, through one of its subsidiaries:
(i) holds a majority of the voting rights in it; or
(ii) is a member or shareholder of it and has the right to appoint or
remove a majority of its board of directors or equivalent
managing body; or
(iii) is a member or shareholder of it and controls alone, pursuant to
an agreement with other shareholders or members, a majority of
the voting rights in it; or
(iv) has the right to exercise a dominant influence over it pursuant
to its constitutional documents or pursuant to a control
contract.
(e) "Improvement" means any improvement, modification, adaptation or
alteration to the inventions the subject of the Licensed Patents which
falls within a claim of the Licensed Patents which is developed or
created within two years of the date of this agreement.
(f) "Infringer" means a third party that infringes or makes unauthorised
use of any of the Licensed Patents or Trade Marks.
(g) "Infringement" means any infringement or unauthorised use of any of
the Licensed Patents or Trade Marks by an Infringer within the Field.
(h) "Licensed Patents" means the patents and patents applications as
listed in Schedule 1 (which may be updated from time to time by mutual
agreement of the parties) including any continuing applications,
provisional applications, divisional applications or continuation in
part applications relating to such patent applications and any
national or international patent applications claiming priority from
such patent applications anywhere in the world and any reissue or
renewals or re-examinations of such patents and any extensions of the
exclusivity granted in connection with such patents.
(i) "Patent Licence Term" has the meaning as specified in clause 3.1.
(j) "Product" means a soft contact lens or a soft contact lens care
solution manufactured, marketed or sold for use within the Field.
(k) "Share Sale Agreement" means the International Share Sale Agreement
between Biocompatibles International plc, Aspect Vision Holdings
Limited and The Cooper Companies, Inc. dated 15 January 2002.
4
<PAGE>
(l) "Trade Mark Licence Term" has the meaning as specified in clause 4.1.
(m) "Trade Marks" means the trade marks particulars of which are set out
in Schedule 2.
1.2 References to "this agreement" include (exhaustively) this agreement and
any schedules to it as may be varied from time to time in accordance with
its provisions. The introduction forms part of this agreement but headings
are for ease of reference only and shall not affect the meaning of this
agreement.
1.3 In this agreement, any reference to:
(a) any statute or statutory provision includes a reference to that
statute or statutory provision as amended, extended or re-enacted and
to any regulation, order, instrument or subordinate legislation under
the relevant statute or statutory provision;
(b) the singular includes a reference to the plural and vice versa;
(c) any paragraph of the introduction, clause, sub-clause or schedule is
to a paragraph of the introduction, clause, sub-clause or schedule (as
the case may be) of or to this agreement;
(d) the word "include" or "including" is, unless otherwise stated, to be
construed without limitation to the generality of the preceding words;
and
(e) any person includes any reference to a body corporate, unincorporated
association or a partnership and any reference to any party who is an
individual is also deemed to include his respective legal personal
representative(s).
1.4 In this agreement any reference to a "law" includes common or customary law
and any constitution, decree, judgment, legislation, order, ordinance,
regulation, statute, treaty or other legislative measure, in each case of
any jurisdiction whatsoever (and "lawful" and "unlawful" shall be construed
accordingly).
1.5 Except for the Existing Agreements, each reference in this agreement to
this agreement or any other agreement, document or deed shall be construed
as a reference to this agreement or such other agreement, document or deed
as each of the same may be amended, varied, novated or supplemented from
time to time.
2. Grant
2.1 Licensor grants to Licensee, and Licensee accepts, an exclusive, subject to
the rights granted to third parties by virtue of the Existing Agreements,
royalty-free licence under the Licensed Patents to research, develop,
manufacture, use, supply, offer to supply, sell, dispose, import, keep and
otherwise exploit Products for the Patent Licence Term in the jurisdictions
covered by the Licensed Patents.
2.2 Licensee may:
5
<PAGE>
(a) sub-license any of its rights under this agreement to a member of its
Group; or
(b) sub-contract the manufacture of, or other dealings in, the Products
under the licence granted in clause 2.1 to any third party
provided that Licensee (1) ensures that there are included in the terms of
the sub-licence or sub-contract obligations and undertakings on the part of
the sub-licensee or subcontractors equivalent to those in this agreement
and (2) any breach or other default by the sub-licensee or subcontractor
will be deemed to be a breach or default by Licensee.
2.3 Save as expressly set out in this agreement no licence under any patent or
other right is granted.
3. Term
3.1 This agreement takes effect on the date of this agreement and (unless
terminated under clause 15) shall continue on a country by country basis in
respect of the Licensed Patents until the later of the date of expiry of
the last to expire of the Licensed Patents subsisting in each such country
respectively, on which date it shall terminate (the "Patent Licence Term").
3.2 During the Patent Licence Term, save with the prior written consent of
Licensee, Licensor shall not make any use in relation to any Product of any
materials sourced from Seal Sands Chemicals Limited under the agreement
with that company referred to in Schedule 3 herein where such use would
fall within any claim of the Licensed Patents.
4. Marking
4.1 Licensee is hereby granted an exclusive, subject to the rights granted to
third parties by virtue of the Existing Agreements, royalty free licence to
use the Trade Marks in relation to Products, which licence may be
terminated immediately by notice:
(a) on the termination of this agreement for any reason;
(b) in the event that Licensee is in material and persistent breach of
clause 4.4
(the "Trade Mark Licence Term").
4.2 Licensor shall not, during the Trade Mark Licence Term, grant any licence
to use the Trade Marks in relation to Products to any third party, except
with the prior express written consent of Licensee.
4.3 During the Trade Mark Licence Term, Licensee may at its option mark all
packaging and advertising material relating to Products manufactured, sold
or disposed of by it under this agreement with the Trade Marks and such
marking shall be:
(a) accompanied by a notice stating that the Trade Marks are the trade
marks of Licensor; and
6
<PAGE>
(b) used in accordance with this clause 4.
4.4 In order to maintain the standards which are essential for the protection
of the value of the Trade Marks, during the Trade Mark Licence Term, where
Licensee exercises the rights granted to it under clause 4.3 above,
Licensee shall use (and shall ensure that permitted sub-licensees and
subcontractors of Licensee use) the Trade Marks only in connection with the
supply, disposal, advertising, distribution and promotion of Products where
the Products have been manufactured in accordance with good industry
practice and to standards and procedures consistent with those used or
applied in respect of the manufacture of Products prior to the date of this
agreement by Licensor.
4.5 During the Patent Licence Term, if Licensee (or its permitted sub-licensees
and subcontractors) makes any reference in any advertising, promotional or
other materials used for Products to the technology licensed herein under
the Licensed Patents, Licensee shall (and shall ensure that its permitted
sub-licensees and subcontractors) include with reasonable prominence a
notice in any such advertising, promotional or other materials stating that
the technology is licensed under patents owned by Licensor.
4.6 Licensee and its permitted sub-licensees do not by virtue of this agreement
obtain or claim any right, title or interest in or to the Trade Marks
except the rights of use as are specifically set out in this agreement.
4.7 Licensee shall not (and shall ensure that permitted sub-licensees and
subcontractors of Licensee do not):
(a) adopt or use any trade mark, symbol or device which incorporates or is
confusingly similar to, the Trade Marks or unfairly competes with the
Trade Marks;
(b) at any time, whether during or after termination of this Agreement,
use the Trade Marks as part of any corporate business or trading name
or style of Licensee;
(c) use the Trade Marks in any way which would tend to allow any of them
to become generic, lose their distinctiveness, become liable to
mislead the public, or be materially detrimental to or inconsistent
with the good name, goodwill, reputation and image of Licensor;
(d) purport to be or represent to any Third Party that Licensee is an
agent or representative of Licensor.
4.8 Licensee acknowledges and agrees that:
(a) ownership of the Trade Marks, and of the goodwill connected with and
symbolised by the Trade Marks, remains the property of Licensor, and
use of the Trade Marks by Licensee is use on behalf of Licensor;
(b) the goodwill in the Trade Marks which Licensee derives by use of the
Trade Marks, or by being connected with the Trade Marks in the course
of trade (whether arising at common law or otherwise), shall accrue to
Licensor, and Licensee shall (before or after
7
<PAGE>
termination of this agreement) at Licensor's request and expense (as
to out-of-pocket expenses only) assign the same, with all rights of
action then accrued, to Licensor without payment.
4.9 Licensee shall not (and shall ensure that permitted sub-licensees and
subcontractors of Licensee do not), while this agreement is in force or
subsequently for so long as any registration of or application for the
Trade Marks is in force or Licensor is applicant for or registered as
proprietor of the Trade Marks or any substantially similar marks in any
part of the world:
(a) challenge Licensor's ownership of the Trade Marks in any part of the
world; nor
(b) apply for registration of the Trade Marks (or any confusingly similar
mark) for any goods or services in any part of the world.
5. Maintenance of Licensed Patents and Trade Marks
5.1 Subject to clause 5.2, Licensor shall:
(a) pay all associated costs and official fees and shall use all
reasonable endeavours to obtain patents on the applications listed in
schedule 1, and after grant and during the Patent Licence Term to keep
in force:
(i) any patents so granted; and
(ii) the patents listed in schedule 1, (except that where a European
patent has been or is about to be granted for any country any
national patent or application for the same country may be
surrendered or allowed to be revoked); and
(b) during the Patent Licence Term pay all renewal fees.
5.2 Subject to clause 5.3, during the Patent Licence Term Licensor may:
(a) abandon any of the Licensed Patents; or
(b) allow any of the Licensed Patents to lapse;
(c) amend the specification of any of the Licensed Patents
provided that it first gives Licensee at least 90 days' notice in writing
of its intention to do so. Where Licensor intends to abandon or allow to
lapse a Licensed Patent (an "Abandoned Patent") such notice shall operate
to grant Licensee an exclusive option, exercisable any time during the
period of 90 days from receipt by Licensee of such notice by notice in
writing to Licensor, to have the Abandoned Patent assigned to it by
Licensor for one pound sterling, subject to Licensor being released from
any and all obligations in respect of such Abandoned Patent (including
those in clause 5.1).
8
<PAGE>
5.3 Licensor may abandon any one or more of the Licensed Patents within the BCP
123 designation (namely, patent 2098823) (a "BCP 123 Patent") without prior
notice to Licensee provided that, in any particular case, there is in force
within the relevant jurisdiction a Licensed Patent within the BCP 19
designation which provides at least equivalent coverage of scope as the BCP
123 Patent insofar as it relates to the Licensee's rights under this
agreement.
5.4 During the Trade Mark Licence Term, Licensor shall pay all renewal fees for
all registrations of the Trade Marks and shall pay all associated costs and
official fees and shall use all reasonable endeavours to obtain
registrations of the trade mark applications within the Trade Marks and
Licensee shall provide, at the reasonable request and expense of Licensor,
all necessary assistance in maintaining such registrations or prosecuting
such applications in respect of the Trade Marks.
5.5 During the Trade Mark Licence Term, if Licensor no longer wishes to
maintain any of the Trade Marks in respect of any particular territory
Licensor shall give 90 days' prior written notice of this fact to Licensee
and Licensee shall have an option to purchase such Trade Marks for (pound)1
consideration.
5.6 During the Trade Mark Licence Term, at Licensee's reasonable request and at
Licensee's expense, Licensor shall provide reasonable assistance to
Licensee in making applications to the relevant registries for either the
registration of this agreement as a licence or the registration of Licensee
as a registered user of the Licensed Patents and Trade Marks in respect of
each registration included in this agreement.
6. Improvements
6.1 During the first two years of this agreement, if either party (or a member
of its Group involved with the development of the subject matter of the
Licensed Patents) makes any Improvement then (subject to clause 10 and to
the extent permitted by law and/or contract) it shall disclose the same to
the other party (which disclosure may be made in confidence pending filing
of patent applications), but shall not be obliged to make such disclosure:
(a) unless the Improvement is substantive; or
(b) after any notice to terminate this agreement has been given,
Improvements shall be disclosed annually or at such other intervals agreed
between the parties.
6.2 In the case of Improvements disclosed by Licensor, such Improvements shall
be licensed to Licensee in accordance with the provisions of this
agreement. In the case of Improvements disclosed by Licensee, Licensor
shall be granted a non-exclusive, non-terminable, (except in circumstances
equivalent to those set out in clause 11.1, mutatis mutandis) royalty-free
and paid up worldwide licence to use (and to assign or sub-license the
right to use on equivalent terms to those accepted by Licensee hereunder)
the same outside the Field during the term of this agreement and
subsequently.
9
<PAGE>
7. Infringement
7.1 Each of Licensee and Licensor agrees promptly to notify the other of any
Infringements or any suspected Infringements or any claim by any third
party that Licensee's use of the rights licensed hereunder infringes any
intellectual property rights of any third party of which they become aware.
7.2 Licensee may initiate proceedings alleging an Infringement in its own name
and at its own expense. Licensor shall, at the reasonable request and cost
of Licensee, give Licensee any assistance it may reasonably request in
connection with such proceedings. Licensee shall have sole discretion
regarding selection of counsel and venue, and ultimate and determinative
authority regarding patent litigation strategy; provided, that Licensee
shall keep Licensor fully informed as to the conduct of such proceedings.
If so requested by Licensee and necessary for Licensor to be a plaintiff or
claimant party, Licensor shall join in any such infringement proceedings as
a plaintiff or claimant party with Licensee or allow Licensee to take such
proceedings in Licensor's name.
7.3 If Licensee does not, within three (3) months after having any Infringement
drawn to its attention by Licensor, commence an action for such
Infringement pursuant to clause 7.2, then Licensor shall be entitled (but
not obliged) to commence proceedings for such Infringement in its own name
and at its own expense. Licensee shall, at the request and cost of
Licensor, give Licensor any assistance reasonably requested by Licensor in
connection with such proceedings. Licensor shall keep Licensee fully
informed as to the conduct of such proceedings. Licensee shall have the
right to participate in the decision-making process with regard to any
decisions that would reasonably affect the scope of the patent claims. Any
sums recovered in the course of such proceedings from the Infringer,
whether by way of damages, account of profits, costs or otherwise, shall be
applied first in reimbursing Licensor for its external costs and expenses
of such proceedings (which shall include any related allegation or claim
made by the defendant that any rights or patent claim asserted in such
action are invalid and/or unenforceable), including legal fees and
expenses, patent attorney fees and expenses and experts' fees and expenses
(provided that Licensor shall not be responsible for legal expenses or
costs incurred by Licensee's counsel related to (i) monitoring or (ii)
participating in the litigation due to a conflict) and the balance shall be
paid to Licensee. If so requested by Licensor and necessary or desirable
for Licensee to be a plaintiff or claimant party, Licensee shall join in
any such infringement proceedings as a plaintiff or claimant party with
Licensor or allow Licensor to take such proceedings in Licensee's name.
7.4 If in the course of any infringement action brought by Licensee pursuant to
clause 7.2 or in the course of any infringement action brought by Licensor
pursuant to clause 7.3, an allegation or claim be made by the defendant in
such action that any rights or patent claim asserted in such action are
invalid and/or unenforceable, the party that brought the infringement
action (the "Controlling Party") shall bear all costs associated with, and
shall be solely responsible for, defending such allegation or claim. The
Controlling Party shall consult with the other party in all significant
matters concerning the defence of such allegation or claim of invalidity
and/or unenforceability, including issues of strategy and settlement, and
shall act in accordance with any reasonable request of the other party.
Neither party shall seek to settle or compromise such allegation or claim
of invalidity and/or unenforceability without the consent of the other
party.
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<PAGE>
7.5 Where one party (the "Joining Party") becomes a party to proceedings at the
request of the other (the "Requesting Party") pursuant to clause 7.2 or
7.4, then the Requesting Party shall indemnify the Joining Party for any
costs or expenses incurred in respect of such proceedings and for any
liability for costs awarded to any other party and for which the Joining
Party is liable to pay.
7.6 In the event that a party becomes aware of any threatened or actual
opposition in respect of any patent application within the Licensed Patents
or any claim that any granted Licensed Patent is invalid, the party
becoming aware shall forthwith notify the other of such matter and the
parties shall consult with each other in good faith as to the defence of
such opposition or claim. If Licensor does not wish to defend any such
claim, and does not commence the defence of any such allegation or claim
within 2 months of notice of the allegation or claim, Licensee may do so
(but not otherwise), provided that Licensee shall bear all costs associated
with, and shall be solely responsible for, defending such allegation or
claim. Licensee shall consult with the Licensor on all significant matters
concerning the defence of such allegation or claim, including issues of
strategy and settlement, and shall act in accordance with any reasonable
request of Licensor. Neither party shall seek to settle or compromise such
allegation or claim of invalidity and/or unenforceability without the
consent of the other party.
8. Disclaimer of representations and warranties
8.1 Except as expressly set out in the Share Sale Agreement, Licensor does not
give any warranties or representations that exercise of the rights granted
to Licensee under this agreement, or manufacture, sale, disposal,
distribution or use of Products does not infringe the intellectual property
rights of any third parties and all representations, warranties or
conditions to that effect are hereby excluded.
8.2 Licensor does not give any warranties or representations that exercise of
the rights granted to Licensee under this agreement, or manufacture, sale,
disposal, distribution or use of Products shall not infringe the
intellectual property rights of any third parties and all representations,
warranties or conditions to that effect are hereby excluded.
8.3 Licensor gives no representation or warranty that any patent application
contained in the Licensed Patents will result in grant, or that any granted
patent contained in the Licensed Patents (or any patent now or subsequently
granted on any application) is or will be valid.
8.4 Licensor gives no representation or warranty that any trade mark
application within the Trade Marks will result in registration, or that any
registered Trade Mark (or any Trade Mark now or subsequently registered on
any application) is or will be valid.
8.5 Except as expressly set out in this agreement and as expressly set out in
the Share Sale Agreement, all conditions, warranties, representations and
other terms, whether express or implied by statute, common law, trade
practice or howsoever, are excluded.
11
<PAGE>
9. Indemnity
9.1 Licensee shall hold Licensor, members of its Group, its officers and
employees (the "Indemnified Parties") harmless and shall indemnify the
Indemnified Parties in respect of all claims, liabilities, costs, damages,
and expenses (including reasonable legal fees and expenses) which any or
all of the Indemnified Parties may incur, to which any or all Indemnified
Parties may become liable or which may be awarded against any or all of the
Indemnified Parties, to the extent that such arise from the exercise by
Licensee of any of the rights licensed to it under this agreement
including:
(a) any claims or allegations that the manufacture, use, sale, of disposal
of a Product infringes the intellectual property rights of any third
party; and
(b) any claims or allegations in respect of personal injury or death as a
result of use of the Products.
9.2 In consideration of Licensor entering into this agreement with Licensee,
Cooper shall be jointly and severally liable to Licensor under the
indemnity set out under sub-clause 9.1 above as if Cooper was named in
place of Licensee in such sub-clause and provided always that any defences
available to Licensee under the agreement shall be available to Cooper
hereunder.
10. Confidentiality and disclosure of Confidential Information
10.1 The parties acknowledge and agree that during the term of this agreement,
each of them and the members of their Group may exchange Confidential
Information, and the disclosure and use of any such Confidential
Information shall be governed by the provisions of this clause 10.
10.2 Each party shall use the Confidential Information of the other party only
for the purpose of the activities contemplated by this agreement and shall
not disclose such Confidential Information to a third party except in
accordance with the provisions of this agreement. The parties shall ensure
that the members of their respective Groups keep all Confidential
Information exchanged hereunder confidential in accordance with the
provisions hereof as though those members were parties hereto.
10.3 Each party shall seek confidential treatment for the terms and conditions
of this agreement to the fullest extent permitted by any governmental
agency or self-regulatory organisation to which such party is required to
provide a copy of this agreement. Prior to seeking confidential treatment
from any governmental agency or self-regulatory organisation for any such
document, the party in question shall consult with the other and the
other's counsel and provide them with a reasonable opportunity to request
the inclusion of specified provisions in any request by the party in
question for confidential treatment.
10.4 Nothing contained in this agreement shall preclude either party from using
Confidential Information as may be necessary in obtaining governmental
marketing approvals, or in manufacturing or marketing products pursuant to
this agreement or in prosecuting patent applications. In the event that
Confidential Information is required by law or government
12
<PAGE>
regulations to be disclosed, the party required to disclose Confidential
Information shall promptly:
(a) inform the disclosing party of such requirement;
(b) use reasonable efforts to limit such disclosure, maintain
confidentiality to the extent possible; and
(c) permit the disclosing party to attempt to limit such disclosure by
appropriate legal means.
11. Termination
11.1 Licensor may terminate this agreement immediately by notice only if one or
more of the following events occurs (to the exclusion of any additional
common law rights to terminate):
(a) Licensee, or a member of Licensee's Group, whether individually or
jointly with others, challenges the validity of or opposes the grant
of any Patent (or assists a third party to do the same);
(b) Licensee becomes or is deemed insolvent;
(c) any distress or execution is levied on any of Licensee's property or
assets;
(d) Licensee makes or offers to make any arrangement or composition with
creditors;
(e) any resolution or petition to wind up Licensee's business (other than
for the purpose of amalgamation or reconstruction) is passed or
presented (and not dismissed or withdrawn within 21 days) or if a
receiver or administrative receiver of Licensee's undertaking,
property or assets is appointed or a petition is presented for the
appointment of an administrator (and not dismissed or withdrawn within
21 days);
(f) Licensee is subject to any proceedings which are equivalent or
substantially similar to any of the proceedings under sub-clause (b),
(c), (d) or (e) under any applicable jurisdiction;
(g) Licensee or any member of the Licensee's Group fails to pay within 14
days of date due (being the Payment Date (as such expression is
defined in the Promissory Notes referred to below) or such earlier
date pursuant to clause 3 of the Promissory Notes referred to below)
all amounts of principal due and payable on such date under certain
Promissory Notes issued on closing of, and in accordance with the
terms of Clause 6.3 of and Schedule 12 to, the Share Sale Agreement
(the "Promissory Notes") and as amended by or in accordance with the
Share Sale Agreement or the Repayment Deed dated on or about 28
February 2002 between, inter alios, Biocompatibles plc, Aspect Vision
Holdings Limited and The Cooper Companies, Inc
13
<PAGE>
(h) Licensee or any member of the Licensee's Group fails to pay within 14
days of the due date for payment all amounts of interest due and
payable on such date under the Promissory Notes; or
(i) Licensee or any member of the Licensee's Group fails to pay within 14
days of the due date for payment all amounts due and payable under the
Arrangement and Administration Agreement dated on or about 28 February
2002 between Biocompatibles International plc, Aspect Vision Holdings
Limited and The Cooper Companies, Inc.
12. Effects of termination
12.1 Termination of this agreement will not affect any accrued rights or
liabilities which either party may have by the time termination takes
effect.
12.2 In the event of termination of this agreement for any reason the following
shall survive:
(a) the confidentiality obligations of the parties; and
(b) the obligations of Licensee under this agreement to indemnify
Licensor.
12.3 In the event of termination of this agreement all licences granted under
this agreement shall terminate.
12.4 Subject to clause 12.3, after termination Licensee shall:
(a) make no further use of any:
(i) Licensed Patents (but this restriction shall only apply in
relation to any particular Licensed Patent during the life of
such Licensed Patent);
(ii) Trade Marks; and
(iii) Confidential Information supplied by Licensor;
(b) provide reasonable and prompt assistance to Licensor to cancel any
registered licences;
(c) as soon as practicable permanently and irretrievably erase all
Confidential Information from all computer memories and storage media;
(d) as soon as practicable return to Licensor all other records of and
documents containing Confidential Information (and all copies thereof)
in the possession, power or control of Licensee (or of a member of
Licensee's Group);
(e) not later than 14 days after such termination, supply to Licensor a
written certificate, signed by a director of Licensee, confirming that
the provisions of this clause 12.4 have been complied with.
14
<PAGE>
13. Force majeure
13.1 Neither party shall be liable for any delay or failure in performing any of
its obligations under this agreement (excluding any obligations as to
payment of royalties) if such delay or failure is caused by circumstances
outside the reasonable control of the party concerned (a "Force Majeure
Event"). Such circumstances shall include acts or defaults of the other
party, acts of God or government, natural disasters, storms, fire, labour
disputes, failure or delay of transportation or default by suppliers.
13.2 The party claiming the Force Majeure Event shall:
(a) promptly notify the other in writing of the reasons for the delay or
stoppage and the likely duration and will make reasonable efforts to
overcome the delay or stoppage; and
(b) be excused from performance of its obligations for a reasonable period
(and in any event for the duration of the Force Majeure Event), and
the time for performance of its obligations shall be automatically
extended for that period.
14. Severability
If at any time any provision of this agreement is or becomes invalid
illegal or unenforceable in any respect under the law of any jurisdiction
then such provision shall be treated in such jurisdiction as severed from
the remaining provisions and neither the validity legality or
enforceability of the remaining provisions nor the validity legality or
enforceability of such provision under the law of any other jurisdiction
shall in any way be affected or impaired. In the event of any such deletion
the parties shall negotiate in good faith in order to agree an alternative
provision in place of the provision so deleted.
15. Variation
Variations to this agreement shall not be effective unless they are in
writing and signed on behalf of both parties by an authorised signatory.
16. Assignment
16.1 This agreement may be assigned by Licensee:
(a) to any member of its Group
(b) to any other person to whom it transfers the business in which the
Licensed Patents are used
provided that Licensee notifies Licensor of any such assignment and, if
Licensor so requires, procures that the assignee enters into an agreement
on the same terms as this agreement directly with Licensor.
15
<PAGE>
16.2 Licensor may assign all or part of this agreement to any person to whom it
transfers all or some of the Licensed Patents and shall promptly notify
Licensee of any such assignment.
17. Relationship between the parties
Nothing in this agreement creates a partnership, agency relationship,
franchise, employment relationship or joint venture between the parties.
Neither party is permitted to enter into any agreement with a third party.
on behalf of the other, nor make any representation or give any warranty to
a third party on behalf of the other, or otherwise bind the other party in
any manner whatsoever without the consent of the other.
18. Entire agreement
18.1 This agreement and the Share Sale Agreement constitute the entire agreement
between the parties in relation to its subject matter and supersede any
previous agreement between the parties in relation to its subject matter.
18.2 Each party acknowledges and agrees that it has not been induced to enter
into this agreement in reliance upon any representation, warranty or term
other than as expressly set out in this agreement and the Share Sale
Agreement. The only remedy available to a party for breach of such
representation, warranty or term shall be for breach of contract.
18.3 Nothing in this agreement shall limit or exclude liability for fraud or
fraudulent misrepresentation.
19. Notices
19.1 Any notice in connection with this agreement (a "Notice") shall be:
(a) in writing in English;
(b) delivered by hand, fax, registered post or by courier using an
internationally recognised courier company.
19.2 A Notice to Licensor shall be sent to such party at the following address,
or such other address as Licensor may notify to Licensee from time to time:
Biocompatibles International plc
Chapman House
Weydon Lane
Farnham
Surrey GD9 8QL
UK
16
<PAGE>
Fax: 01252 732777
Attention: Crispin Simon/Company Secretary
19.3 A Notice to Licensee shall be sent to such party at the following address,
or such other address as the Licensee may notify to Licensor from time to
time:
CooperVision International Holding Company LP
c/o The Cooper Companies, Inc.
6140 Stoneridge Mall Road
Suite 590
Pleasanton, CA 94588
United States of America
Fax: 925-460-3662
Attention: Vice President of Legal Affairs & Secretary
19.4 A Notice shall be effective upon receipt and shall be deemed to have been
received:
(a) at the time of delivery, if delivered by hand, registered post or
courier;
(b) at the time of transmission in legible form, if delivered by fax.
20. Waiver
20.1 If a party delays in enforcing its rights under this agreement then unless
the party concerned expressly agrees otherwise, that delay shall not be
treated as waiving the rights of the party concerned.
20.2 The single or partial exercise of any right, power or remedy shall not
preclude any other or further exercise of that right, power or remedy.
20.3 Any waiver of a party's rights in relation to a particular breach of this
agreement shall not operate as a waiver of any subsequent breach.
20.4 No custom or practice of the parties at variance with the terms of this
agreement shall constitute a waiver of the rights of either party under
this agreement.
21. Cumulative remedies
Any right, remedy or power to which either party is or may become entitled
under this agreement or in consequence of the other's conduct may be
enforced from time to time separately or concurrently with any right or
remedy given by this agreement or now or afterwards provided for and
arising by operation of law so that such rights and remedies are not
exclusive of the other or others but are cumulative.
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<PAGE>
22. Rights of third parties
No term of this agreement shall be enforceable under the Contracts (Rights
of Third Parties) Act 1999 by a party other than the parties to this
agreement (or their permitted assignees).
23. Publicity
Neither party may include the other's name or any information concerning
the transactions referred to in this agreement in any of its publicity
material, press announcements or other communications without first
obtaining the other party's written consent, except that nothing shall
restrict the parties from complying with any regulation or legislation
pertaining to public announcements.
24. Precedence
In the event of any conflict between the provisions of this agreement and:
(a) the provisions of any formal or confirmatory licence used for recordal
purposes; or
(b) the Share Sale Agreement,
the provisions of this agreement shall prevail.
25. Counterparts
This agreement may be entered into in any number of counterparts, all of
which taken together shall constitute one and the same instrument. Any
party may enter into this agreement by executing any such counterpart.
26. Governing law and jurisdiction
26.1 This agreement shall be governed by and construed in accordance with
English law.
26.2 Each of the parties irrevocably agrees that the courts of England are to
have exclusive jurisdiction to settle any dispute which may arise out of or
in connection with this agreement and the documents to be entered into
pursuant to it and that accordingly any proceedings arising out of or in
connection with this agreement and the documents to be entered into
pursuant to it shall be brought in such courts. Each of the parties
irrevocably submits to the jurisdiction of such courts and waives any
objection to proceedings in any such court on the ground of venue or on the
ground that proceedings have been brought in an inconvenient forum.
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<PAGE>
This agreement has been executed and delivered as a deed on the date first
written above.
EXECUTED by BIOCOMPATIBLES )
LIMITED acting by )
/s/ Swag Mukerji
-------------------------------
Authorised signatory
/s/ Fiona Evans
-------------------------------
Authorised signatory
EXECUTED by COOPERVISION )
INTERNATIONAL HOLDING )
COMPANY LP acting by )
-------------------------------
Authorised signatory
-------------------------------
Authorised signatory
EXECUTED as a deed by THE COOPER )
COMPANIES, INC. acting by )
-------------------------------
Authorised signatory
-------------------------------
Authorised signatory
19
<PAGE>
This agreement has been executed and delivered as a deed on the date first
written above.
EXECUTED by BIOCOMPATIBLES )
LIMITED acting by )
-------------------------------
Authorised signatory
-------------------------------
Authorised signatory
EXECUTED by COOPERVISION )
INTERNATIONAL HOLDING )
COMPANY LP acting by )
/s/ Carol R. Kaufman
-------------------------------
Authorised signatory
-------------------------------
Authorised signatory
EXECUTED as a deed by THE COOPER )
COMPANIES, INC. acting by )
/s/ Carol R. Kaufman
-------------------------------
Authorised signatory
-------------------------------
Authorised signatory
20
<PAGE>
This agreement has been executed and delivered as a deed on the date first
written above.
EXECUTED by BIOCOMPATIBLES )
LIMITED acting by )
-------------------------------
Authorised signatory
-------------------------------
Authorised signatory
EXECUTED by COOPERVISION )
INTERNATIONAL HOLDING )
COMPANY LP acting by )
/s/ Carol R. Kaufman
-------------------------------
Authorised signatory
/s/ Robert S. Weiss
-------------------------------
Authorised signatory
EXECUTED as a deed by THE COOPER )
COMPANIES, INC. acting by )
/s/ Carol R. Kaufman
-------------------------------
Authorised signatory
/s/ Robert S. Weiss
-------------------------------
Authorised signatory
21
<PAGE>
SCHEDULE 1
Patents being licensed
<TABLE>
<CAPTION>
Client Ref. Country Appl. Number Priority Date Appl. Date Grant Date
<S> <C> <C> <C> <C> <C>
BCP019 Austria 91918819.3 29-Oct-90 29-Oct-91 18-Dec-96
BCP019 Belgium 91918819.3 29-Oct-90 29-Oct-91 18-Dec-96
BCP019 Denmark 91918819.3 29-Oct-90 29-Oct-91 18-Dec-96
BCP019 France 91918819.3 29-Oct-90 29-Oct-91 18-Dec-96
BCP019 Germany 91918819.3 29-Oct-90 29-Oct-91 18-Dec-96
BCP019 Greece 91918819.3 29-Oct-90 29-Oct-91 18-Dec-96
BCP019 Hong Kong 532/1997 26-Mar-97 24-Apr-97
BCP019 Italy 91918819.3 29-Oct-90 29-Oct-91 18-Dec-96
BCP019 Luxembourg 91918819.3 29-Oct-90 29-Oct-91 18-Dec-96
BCP019 Netherlands 91918819.3 29-Oct-90 29-Oct-91 18-Dec-96
BCP019 Singapore 9605164-4 29-Oct-90 29-Oct-91 18-May-98
BCP019 Spain 91918819.3 29-Oct-90 29-Oct-91 18-Dec-96
BCP019 Sweden 91918819.3 29-Oct-90 29-Oct-91 18-Dec-96
BCP019 Switzerland 91918819.3 29-Oct-90 29-Oct-91 18-Dec-96
BCP019 United Kingdom 91918819.3 29-Oct-90 29-Oct-91 18-Dec-96
BCP019.1 Japan 517136/91 29-Oct-90 29-Oct-91 19-Dec-96
BCP019.1 DIV Japan 8-194131 29-Oct-90 05-Jul-96 03-Dec-99
BCPO45 France 95901536.3 23-Nov-93 23-Nov-94 26-Apr-00
BCPO45 Germany 95901536.3 23-Nov-93 23-Nov-94 26-Apr-00
BCPO45 Japan 7-514911 23-Nov-93 23-Nov-94 22-Jan-99
BCPO45 Switzerland 95901536.3 23-Nov-93 23-Nov-94 26-Apr-00
BCPO45 United Kingdom 95901536.3 23-Nov-93 23-Nov-94 26-Apr-00
BCP123 Canada 2098823 21-Dec-90 20-Dec-91
</TABLE>
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<PAGE>
SCHEDULE 2
Trade Marks
<TABLE>
<CAPTION>
Application Registration
Country Trade mark designation Proprietor/Applicant number number Classes
- -------------------- ------------------------- ---------------------- ----------- ------------ -------
<S> <C> <C> <C> <C> <C>
Japan Biocompatibles-PC Device Biocompatibles Limited 10-61411 4468801 5,9,10
Switzerland Biocompatibles-PC Device Biocompatibles Limited 3190/1998 460506 5,9,10
Norway Biocompatibles-PC Device Biocompatibles Limited 9802340 202264 5,9,10
Australia Biocompatibles-PC Device Biocompatibles Limited 757183 757183 5,9,10
United Kingdom PC Inside (Series of 2) Biocompatibles Limited 2225139 2225139 5,9,10
Euro-Community (CTM) Biocompatibles -PC Device Biocompatibles Limited 000727131 5,9,10
Canada Biocompatibles-PC Device Biocompatibles Limited 876974 Pending n/a
</TABLE>
23
<PAGE>
SCHEDULE 3
Existing Agreements
Agreement between Biocompatibles Limited and Seal Sands Chemicals Limited dated
September 2000.
Undated agreement between Biocompatibles Limited and Specsavers (UK) Limited.
Distribution agreements between Biocompatibles Limited and any distributor under
which (a) the distributor distributes Products manufactured by Biocompatibles
Limited and (b) the distributor is granted rights under the Trade Marks in
relation to such Products.
24
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10
<SEQUENCE>5
<FILENAME>ex10-21.txt
<DESCRIPTION>EXHIBIT 10.21
<TEXT>
<PAGE>
Exhibit 10.21
Dated 28 February 2002
BIOCOMPATIBLES LIMITED
- and -
COOPERVISION TECHNOLOGY INC.
- and -
THE COOPER COMPANIES, INC.
----------
PATENT AND TRADE MARK LICENCE
----------
TAYLOR JOYNSON GARRETT
Carmelite
50 Victoria Embankment
Blackfriars
London EC4Y 0DX
T:+44(0)20 7300 7000
F:+44(0)20 7300 7100
<PAGE>
DX 41 London
Ref:JWR/DVP
Index
<TABLE>
Clause No.
<S> <C> <C>
1. Definitions and interpretation................................ 3
2. Grant......................................................... 5
3. Term.......................................................... 6
4. Marking....................................................... 6
5. Maintenance of Licensed Patents and Trade Marks............... 8
6. Improvements.................................................. 9
7. Infringement..................................................10
8. Disclaimer of representations and warranties..................11
9. Indemnity.....................................................12
10. Confidentiality and disclosure of Confidential Information....12
11. Termination...................................................13
12. Effects of termination........................................14
13. Force majeure.................................................15
14. Severability..................................................15
15. Variation.....................................................15
16. Assignment....................................................16
17. Relationship between the parties..............................16
18. Entire agreement..............................................16
19. Notices.......................................................16
20. Waiver........................................................18
21. Cumulative remedies...........................................18
22. Rights of third parties.......................................18
23. Publicity.....................................................18
24. Precedence....................................................18
25. Counterparts..................................................19
26. Governing law and jurisdiction................................19
SCHEDULE 1...19
Patents being licensed....................................20
SCHEDULE 2...21
Trade Marks...............................................21
SCHEDULE 3...22
Existing Agreements.......................................22
</TABLE>
2
<PAGE>
THIS LICENCE is made on 28 February 2002
BETWEEN
(1) BIOCOMPATIBLES LIMITED an English registered company number 1833264 whose
registered office is at Chapman House, Farnham Business Park, Weydon Lane,
Farnham, Surrey, GD9 8QL ("Licensor"); and
(2) COOPERVISION TECHNOLOGY INC. whose principal office is at 6140 Stoneridge
Mall Road, Suite 590, Pleasanton, CA 94588, United States of America
("Licensee").
(3) THE COOPER COMPANIES, INC. whose principal office is at 6140 Stoneridge
Mall Road, Suite 590, Pleasanton, CA 94588, United States of America
("Cooper").
INTRODUCTION
(A) Licensor is registered as the proprietor of the patents and the applicant
in respect of the patent applications short particulars of which are set
out in schedule 1. In addition, Licensor is the registered proprietor of
the trade marks and the applicant in respect of the trade mark applications
which are set out in schedule 2.
(B) The parties are willing to enter into a licence under such licensed patents
and trade marks on the terms as set out in this agreement.
AGREED TERMS
27. Definitions and interpretation
27.1 In this agreement the following words and expressions have the following
meanings:
(a) "Confidential Information" means any and all technical information,
data, materials and other information relating to the business of
either of the parties, which one party (the "Disclosing Party")
provides to the other party (the "Receiving Party") hereunder orally,
in writing or in any other tangible form, but shall not include any
portion thereof which:
(i) is known to the Receiving Party, as evidenced by the Receiving
Party's written records, before receipt thereof under this
agreement;
(ii) is disclosed to the Receiving Party by a Third Party having a
right to make such disclosure;
(iii) is or becomes patented, published or otherwise part of the
public domain through no fault of the Receiving Party; or
(iv) is independently developed by or on behalf of the Receiving
Party, as evidenced by the Receiving Party's written records,
without recourse to such Confidential Information disclosed
under this agreement.
(b) "Existing Agreements" means the agreements referred to in schedule 3
and which shall refer to the Existing Agreements in their form as at
the date of this agreement.
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<PAGE>
(c) "Field" means vision correction, soft contact lens care and cosmetic
applications.
(d) "Group" means in relation to a party, its subsidiaries, its holding
company and any subsidiaries of such holding company. A company is a
"subsidiary" of another company (its "holding company") if that other
company, directly or indirectly, through one of its subsidiaries:
(i) holds a majority of the voting rights in it; or
(ii) is a member or shareholder of it and has the right to appoint or
remove a majority of its board of directors or equivalent
managing body; or
(iii) is a member or shareholder of it and controls alone, pursuant to
an agreement with other shareholders or members, a majority of
the voting rights in it; or
(iv) has the right to exercise a dominant influence over it pursuant
to its constitutional documents or pursuant to a control
contract.
(e) "Improvement" means any improvement, modification, adaptation or
alteration to the inventions the subject of the Licensed Patents which
falls within a claim of the Licensed Patents which is developed or
created within two years of the date of this agreement.
(f) "Infringer" means a third party that infringes or makes unauthorised
use of any of the Licensed Patents or Trade Marks.
(g) "Infringement" means any infringement or unauthorised use of any of
the Licensed Patents or Trade Marks by an Infringer within the Field.
(h) "Licensed Patents" means the patents and patents applications as
listed in Schedule 1 (which may be updated from time to time by mutual
agreement of the parties) including any continuing applications,
provisional applications, divisional applications or continuation in
part applications relating to such patent applications and any
national or international patent applications claiming priority from
such patent applications anywhere in the world and any reissue or
renewals or re-examinations of such patents and any extensions of the
exclusivity granted in connection with such patents.
(i) "Patent Licence Term" has the meaning as specified in clause 3.1.
(j) "Product" means a soft contact lens or a soft contact lens care
solution manufactured, marketed or sold for use within the Field.
(k) "Share Sale Agreement" means the International Share Sale Agreement
between Biocompatibles International plc, Aspect Vision Holdings
Limited and the Cooper Companies, Inc. dated 15 January 2002.
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<PAGE>
(l) "Trade Mark Licence Term" has the meaning as specified in clause 4.1.
(m) "Trade Marks" means the trade marks particulars of which are set out
in Schedule 2.
27.2 References to "this agreement" include (exhaustively) this agreement and
any schedules to it as may be varied from time to time in accordance with
its provisions. The introduction forms part of this agreement but headings
are for ease of reference only and shall not affect the meaning of this
agreement.
27.3 In this agreement, any reference to:
(a) any statute or statutory provision includes a reference to that
statute or statutory provision as amended, extended or re-enacted and
to any regulation, order, instrument or subordinate legislation under
the relevant statute or statutory provision;
(b) the singular includes a reference to the plural and vice versa;
(c) any paragraph of the introduction, clause, sub-clause or schedule is
to a paragraph of the introduction, clause, sub-clause or schedule (as
the case may be) of or to this agreement;
(d) the word "include" or "including" is, unless otherwise stated, to be
construed without limitation to the generality of the preceding words;
and
(e) any person includes any reference to a body corporate, unincorporated
association or a partnership and any reference to any party who is an
individual is also deemed to include his respective legal personal
representative(s).
27.4 In this agreement any reference to a "law" includes common or customary law
and any constitution, decree,' judgment, legislation, order, ordinance,
regulation, statute, treaty or other legislative measure, in each case of
any jurisdiction whatsoever (and "lawful" and "unlawful" shall be construed
accordingly).
27.5 Except for the Existing Agreements, each reference in this agreement to
this agreement or any other agreement, document or deed shall be construed
as a reference to this agreement or such other agreement, document or deed
as each of the same may be amended, varied, novated or supplemented from
time to time.
28. Grant
28.1 Licensor grants to Licensee, and Licensee accepts, an exclusive, subject to
the rights granted to third parties by virtue of the Existing Agreements,
royalty-free licence under the Licensed Patents to research, develop,
manufacture, use, supply, offer to supply, sell, dispose, import, keep and
otherwise exploit Products for the Patent Licence Term in the jurisdictions
covered by the Licensed Patents.
28.2 Licensee may:
5
<PAGE>
(a) sub-license any of its rights under this agreement to a member of its
Group; or
(b) sub-contract the manufacture of, or other dealings in, the Products
under the licence granted in clause 2.1 to any third party
provided that Licensee (1) ensures that there are included in the terms of
the sub-licence or sub-contract obligations and undertakings on the part of
the sub-licensee or subcontractors equivalent to those in this agreement
and (2) any breach or other default by the sub-licensee or subcontractor
will be deemed to be a breach or default by Licensee.
28.3 Save as expressly set out in this agreement no licence under any patent or
other right is granted.
29. Term
29.1 This agreement takes effect on the date of this agreement and (unless
terminated under clause 15) shall continue on a country by country basis in
respect of the Licensed Patents until the later of the date of expiry of
the last to expire of the Licensed Patents subsisting in each such country
respectively, on which date it shall terminate (the "Patent Licence Term").
29.2 During the Patent Licence Term, save with the prior written consent of
Licensee, Licensor shall not make any use in relation to any Product of any
materials sourced from Seal Sands Chemicals Limited under the agreement
with that company referred to in Schedule 3 herein where such use would
fall within any claim of the Licensed Patents.
30. Marking
30.1 Licensee is hereby granted an exclusive, subject to the rights granted to
third parties by virtue of the Existing Agreements, royalty free licence to
use the Trade Marks in relation to Products, which licence may be
terminated immediately by notice:
(a) on the termination of this agreement for any reason;
(b) in the event that Licensee is in material and persistent breach of
clause 4.4
(the "Trade Mark Licence Term").
30.2 Licensor shall not, during the Trade Mark Licence Term, grant any licence
to use the Trade Marks in relation to Products to any third party, except
with the prior express written consent of Licensee.
30.3 During the Trade Mark Licence Term, Licensee may at its option mark all
packaging and advertising material relating to Products manufactured, sold
or disposed of by it under this agreement with the Trade Marks and such
marking shall be:
6
<PAGE>
(a) accompanied by a notice stating that the Trade Marks are the trade
marks of Licensor; and
(b) used in accordance with this clause 4.
30.4 In order to maintain the standards which are essential for the protection
of the value of the Trade Marks, during the Trade Mark Licence Term, where
Licensee exercises the rights granted to it under clause 4.3 above,
Licensee shall use (and shall ensure that permitted sub-licensees and
subcontractors of Licensee use) the Trade Marks only in connection with the
supply, disposal, advertising, distribution and promotion of Products where
the Products have been manufactured in accordance with good industry
practice and to standards and procedures consistent with those used or
applied in respect of the manufacture of Products prior to the date of this
agreement by Licensor.
30.5 During the Patent Licence Term, if Licensee (or its permitted sub-licensees
and subcontractors) makes any reference in any advertising, promotional or
other materials used for Products to the technology licensed herein under
the Licensed Patents, Licensee shall (and shall ensure that its permitted
sub-licensees and subcontractors) include with reasonable prominence a
notice in any such advertising, promotional or other materials stating that
the technology is licensed under patents owned by Licensor.
30.6 Licensee and its permitted sub-licensees do not by virtue of this agreement
obtain or claim any right, title or interest in or to the Trade Marks
except the rights of use as are specifically set out in this agreement.
30.7 Licensee shall not (and shall ensure that permitted sub-licensees and
subcontractors of Licensee do not):
(a) adopt or use any trade mark, symbol or device which incorporates or is
confusingly similar to, the Trade Marks or unfairly competes with the
Trade Marks;
(b) at any time, whether during or after termination of this Agreement,
use the Trade Marks as part of any corporate business or trading name
or style of Licensee;
(c) use the Trade Marks in any way which would tend to allow any of them
to become generic, lose their distinctiveness, become liable to
mislead the public, or be materially detrimental to or inconsistent
with the good name, goodwill, reputation and image of Licensor;
(d) purport to be or represent to any Third Party that Licensee is an
agent or representative of Licensor.
30.8 Licensee acknowledges and agrees that:
(a) ownership of the Trade Marks, and of the goodwill connected with and
symbolised by the Trade Marks, remains the property of Licensor, and
use of the Trade Marks by Licensee is use on behalf of Licensor;
7
<PAGE>
(b) the goodwill in the Trade Marks which Licensee derives by use of the
Trade Marks, or by being connected with the Trade Marks in the course
of trade (whether arising at common law or otherwise), shall accrue to
Licensor, and Licensee shall (before or after termination of this
agreement) at Licensor's request and expense (as to out-of-pocket
expenses only) assign the same, with all rights of action then
accrued, to Licensor without payment.
30.9 Licensee shall not (and shall ensure that permitted sub-licensees and
subcontractors of Licensee do not), while this agreement is in force or
subsequently for so long as any registration of or application for the
Trade Marks is in force or Licensor is applicant for or registered as
proprietor of the Trade Marks or any substantially similar marks in any
part of the world:
(a) challenge Licensor's ownership of the Trade Marks in any part of the
world; nor
(b) apply for registration of the Trade Marks (or any confusingly similar
mark) for any goods or services in any part of the world.
31. Maintenance of Licensed Patents and Trade Marks
31.1 Subject to clause 5.2, Licensor shall:
(a) pay all associated costs and official fees and shall use all
reasonable endeavours to obtain patents on the applications listed in
schedule 1, and after grant and during the Patent Licence Term to keep
in force:
(i) any patents so granted; and
(ii) the patents listed in schedule 1, (except that where a European
patent has been or is about to be granted for any country any
national patent or application for the same country may be
surrendered or allowed to be revoked); and
(b) during the Patent Licence Term pay all renewal fees.
31.2 Subject to clause 5.3, during the Patent Licence Term Licensor may:
(a) abandon any of the Licensed Patents; or
(b) allow any of the Licensed Patents to lapse;
(c) amend the specification of any of the Licensed Patents
provided that it first gives Licensee at least 90 days' notice in writing
of its intention to do so. Where Licensor intends to abandon or allow to
lapse a Licensed Patent (an "Abandoned Patent") such notice shall operate
to grant Licensee an exclusive option, exercisable any time during the
period of 90 days from receipt by Licensee of such notice by notice in
writing to
8
<PAGE>
Licensor, to have the Abandoned Patent assigned to it by Licensor for one
pound sterling, subject to Licensor being released from any and all
obligations in respect of such Abandoned Patent (including those in clause
5.1).
31.3 Licensor may abandon any one or more of the Licensed Patents within the BCP
123 designation (namely 632467 and 149078) (a "BCP 123 Patent") without
prior notice to Licensee provided that, in any particular case, there is in
force a Licensed Patent within the BCP 19 designation which provides at
least equivalent coverage of scope as the BCP 123 Patent insofar as it
relates to the Licensee's rights under this agreement.
31.4 During the Trade Mark Licence Term, Licensor shall pay all renewal fees for
all registrations of the Trade Marks and shall pay all associated costs and
official fees and shall use all reasonable endeavours to obtain
registrations of the trade mark applications within the Trade Marks and
Licensee shall provide, at the reasonable request and expense of Licensor,
all necessary assistance in maintaining such registrations or prosecuting
such applications in respect of the Trade Marks.
31.5 During the Trade Mark Licence Term, if Licensor no longer wishes to
maintain any of the Trade Marks in respect of any particular territory
Licensor shall give 90 days' prior written notice of this fact to Licensee
and Licensee shall have an option to purchase such Trade Marks for 'L'1
consideration.
31.6 During the Trade Mark Licence Term, at Licensee's reasonable request and at
Licensee's expense, Licensor shall provide reasonable assistance to
Licensee in making applications to the relevant registries for either the
registration of this agreement as a licence or the registration of Licensee
as a registered user of the Licensed Patents and Trade Marks in respect of
each registration included in this agreement.
32. Improvements
32.1 During the first two years of this agreement, if either party (or a member
of its Group involved with the development of the subject matter of the
Licensed Patents) makes any Improvement then (subject to clause 10 and to
the extent permitted by law and/or contract) it shall disclose the same to
the other party (which disclosure may be made in confidence pending filing
of patent applications), but shall not be obliged to make such disclosure:
(a) unless the Improvement is substantive; or
(b) after any notice to terminate this agreement has been given,
Improvements shall be disclosed annually or at such other intervals agreed
between the parties.
32.2 In the case of Improvements disclosed by Licensor, such Improvements shall
be licensed to Licensee in accordance with the provisions of this
agreement. In the case of Improvements disclosed by Licensee, Licensor
shall be granted a non-exclusive, non-terminable, (except in circumstances
equivalent to those set out in clause 11.1, mutatis mutandis) royalty-free
and paid up worldwide licence to use (and to assign or sub-license the
right to use on equivalent
9
<PAGE>
terms to those accepted by Licensee hereunder) the same outside the Field
during the term of this agreement and subsequently.
33. Infringement
33.1 Each of Licensee and Licensor agrees promptly to notify the other of any
Infringements or any suspected Infringements or any claim by any third
party that Licensee's use of the rights licensed hereunder infringes any
intellectual property rights of any third party of which they become aware.
33.2 Licensee may initiate proceedings alleging an Infringement in its own name
and at its own expense. Licensor shall, at the reasonable request and cost
of Licensee, give Licensee any assistance it may reasonably request in
connection with such proceedings. Licensee shall have sole discretion
regarding selection of counsel and venue, and ultimate and determinative
authority regarding patent litigation strategy; provided, that Licensee
shall keep Licensor fully informed as to the conduct of such proceedings.
If so requested by Licensee and necessary for Licensor to be a plaintiff or
claimant party, Licensor shall join in any such infringement proceedings as
a plaintiff or claimant party with Licensee or allow Licensee to take such
proceedings in Licensor's name.
33.3 If Licensee does not, within three (3) months after having any Infringement
drawn to its attention by Licensor, commence an action for such
Infringement pursuant to clause 7.2, then Licensor shall be entitled (but
not obliged) to commence proceedings for such Infringement in its own name
and at its own expense. Licensee shall, at the request and cost of
Licensor, give Licensor any assistance reasonably requested by Licensor in
connection with such proceedings. Licensor shall keep Licensee fully
informed as to the conduct of such proceedings. Licensee shall have the
right to participate in the decision-making process with regard to any
decisions that would reasonably affect the scope of the patent claims. Any
sums recovered in the course of such proceedings from the Infringer,
whether by way of damages, account of profits, costs or otherwise, shall be
applied first in reimbursing Licensor for its external costs and expenses
of such proceedings (which shall include any related allegation or claim
made by the defendant that any rights or patent claim asserted in such
action are invalid and/or unenforceable), including legal fees and
expenses, patent attorney fees and expenses and experts' fees and expenses
(provided that Licensor shall not be responsible for legal expenses or
costs incurred by Licensee's counsel related to (i) monitoring or (ii)
participating in the litigation due to a conflict) and the balance shall be
paid to Licensee. If so requested by Licensor and necessary or desirable
for Licensee to be a plaintiff or claimant party, Licensee shall join in
any such infringement proceedings as a plaintiff or claimant party with
Licensor or allow Licensor to take such proceedings in Licensee's name.
33.4 If in the course of any infringement action brought by Licensee pursuant to
clause 7.2 or in the course of any infringement action brought by Licensor
pursuant to clause 7.3, an allegation or claim be made by the defendant in
such action that any rights or patent claim asserted in such action are
invalid and/or unenforceable, the party that brought the infringement
action (the "Controlling Party") shall bear all costs associated with, and
shall be solely responsible for, defending such allegation or claim. The
Controlling Party shall consult with the other party in
10
<PAGE>
all significant matters concerning the defence of such allegation or claim
of invalidity and/or unenforceability, including issues of strategy and
settlement, and shall act in accordance with any reasonable request of the
other party. Neither party shall seek to settle or compromise such
allegation or claim of invalidity and/or unenforceability without the
consent of the other party.
33.5 Where one party (the "Joining Party") becomes a party to proceedings at the
request of the other (the "Requesting Party") pursuant to clause 7.2 or
7.4, then the Requesting Party shall indemnify the Joining Party for any
costs or expenses incurred in respect of such proceedings and for any
liability for costs awarded to any other party and for which the Joining
Party is liable to pay.
33.6 In the event that a party becomes aware of any threatened or actual
opposition in respect of any patent application within the Licensed Patents
or any claim that any granted Licensed Patent is invalid, the party
becoming aware shall forthwith notify the other of such matter and the
parties shall consult with each other in good faith as to the defence of
such opposition or claim. If Licensor does not wish to defend any such
claim, and does not commence the defence of any such allegation or claim
within 2 months of notice of the allegation or claim, Licensee may do so
(but not otherwise), provided that Licensee shall bear all costs associated
with, and shall be solely responsible for, defending such allegation or
claim. Licensee shall consult with the Licensor on all significant matters
concerning the defence of such allegation or claim, including issues of
strategy and settlement, and shall act in accordance with any reasonable
request of Licensor. Neither party shall seek to settle or compromise such
allegation or claim of invalidity and/or unenforceability without the
consent of the other party.
34. Disclaimer of representations and warranties
34.1 Except as expressly set out in the Share Sale Agreement, Licensor does not
give any warranties or representations that exercise of the rights granted
to Licensee under this agreement, or manufacture, sale, disposal,
distribution or use of Products does not infringe the intellectual property
rights of any third parties and all representations, warranties or
conditions to that effect are hereby excluded.
34.2 Licensor does not give any warranties or representations that exercise of
the rights granted to Licensee under this agreement, or manufacture, sale,
disposal, distribution or use of Products shall not infringe the
intellectual property rights of any third parties and all representations,
warranties or conditions to that effect are hereby excluded.
34.3 Licensor gives no representation or warranty that any patent application
contained in the Licensed Patents will result in grant, or that any granted
patent contained in the Licensed Patents (or any patent now or subsequently
granted on any application) is or will be valid.
34.4 Licensor gives no representation or warranty that any trade mark
application within the Trade Marks will result in registration, or that any
registered Trade Mark (or any Trade Mark now or subsequently registered on
any application) is or will be valid.
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34.5 Except as expressly set out in this agreement and as expressly set out in
the Share Sale Agreement, all conditions, warranties, representations and
other terms, whether express or implied by statute, common law, trade
practice or howsoever, are excluded.
35. Indemnity
35.1 Licensee shall hold Licensor, members of its Group, its officers and
employees (the "Indemnified Parties") harmless and shall indemnify the
Indemnified Parties in respect of all claims, liabilities, costs, damages,
and expenses (including reasonable legal fees and expenses) which any or
all of the Indemnified Parties may incur, to which any or all Indemnified
Parties may become liable or which may be awarded against any or all of the
Indemnified Parties, to the extent that such arise from the exercise by
Licensee of any of the rights licensed to it under this agreement
including:
(a) any claims or allegations that the manufacture, use, sale, or disposal
of a Product infringes the intellectual property rights of any third
party; and
(b) any claims or allegations in respect of personal injury or death as a
result of use of the Products.
35.2 In consideration of Licensor entering into this agreement with Licensee,
Cooper shall be jointly and severally liable to Licensor under the
indemnity set out under sub-clause 9.1 above as if Cooper was named in
place of Licensee in such sub-clause and provided always that any defences
available to Licensee under the agreement shall be available to Cooper
hereunder.
36. Confidentiality and disclosure of Confidential Information
36.1 The parties acknowledge and agree that during the term of this agreement,
each of them and the members of their Group may exchange Confidential
Information, and the disclosure and use of any such Confidential
Information shall be governed by the provisions of this clause 10.
36.2 Each party shall use the Confidential Information of the other party only
for the purpose of the activities contemplated by this agreement and shall
not disclose such Confidential Information to a third party except in
accordance with the provisions of this agreement. The parties shall ensure
that the members of their respective Groups keep all Confidential
Information exchanged hereunder confidential in accordance with the
provisions hereof as though those members were parties hereto.
36.3 Each party shall seek confidential treatment for the terms and conditions
of this agreement to the fullest extent permitted by any governmental
agency or self-regulatory organisation to which such party is required to
provide a copy of this agreement. Prior to seeking confidential treatment
from any governmental agency or self-regulatory organisation for any such
document, the party in question shall consult with the other and the
other's counsel and provide them with a reasonable opportunity to request
the inclusion of specified provisions in any request by the party in
question for confidential treatment.
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36.4 Nothing contained in this agreement shall preclude either party from using
Confidential Information as may be necessary in obtaining governmental
marketing approvals, or in manufacturing or marketing products pursuant to
this agreement or in prosecuting patent applications. In the event that
Confidential Information is required by law or government regulations to be
disclosed, the party required to disclose Confidential Information shall
promptly:
(a) inform the disclosing party of such requirement;
(b) use reasonable efforts to limit such disclosure, maintain
confidentiality to the extent possible; and
(c) permit the disclosing party to attempt to limit such disclosure by
appropriate legal means.
37. Termination
37.1 Licensor may terminate this agreement immediately by notice only if one or
more of the following events occurs (to the exclusion of any additional
common law rights to terminate):
(a) Licensee, or a member of Licensee's Group, whether individually or
jointly with others, challenges the validity of or opposes the grant
of any Patent (or assists a third party to do the same);
(b) Licensee becomes or is deemed insolvent;
(c) any distress or execution is levied on any of Licensee's property or
assets;
(d) Licensee makes or offers to make any arrangement or composition with
creditors;
(e) any resolution or petition to wind up Licensee's business (other than
for the purpose of amalgamation or reconstruction) is passed or
presented (and not dismissed or withdrawn within 21 days) or if a
receiver or administrative receiver of Licensee's undertaking,
property or assets is appointed or a petition is presented for the
appointment of an administrator (and not dismissed or withdrawn within
21 days);
(f) Licensee is subject to any proceedings which are equivalent or
substantially similar to any of the proceedings under sub-clause (b),
(c), (d) or (e) under any applicable jurisdiction;
(g) Licensee or any member of the Licensee's Group fails to pay within 14
days of date due (being the Payment Date (as such expression is
defined in the Promissory Notes referred to below) or such earlier
date pursuant to clause 3 of the Promissory Notes referred to below)
all amounts of principal due and payable on such date under certain
Promissory Notes issued on closing of, and in accordance with the
terms of Clause 6.3 of and Schedule 12 to, the Share Sale Agreement
(the "Promissory Notes") and as amended by or in accordance with the
Share Sale Agreement or the
13
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Repayment Deed dated on or about 28 February 2002 between, inter
alios, Biocompatibles International plc, Aspect Vision Holdings
Limited and The Cooper Companies, Inc.
(h) Licensee or any member of the Licensee's Group fails to pay within 14
days of the due date for payment all amounts of interest due and
payable on such date under the Promissory Notes; or
(i) Licensee or any member of the Licensee's Group fails to pay within 14
days of the due date for payment all amounts due and payable under the
Arrangement and Administration Agreement dated on or about 28 February
2002 between Biocompatibles International plc, Aspect Vision Holdings
Limited and The Cooper Companies, Inc.
38. Effects of termination
38.1 Termination of this agreement will not affect any accrued rights or
liabilities which either party may have by the time termination takes
effect.
38.2 In the event of termination of this agreement for any reason the following
shall survive:
(a) the confidentiality obligations of the parties; and
(b) the obligations of Licensee under this agreement to indemnify
Licensor.
38.3 In the event of termination of this agreement all licences granted under
this agreement shall terminate.
38.4 Subject to clause 12.3, after termination Licensee shall:
(a) make no further use of any:
(i) Licensed Patents (but this restriction shall only apply in
relation to any particular Licensed Patent during the life of
such Licensed Patent);
(ii) Trade Marks; and
(iii) Confidential Information supplied by Licensor;
(b) provide reasonable and prompt assistance to Licensor to cancel any
registered licences;
(c) as soon as practicable permanently and irretrievably erase all
Confidential Information from all computer memories and storage media;
14
<PAGE>
(d) as soon as practicable return to Licensor all other records of and
documents containing Confidential Information (and all copies thereof)
in the possession, power or control of Licensee (or of a member of
Licensee's Group);
(e) not later than 14 days after such termination, supply to Licensor a
written certificate, signed by a director of Licensee, confirming that
the provisions of this clause 12.4 have been complied with.
39. Force majeure
39.1 Neither party shall be liable for any delay or failure in performing any of
its obligations under this agreement (excluding any obligations as to
payment of royalties) if such delay or failure is caused by circumstances
outside the reasonable control of the party concerned (a "Force Majeure
Event"). Such circumstances shall include acts or defaults of the other
party, acts of God or government, natural disasters, storms, fire, labour
disputes, failure or delay of transportation or default by suppliers.
39.2 The party claiming the Force Majeure Event shall:
(a) promptly notify the other in writing of the reasons for the delay or
stoppage and the likely duration and will make reasonable efforts to
overcome the delay or stoppage; and
(b) be excused from performance of its obligations for a reasonable period
(and in any event for the duration of the Force Majeure Event), and
the time for performance of its obligations shall be automatically
extended for that period.
40. Severability
If at any time any provision of this agreement is or becomes invalid
illegal or unenforceable in any respect under the law of any jurisdiction
then such provision shall be treated in such jurisdiction as severed from
the remaining provisions and neither the validity legality or
enforceability of the remaining provisions nor the validity legality or
enforceability of such provision under the law of any other jurisdiction
shall in any way be affected or impaired. In the event of any such deletion
the parties shall negotiate in good faith in order to agree an alternative
provision in place of the provision so deleted.
41. Variation
Variations to this agreement shall not be effective unless they are in
writing and signed on behalf of both parties by an authorised signatory.
15
<PAGE>
42. Assignment
42.1 This agreement may be assigned by Licensee:
(a) to any member of its Group
(b) to any other person to whom it transfers the business in which the
Licensed Patents are used
provided that Licensee notifies Licensor of any such assignment and, if
Licensor so requires, procures that the assignee enters into an agreement
on the same terms as this agreement directly with Licensor.
42.2 Licensor may assign all or part of this agreement to any person to whom it
transfers all or some of the Licensed Patents and shall promptly notify
Licensee of any such assignment.
43. Relationship between the parties
Nothing in this agreement creates a partnership, agency relationship,
franchise, employment relationship or joint venture between the parties.
Neither party is permitted to enter into any agreement with a third party
on behalf of the other, nor make any representation or give any warranty to
a third party on behalf of the other, or otherwise bind the other party in
any manner whatsoever without the consent of the other.
44. Entire agreement
44.1 This agreement and the Share Sale Agreement constitute the entire agreement
between the parties in relation to its subject matter and supersede any
previous agreement between the parties in relation to its subject matter.
44.2 Each party acknowledges and agrees that it has not been induced to enter
into this agreement in reliance upon any representation, warranty or term
other than as expressly set out in this agreement and the Share Sale
Agreement. The only remedy available to a party for breach of such
representation, warranty or term shall be for breach of contract.
44.3 Nothing in this agreement shall limit or exclude liability for fraud or
fraudulent misrepresentation.
45. Notices
45.1 Any notice in connection with this agreement (a "Notice") shall be:
(a) in writing in English;
16
<PAGE>
(b) delivered by hand, fax, registered post or by courier using an
internationally recognised courier company.
45.2 A Notice to Licensor shall be sent to such party at the following address,
or such other address as Licensor may notify to Licensee from time to time:
Biocompatibles International plc
Chapman House
Farnham Business Park
Weydon Lane
Farnham
Surrey
GD9 8QL
UK
Fax: 01252 732777
Attention: Crispin Simon/Company Secretary
45.3 A Notice to Licensee shall be sent to such party at the following address,
or such other address as the Licensee may notify to Licensor from time to
time:
CooperVision Technology, Inc.
6140 Stoneridge Mall Road
Suite 590
Pleasanton, CA 94588
United States of America
Fax: 925-460-3662
Attention: Vice President of Legal Affairs & Secretary
45.4 A Notice shall be effective upon receipt and shall be deemed to have been
received:
(a) at the time of delivery, if delivered by hand, registered post or
courier;
(b) at the time of transmission in legible form, if delivered by fax.
17
<PAGE>
46. Waiver
46.1 If a party delays in enforcing its rights under this agreement then unless
the party concerned expressly agrees otherwise, that delay shall not be
treated as waiving the rights of the party concerned.
46.2 The single or partial exercise of any right, power or remedy shall not
preclude any other or further exercise of that right, power or remedy.
46.3 Any waiver of a party's rights in relation to a particular breach of this
agreement shall not operate as a waiver of any subsequent breach.
46.4 No custom or practice of the parties at variance with the terms of this
agreement shall constitute a waiver of the rights of either party under
this agreement.
47. Cumulative remedies
Any right, remedy or power to which either party is or may become entitled
under this agreement or in consequence of the other's conduct may be
enforced from time to time separately or concurrently with any right or
remedy given by this agreement or now or afterwards provided for and
arising by operation of law so that such rights and remedies are not
exclusive of the other or others but are cumulative.
48. Rights of third parties
No term of this agreement shall be enforceable under the Contracts (Rights
of Third Parties) Act 1999 by a party other than the parties to this
agreement (or their permitted assignees).
49. Publicity
Neither party may include the other's name or any information concerning
the transactions referred to in this agreement in any of its publicity
material, press announcements or other communications without first
obtaining the other party's written consent, except that nothing shall
restrict the parties from complying with any regulation or legislation
pertaining to public announcements.
50. Precedence
In the event of any conflict between the provisions of this agreement and:
(c) the provisions of any formal or confirmatory licence used for recordal
purposes; or
(d) the Share Sale Agreement,
the provisions of this agreement shall prevail.
18
<PAGE>
51. Counterparts
This agreement may be entered into in any number of counterparts, all of
which taken together shall constitute one and the same instrument. Any
party may enter into this agreement by executing any such counterpart.
52. Governing law and jurisdiction
52.1 This agreement shall be governed by and construed in accordance with
English law.
52.2 Each of the parties irrevocably agrees that the courts of England are to
have exclusive jurisdiction to settle any dispute which may arise out of or
in connection with this agreement and the documents to be entered into
pursuant to it and that accordingly any proceedings arising out of or in
connection with this agreement and the documents to be entered into
pursuant to it shall be brought in such courts. Each of the parties
irrevocably submits to the jurisdiction of such courts and waives any
objection to proceedings in any such court on the ground of venue or on the
ground that proceedings have been brought in an inconvenient forum.
This agreement has been executed and delivered as a deed on the date first
written above.
EXECUTED by BIOCOMPATIBLES )
LIMITED acting by )
/s/ Swag Mukerji
-------------------------------
Authorised signatory
/s/ Fiona Evans
-------------------------------
Authorised signatory
EXECUTED by COOPERVISION )
TECHNOLOGY INC acting by )
/s/ Carol R. Kaufman
-------------------------------
Authorised signatory
/s/ Robert S. Weiss
-------------------------------
Authorised signatory
EXECUTED as a deed by THE COOPER )
COMPANIES, INC. acting by )
/s/ Carol R. Kaufman
-------------------------------
Authorised signatory
/s/ Robert S. Weiss
-------------------------------
Authorised signatory
19
<PAGE>
SCHEDULE 1
Patents being licensed
<TABLE>
<CAPTION>
Client Ref. Country Appl. Number Priority Date Appl. Date Grant Date
<S> <C> <C> <C> <C> <C>
BCP019.1 United States of America 08/050032 29-Oct-90 29-Oct-91
BCP019.2 United States of America 08/469861 29-Oct-90 06-Jun-95
BCP045 United States of America 08/704519 23-Nov-93 23-Nov-94 21-Apr-98
BCP123 United States of America 632467 21-Dec-90 14-Dec-93
BCP123 United States of America 149078 21-Dec-90 21-Feb-95
</TABLE>
20
<PAGE>
SCHEDULE 2
Trade Marks
<TABLE>
<CAPTION>
Proprietor/ Application Registration Classes
Country Trade mark designation Applicant number number
- ---------------- ---------------------- -------------- ----------- ------------ --------
<S> <C> <C> <C> <C> <C>
United States of Biocompatibles-PC Biocompatibles 75/486678 Pending 5, 9, 10
America Device Limited
</TABLE>
21
<PAGE>
SCHEDULE 3
Existing Agreements
Agreement between Biocompatibles Limited and Seal Sands Chemicals Limited dated
September 2000.
Undated agreement between Biocompatibles Limited and Specsavers (UK) Limited.
Distribution agreements between Biocompatibles Limited and any distributor under
which (a) the distributor distributes Products manufactured by Biocompatibles
Limited and (b) the distributor is granted rights under the Trade Marks in
relation to such Products.
22
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10
<SEQUENCE>6
<FILENAME>ex10-22.txt
<DESCRIPTION>EXHIBIT 10.22
<TEXT>
<PAGE>
Exhibit 10.22
DATED 3rd MARCH 2003
ABBOTT VASCULAR DEVICES LIMITED
(formerly known as Biocompatibles Limited)
- and -
COOPERVISION INTERNATIONAL HOLDING COMPANY LP
- and -
THE COOPER COMPANIES, INC
- and -
BIOCOMPATIBLES UK LIMITED
----------
DEED OF NOVATION
----------
TAYLOR WESSING
Carmelite
50 Victoria Embankment
Blackfriars
London EC4Y ODX
Tel No: 020-7300 7000
Fax No: 020-7300 7100
DX: 41 London
Ref: CBS
<PAGE>
THIS DEED OF NOVATION is made the 3rd day of March 2003
BETWEEN:
(1) ABBOTT VASCULAR DEVICES LIMITED (formerly known as Biocompatibles Limited)
a company incorporated in England and Wales with company registration
number 01833264 and whose registered office is at North Road, Queenborough,
Kent ME11 5EL ("AVDL");
(2) COOPERVISION INTERNATIONAL HOLDING COMPANY LP whose registered office is at
c/o The Cooper Companies, Inc., 6140 Stoneridge Mall Road, Suite 590,
Pleasanton, CA 94588, United States of America ("CIH");
(3) THE COOPER COMPANIES, INC. whose principal office is at 6140 Stoneridge
Mall Road, Suite 590, Pleasanton, CA 94588, United States of America
("CC"); and
(4) BIOCOMPATIBLES UK LIMITED a company incorporated in England and Wales with
company registration number 04305025 and whose registered office is at
Chapman House, Farnham Business Park, Farnham, Surrey GU9 8QL ("BUK").
WHEREAS:
(A) Biocompatibles Limited ("BL"), CIH and CC entered into a Patent and Trade
Mark Licence dated 28 February 2002 (the "Licence Agreement");
(B) By an Agreement between BL, BUK and Biocompatibles International plc dated
16 March 2002, BL agreed to sell and BUK agreed to purchase the business of
BL (including the intellectual property which BL licenses to CIH under the
Licence Agreement);
(C) BL and BUK have requested that CIH and CC accept the substitution of BUK in
place of BL as a party to the Licence Agreement, and CIH and CC have
accepted this request, on the terms set out below.
2
<PAGE>
NOW IT IS HEREBY AGREED as follows:-
1. CIH and CC both consent and agree to the novation set out in clause 2
below.
2. From the date of this agreement, BL ceases to be a party to the Licence
Agreement and BUK becomes a party to the Licence Agreement in place of BL.
3. CIH and CC both hereby:
a) release and discharge BL/AVDL from the performance of all its
obligations under the Licence Agreement, and from all claims, demands
and liabilities whatsoever arising under or in connection with the
Licence Agreement whether arising or accrued before, on or after the
date of this agreement; and
b) accepts the liability of BUK in place of BL and shall be bound by the
terms of the Licence Agreement in every way as if BUK had been named
as party to the Licence Agreement in place of BL.
4. From the date of this agreement, BUK undertakes to CIH, CC and to BL/AVDL
to be bound by the terms of the Licence Agreement in substitution for BL,
and to observe and perform all obligations under the Licence Agreement
which arise on or after the date of this agreement and which would have
been obligations of BL if BL had not been released from the performance of
such obligations under clause 3, as if BUK had at all times been a party to
the Licence Agreement.
5. BUK shall assume and be responsible for any and all liabilities arising
under or in connection with the Licence Agreement which have accrued prior
to the date of this agreement and which would have been liabilities of BL
if BL had not been released from such liabilities under clause 3.
6. This agreement shall be governed by and construed in accordance with the
laws of England.
7. Each of the parties irrevocably agrees that the courts of England are to
have exclusive jurisdiction to settle any dispute which may arise out of or
in connection with this agreement and that accordingly any proceedings
arising out of or in connection with this agreement shall be brought in
such courts. Each of the parties irrevocably submits to the jurisdiction of
such courts with respect to such disputes and waives any objection to
proceedings in any such court on the ground of venue or on the ground that
proceedings have been brought in an inconvenient forum.
IN WITNESS whereof the parties hereby have executed and delivered this agreement
as a deed on the day first written above.
3
<PAGE>
EXECUTED as a Deed )
for and on behalf of )
ABBOTT )
VASCULAR DEVICES ) /s/ Thomas C Freyman
LIMITED ) Authorised Signatory
/s/ Tom Sides
Authorised Signatory
EXECUTED as a Deed )
for and on behalf of )
COOPERVISION ) /s/ Carol Kaufman
INTERNATIONAL ) Authorised Signatory
HOLDING COMPANY LP )
/s/ Robert Weiss
Authorised Signatory
EXECUTED as a Deed )
for and on behalf of )
THE COOPER ) /s/ Carol Kaufman
COMPANIES, INC ) Authorised Signatory
/s/ Robert Weiss
Authorised Signatory
EXECUTED as a Deed )
for and on behalf of )
BIOCOMPATIBLES UK ) /s/ Swag Mukerji
LIMITED ) Authorised Signatory
/s/ Crispin Simon
Authorised Signatory
4
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10
<SEQUENCE>7
<FILENAME>ex10-23.txt
<DESCRIPTION>EXHIBIT 10.23
<TEXT>
<PAGE>
Exhibit 10.23
DATED 3rd MARCH 2003
ABBOTT VASCULAR DEVICES LIMITED
(formerly known as Biocompatibles Limited)
- and -
COOPERVISION TECHNOLOGY INC
- and -
THE COOPER COMPANIES, INC
- and -
BIOCOMPATIBLES UK LIMITED
----------
DEED OF NOVATION
----------
TAYLOR WESSING
Carmelite
50 Victoria Embankment
Blackfriars
London EC4Y ODX
Tel No: 020-7300 7000
Fax No: 020-7300 7100
DX: 41 London
Ref: CBS
<PAGE>
THIS DEED OF NOVATION is made the 3rd day of March 2003
BETWEEN:
(1) ABBOTT VASCULAR DEVICES LIMITED (formerly known as Biocompatibles Limited)
a company incorporated in England and Wales with company registration
number 01833264 and whose registered office is at North Road, Queenborough,
Kent M11 5EL ("AVDL");
(2) COOPERVISION TECHNOLOGY INC. whose principal office is at 6140 Stoneridge
Mall Road, Suite 590, Pleasanton, CA 94588, United States of America
("CTI");
(3) THE COOPER COMPANIES, INC. whose principal office is at 6140 Stoneridge
Mall Road, Suite 590, Pleasanton, CA 94588, United States of America
("CC"); and
(4) BIOCOMPATIBLES UK LIMITED a company incorporated in England and Wales with
company registration number 04305025 and whose registered office is at
Chapman House, Farnham Business Park, Farnham, Surrey GU9 8QL ("BUK").
WHEREAS:
(A) Biocompatibles Limited ("BL"), CTI and CC entered into a Patent and Trade
Mark Licence dated 28 February 2002 (the "Licence Agreement");
(B) By an Agreement between BL, BUK and Biocompatibles International plc dated
16 March 2002, BL agreed to sell and BUK agreed to purchase the business of
BL (including the intellectual property which BL licenses to CTI under the
Licence Agreement);
(C) BL and BUK have requested that CTI and CC accept the substitution of BUK in
place of BL as a party to the Licence Agreement, and CTI and CC have
accepted this request, on the terms set out below.
2
<PAGE>
NOW IT IS HEREBY AGREED as follows:-
1. CTI and CC both consent and agree to the novation set out in clause 2
below.
2. From the date of this agreement, BL ceases to be a party to the
Licence Agreement and BUK becomes a party to the Licence Agreement in
place of BL.
3. CTI and CC both hereby:
a) release and discharge BL/AVDL from the performance of all its
obligations under the Licence Agreement, and from all claims,
demands and liabilities whatsoever arising under or in connection
with the Licence Agreement whether arising or accrued before, on
or after the date of this agreement; and
b) accepts the liability of BUK in place of BL and shall be bound by
the terms of the Licence Agreement in every way as if BUK had
been named as party to the Licence Agreement in place of BL.
4. From the date of this agreement, BUK undertakes to CTI, CC and to
BL/AVDL to be bound by the terms of the Licence Agreement in
substitution for BL, and to observe and perform all obligations under
the Licence Agreement which arise on or after the date of this
agreement and which would have been obligations of BL if BL had not
been released from the performance of such obligations under clause 3,
as if BUK had at all times been a party to the Licence Agreement.
5. BUK shall assume and be responsible for any and all liabilities
arising under or in connection with the Licence Agreement which have
accrued prior to the date of this agreement and which would have been
liabilities of BL if BL had not been released from such liabilities
under clause 3.
6. This agreement shall be governed by and construed in accordance with
the laws of England.
7. Each of the parties irrevocably agrees that the courts of England are
to have exclusive jurisdiction to settle any dispute which may arise
out of or in connection with this agreement and that accordingly any
proceedings arising out of or in connection with this agreement shall
be brought in such courts. Each of the parties irrevocably submits to
the jurisdiction of such courts with respect to such disputes and
waives any objection to proceedings in any such court on the ground of
venue or on the ground that proceedings have been brought in an
inconvenient forum.
IN WITNESS whereof the parties hereby have executed and delivered this agreement
as a deed on the day first written above.
EXECUTED as a Deed )
for and on behalf of )
ABBOTT VASCULAR DEVICES ) /s/ Thomas C. Freyman
LIMITED ) Authorised Signatory
3
<PAGE>
/s/ Tom Sides
Authorised Signatory
EXECUTED as a Deed )
for and on behalf of )
COOPERVISION ) /s/ Carol Kaufman
TECHNOLOGY INC. ) Authorised Signatory
/s/ Robert Weiss
Authorised Signatory
EXECUTED as a Deed )
for and on behalf of )
THE COOPER ) /s/ Carol Kaufman
COMPANIES, INC ) Authorised Signatory
/s/ Robert Weiss
Authorised Signatory
EXECUTED as a Deed )
for and on behalf of )
BIOCOMPATIBLES UK ) /s/ Swag Mukerji
LIMITED ) Authorised Signatory
/s/ Crispin Simon
Authorised Signatory
4
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-13
<SEQUENCE>8
<FILENAME>ex13.txt
<DESCRIPTION>EXHIBIT 13
<TEXT>
<Page>
Exhibit 13
[GRAPHIC]
THE COOPER COMPANIES, INC.
2003 Annual Report
<Page>
THE COOPER COMPANIES, INC.
[GRAPHIC]
[5] Important Events in 2003 [6] Financial Highlights
[7] Interview with Tom Bender [13] Letter to Shareholders
[17] Business Review [18] CooperVision [23] CooperSurgical
[29] Index to Financial Information [78] Corporate Information
<Page>
THE COOPER COMPANIES, INC.
[GRAPHIC]
The Cooper Companies, Inc. is a rapidly growing specialty medical products
company serving the vision care and women's healthcare markets with high-quality
products and services.
CooperVision markets a broad range of contact lenses, emphasizing high-growth,
specialty and value-added market segments around the world.
CooperSurgical offers medical devices, diagnostic products and surgical
instruments and accessories used primarily by gynecologists and obstetricians.
2
<Page>
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN
<TABLE>
<CAPTION>
Cumulative Total Return
---------------------------------------------------
10/98 10/99 10/00 10/01 10/02 10/03
------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
THE COOPER COMPANIES, INC. 100.00 105.43 151.17 203.31 224.94 369.50
S & P SMALLCAP 600 100.00 112.04 140.35 131.32 126.35 168.78
S & P HEALTH CARE EQUIPMENT 100.00 101.05 148.44 126.00 121.13 154.48
</TABLE>
Copyright 'c' 2002 Standard & Poor's, a division of The McGraw-Hill Companies,
Inc. All right reserved.
$100 invested on 10/31/98 in stock or index-including reinvestment of dividends.
Fiscal year ending October 31.
This graph compares the cumulative total return on Cooper's common stock with
the cumulative total return of the Standard & Poor's SmallCaps 600 Stock Index
(which includes the Company) and the Standard and Poor's Health Care Equipment
Index for the five-year period ended October 31, 2003. The graph assumes that
the value of the investments in The Cooper Companies, Inc. and in each index was
$100 on October 31, 1998 and assumes that all dividends were reinvested.
3
<Page>
THE COOPER COMPANIES, INC.
2003 Financial Summary
Revenue
$412 million, up 31 percent
Operating income
$95 million, up 42 percent
Earnings per share
$2.13, up 36 percent
Operating cash flow
$80 million, up 42 percent
2004 Estimates
Revenue $465 million to $477 million
Earnings per share $2.48 to $2.51
4
<Page>
IMPORTANT EVENTS IN 2003
CooperVision
Revenue grew 23 percent to $330 million on a pro forma basis that includes
Biocompatibles revenue as if Cooper owned it for all of fiscal 2002.
Revenue for CVI's specialty lenses -- toric lenses, cosmetic lenses, multifocal
lenses and lenses to alleviate dry eye symptoms -- grew 29 percent to $198
million, representing over 60 percent of its business.
CooperSurgical
Revenue grew 15 percent to $82 million.
During fiscal 2003 acquired:
o Prism Enterprises, LP, which develops, manufacturers and sells medical
devices and disposable products for the obstetric, neonatal and
gynecological markets.
o Avalon Medical Corporation, the United States distributor of the Filshie
Clip, a device used worldwide to perform female sterilization.
After the fiscal year closed, acquired the rights to a product line to treat
female stress incontinence from SURx, Inc.
The Cooper Companies
Extended the revolving credit portion of our KeyBank $225 million credit
facility for two additional years at more favorable terms.
In a private placement, sold $115 million of 2.625% convertible senior
debentures due 2023.
Decreased our effective tax rate to 24 percent which we expect will extend our
net operating loss carryforwards through 2006.
Ranked 37th on Forbes Magazine's list of 200 Best Small Companies for 2003.
5
<Page>
FINANCIAL HIGHLIGHTS
Selected Five-Year Financial Information
<TABLE>
<CAPTION>
(In thousands except per share data) 2003 2002 2001 2000 1999
- ------------------------------------ -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Per Share Information*:
Income from continuing operations $ 2.13 $ 1.57 $ 1.22 $ 1.01 $ .77
Net income as reported 2.13 1.57 1.22 1.00 .88
Dividends 0.06 0.048 0.034 0.04 0.02
Cash flow** 3.19 2.45 2.07 1.75 1.41
Stock price - high 44.75 28.95 27.86 19.40 15.94
Stock price - low 23.10 19.17 15.25 12.32 5.88
Net sales 411,790 315,306 234,572 201,217 168,155
Gross profit 265,202 199,493 153,368 133,117 109,146
Operating income 95,242 66,971 54,758 46,869 38,811
Interest expense 6,964 6,874 3,738 4,744 6,330
Provision for income taxes 21,717 16,294 14,992 12,727 10,711
Net income 68,770 48,875 37,136 28,968 25,100
Working capital 145,910 72,229 87,232 47,410 58,565
Property, plant and equipment, net 116,277 87,944 61,028 47,933 40,319
Total assets 705,564 571,115 396,849 322,565 285,873
Total debt 185,861 163,651 68,802 48,351 61,955
Stockholders' equity 422,047 311,442 256,284 198,438 164,143
Capital expenditures 33,872 23,434 16,757 14,665 10,121
Depreciation and amortization 12,525 11,369 10,988 8,734 8,440
</TABLE>
* All references to per share information in this report are to diluted per
share amounts.
** Pretax income from continuing operations plus depreciation and amortization.
6
<Page>
INTERVIEW WITH TOM BENDER BY OPTISTOCK.COM
[PHOTO]
In August, Chairman and CEO Tom Bender sat down with the editors of
OptiStock.com, which provides investors with insight into the growing vision
care market as well as information on public companies, to discuss The Cooper
Companies and the prospects for its two medical device businesses. (For this
report, the original interview has been edited and updated to reflect fiscal
2003 year-end results and latest market estimates.)
7
<Page>
Interview with Tom Bender by OptiStock.com
OptiStock: For those investors not familiar with The Cooper Companies,
please provide a brief overview of your businesses.
Bender: The Cooper Companies has two business units: CooperVision, a
global leader in contact lenses, drives the business,
contributing 80 percent of revenue, and CooperSurgical, our
women's healthcare medical device business.
Five companies represent virtually all of the world contact
lens market. CooperVision's market share ranks fourth
internationally, number two in Canada, and number three in the
United States. CooperVision's U.S. contact lens revenue is
about $165 million. The vision segment of the company's
business has grown at a compounded 22 percent over the past
five years. The Cooper Companies built CooperVision from a $38
million worldwide division in 1994 to about $330 million this
fiscal year. During this period, about 70 percent of the
company's growth has been through internal development and 30
percent through strategic acquisitions.
There are about 75 companies in the medical device segment of
the women's healthcare market. CooperSurgical is one of the
largest, growing from $13 million in sales in 1995 to about
$82 million this fiscal year, largely through 22 acquisitions
in the past several years. This segment of the company's
business has grown at a compounded rate of 23 percent over the
past five years.
OptiStock: Through the past several years, CooperVision has added revenue
and profits by acquiring Biocompatibles and partnering with
Rohto Pharmaceuticals in Japan. How have these moves impacted
the company?
Bender: Our guidance has remained the same in Japan at $4 to $5
million in sales this year. We just received approval to sell
our two-week disposable lenses there. It's really too soon to
report on results in Japan.
Our Biocompatibles acquisition, on the other hand, has
provided several benefits already. It enabled us to become a
bigger player in Europe, since 60 percent of the
Biocompatibles business was in Europe. This acquisition also
provided us with a specialty product (Proclear) that fits us
perfectly and will help us build a third-generation product
line around the Biocompatibles material. That will include our
Proclear toric lens, which we have already launched. At the
end of this calendar year, we expect to also launch a
disposable multifocal contact lens in this same material.
8
<Page>
Interview with Tom Bender by OptiStock.com
OptiStock: What new plans do you have for driving organic growth, and how
are demographics impacting your business?
Bender: In the worse case, our long-term strategy is to hold share in
North America and Europe and duplicate our success in these
markets in the Far East region. If we do this, I think we will
generate mid-teens growth on a global basis.
The contact lens market is the fastest-growing segment in the
eyecare market. Favorable demographics and increased incidence
of myopia (nearsightedness) drive this category. More babies
were born in the U.S. in the 1990s than any single decade in
our history (the baby boomers spanned two decades), and those
babies are now becoming teenagers. In addition, studies have
shown that more teens have myopia.
In conjunction with these facts, the entry age for first-time
contact lens wearers has dropped from the high teens to the
low teens, making it easy to foresee the next two decades as
upswings for the contact lens business. It is already showing
in sales. In fact, we've reported more than 20 percent growth
in our contact lens business this year, and the competition
has been strong, too.
OptiStock: CooperVision and four other companies dominate the contact
lens market, especially in specialty lenses. For how long can
this sector support five companies? Do you anticipate any
consolidation within the contact lens sector in the near term?
Bender: Regulatory authorities may or may not allow more deals in this
market in the United States. Right now we have no interest in
merging with or acquiring any other contact lens companies. We
are growing at a faster rate than most other companies, so
merging or acquiring would not make sense for us. It is also
unlikely that we will see any meaningful new players because
entering the market is too costly. There may be some serious
consolidation in other eye-related segments later on, but
probably not in the contact lens sector. It will be most
likely in pharmaceuticals or surgical.
The transition is for contact lens companies to move away from
commodity soft lenses. Growing companies are looking to fit
individual patients' needs, and that is happening worldwide,
leading to more, not fewer opportunities. CooperVision
approaches this with value-added specialty lenses such as our
toric, multifocal and cosmetic lenses; the Proclear line,
which is targeted to patients who have dry eyes, and the
Frequency Aspheric line, which can provide sharper vision for
selected patients.
9
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Interview with Tom Bender by OptiStock.com
The U.S. is leading the world with patients who want specialty
and value-added lenses. But the global marketplace is catching
up. In Europe, specialty or value-added products currently
drive only 25 percent of the market. But that was only 15
percent a few years ago. This is now beginning in the Far East
too. There are a lot of potential drivers outside the U.S., as
well as inside the U.S.
OptiStock: As newer types of refractive surgery become available and as
existing ones are refined, how do you see these impacting your
business? Has there been an impact on new fits?
Bender: We see no impact on our business at all. The profile of the
refractive surgery market is an older patient. Almost all are
ex-contact lens wearers usually in their late 30's or early
40's. In contrast, about 75 percent of all current contact
lens wearers are under age 35. Almost all new contact lens
wearers are in their teens or 20's. Refractive procedures will
not affect our target market, because myopia does not
typically stabilize until the mid- to late 20's. Therefore,
surgeons do not perform these procedures on youth. We do not
see any youth refractive surgical procedures coming along, and
custom ablation has not given the market much new life as yet.
In fact, the overall refractive surgery procedures continue to
decline.
Plus, there still is a fear issue. It is mostly the high
myopes who take the chance on refractive surgery. Many others
are afraid to pursue an elective surgical procedure that could
negatively affect their vision. It's not worth the risk. I
feel the same way about other niche procedures, like the new
implantable contact lenses. That is another technology just
hoping to find a home.
OptiStock: How are profit margins in Japan compared with those in the
U.S.? As Japan becomes a more important element of your growth
strategy, are you concerned about its potential impact on your
margin structure?
Bender: Because we are an OEM supplier, our gross margins are only 37
percent to 40 percent, but those dollars fall directly to the
operating income line, since our partner supplies the
marketing effort. I anticipate that the Rohto sales force will
do an outstanding job against the other major manufacturer
currently in that market.
10
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Interview with Tom Bender by OptiStock.com
OptiStock: What new products will CooperVision launch in the balance of
2003 and into 2004?
Bender: We have a rich pipeline in place. We are planning to launch
the Proclear disposable multifocal contact lens in Europe at
the end of this calendar year and in the U.S. in the first
part of 2004. We are launching enhancement colored contact
lenses in Europe at the end of our fiscal 2003, which is in
October. For 2005, we are hoping to launch a long-term or
continuous-wear product made from the Biocompatibles'
material.
OptiStock: Changing focus to CooperSurgical, that part of your company
brings in only about 20 percent of your revenue and is not as
well known as CooperVision. How do you envision this business
going forward as part of your overall growth strategy?
Bender: With Cooper's net operating loss carry forward extending
through 2006, we expect to generate more cash flow per share
than earnings per share. Right now, we can get a better return
on women's health investments than on paying down debt, and
that's my first choice for the cash as long as there are still
good properties to purchase. Our other options are to look for
a third specialty to invest in or to return the cash to
shareholders as dividends.
We are in an excellent position with our women's health
business. Our operating margins for CooperSurgical jumped from
14 percent of sales in 2000 to 17 percent of sales in 2001 to
20 percent of sales in 2002. This fiscal year, it's 22
percent, approaching what we're getting in the vision business
at 27 percent. The outlook for this business remains strong
with a product portfolio that addresses the changing
demographics of the market.
We recently began to carve out a subcategory in women's
healthcare by entering the medical device market for
infertility. We have fewer than $10 million in sales currently
but see great potential there.
OptiStock: Cooper's growth rate over the past three years has averaged
approximately 2.5 times the market rate. Do you expect that to
continue?
Bender: No. But we surprised ourselves this year. We are currently
growing at two times the market. We're looking for 1.5 times
market growth over the next five years.
11
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Interview with Tom Bender by OptiStock.com
OptiStock: One of the striking things about Cooper's fundamentals is the
unusually high short interest in your stock. Given your track
record of consistently delivering numbers, how would you
explain that?
Bender: I think that many of those who bet against our fundamentals
and shorted the stock are under water right now. While the
stock has been down nearly 10 percent recently, we have hit
all-time highs this past year as well. Overall, we're trading
up about 30 percent for the year. However, I don't worry about
the shorts too much because I'm convinced that they will have
to cover at some point. My job is to reward the "longs" by
hitting our numbers.
OptiStock: Do you believe the market has fairly valued your stock?
Bender: I want to be fairly valued for the 15 percent to 20 percent
bottom line growth that we deliver. But I don't think any CEO
would say his company's stock is fairly valued.
OptiStock: Finally, the nature of investing has changed dramatically over
the past several years as investors continue to question
companies' numbers and performance. Given the fact that this
trend will probably continue short-term, what would you say to
investors?
Bender: Two things come to mind. First, history does mean something.
We've been a top performer for a long period. Our ability to
achieve our guidance and objectives has been proven. Second,
understand the dynamics of the contact lens market. It won't
be slowed down. Myopia is myopia, and it is growing, as are
the numbers of teens. Both will continue to grow. For the
first three years of this decade, there has been an average of
four million births a year. That compares with 3.8 million a
year in the 1990s and 3.3 million a year in the 1980s. These
dramatic demographic shifts will propel this market.
Investors should seriously consider investing in contact
lenses. Take a look at all five of the top companies and their
sales and see if you can find another vision business growing
like we are. You can't. That kind of growth is only in the
contact lens industry. We have a window of opportunity at
Cooper, and we're taking advantage of it.
12
<Page>
TO OUR SHAREHOLDERS
In 2003, The Cooper Companies delivered another year of strong performance to
its shareholders. Revenue grew 31 percent, earnings per share rose 36 percent
and cash flow per share increased 30 percent.
13
<Page>
To Our Shareholders
Since 1998, Cooper's revenue has grown at a compounded annual rate of 23
percent, its operating income at 26 percent, its earnings per share from
continuing operations at 36 percent and its cash flow per share at 27 percent.
During this same period, revenue at CooperVision (CVI), our contact lens
business, has grown at a compounded annual rate of 22 percent, and CVI remains
the fastest growing and one of the world's leading contact lens manufacturers.
Over the next three years, new products and geographic expansion will, we
anticipate, generate percentage revenue growth in the mid-teens as growth
accelerates in our specialty lens franchise around the world.
CooperSurgical (CSI), our women's healthcare business, has achieved significant
scale during this five-year period. With revenue growing at a compounded annual
rate of 23 percent since 1998 and expected revenue in 2004 to range between $90
million and $92 million, CSI has become a leading supplier of products for the
gynecology market in the United States.
REVENUE (in millions)
<TABLE>
<CAPTION>
99 00 01 02 03
----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C>
CVI 138.1 154.8 176.1 243.9 329.6
CSI 30.1 46.4 58.5 71.4 82.2
</TABLE>
OPERATING INCOME (in millions)
<TABLE>
<CAPTION>
99 00 01 02 03
----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C>
CVI 40.8 47.3 51.4 60.4 88.8
CSI 4.3 6.3 10.1 14.1 18.2
</TABLE>
Other important financial measures also reflect Cooper's consistent performance
over the past five years:
o Cash flow (pretax income from continuing operations plus depreciation and
amortization) per share has grown from $1.41 to $3.19.
o Our effective tax rate has declined to 24 percent, and we expect to extend
our net operating loss carryforwards through 2006.
o One hundred shares of Cooper stock that cost $1,163 at the end of fiscal
1998 more than tripled to $4,345 by the end of fiscal 2003. During this
period, the Company's market capitalization quadrupled growing from $336
million to $1.4 billion.
This consistent performance reflects the talent and commitment of Cooper's
employees, and we thank them for their continued dedication and hard work.
14
<Page>
To Our Shareholders
Market Background
During 2003, the world market for soft contact lenses grew about 14 percent, or
8 percent in constant currency, to an estimated $3.5 billion, and we forecast
about 8 percent to 10 percent annual constant currency growth over the near
term.
Young women represent about two-thirds of new contact lens wearers, and they
continue to enter the market in growing numbers. In the United States, the
world's largest market, these patients are members of the "baby echo"
demographic group that emerged in the late 1990's. In addition, studies of lens
wear throughout the world report increasing cases of myopia, or
near-sightedness, the most common visual defect of new contact lens wearers.
Today, contact lens practitioners are more likely to choose specialty and
value-added contact lenses for their patients instead of lower priced,
commodity-like lenses. CooperVision is the world's fastest growing specialty
lens company with products in all major specialty categories:
o Toric lenses, used to correct astigmatism, a visual defect caused by
corneal irregularity, are CVI's leading products accounting for about 40
percent of its worldwide revenue. Torics are the fastest growing segment of
the worldwide contact lens market, with disposable torics -- lenses used
for up to one month and then discarded -- the most rapidly increasing
category. CVI's leading brands in this category are CV Encore Toric,
Frequency 55 Toric, Frequency 55 XR Toric and Proclear Toric.
o CVI's Proclear sphere and toric disposable products, manufactured from a
polymer that enhances tissue-device compatibility, offer relief to many
patients with dry eye symptoms who might otherwise drop out of lens wear.
o Frequency Aspheric, a value-added disposable product that provides a
crisper quality of vision and improved visual acuity in low light
conditions, has become the worldwide leader in its market category.
o Frequency Colors and Frequency Expressions, two of CVI's cosmetic lenses,
incorporate aspheric technology and compete effectively in the worldwide
cosmetic contact lens segment.
o Frequency Multifocal, a disposable lens for patients with presbyopia, a
visual defect of aging, has been well accepted in the United States and in
Europe.
In women's healthcare, favorable demographic trends also support our business.
Many women of the "baby boomer" generation have reached the age when
gynecological disorders become more frequent, and physicians use CooperSurgical
products to diagnose and treat many of these conditions.
15
<Page>
To Our Shareholders
During 2003, CSI continued to consolidate the fragmented medical device segment
of the women's healthcare market by completing three acquisitions that
strengthen both its in-office and hospital businesses. Obstetricians and
gynecologists use CSI products in many common in-office and surgical
gynecological procedures, as well as in infertility assessment and obstetric and
neonatal environments.
Corporate Activities
o In June, the Company completed the sale, in a private placement, of $115
million of 2.625% convertible senior debentures due 2023. The debentures
will be convertible, under certain conditions, into shares of Cooper's
common stock at an initial conversion price of approximately $44.40 per
share. The Company used some of the net proceeds to reduce amounts drawn
under its revolving credit facility, and intends that the remainder will
fund corporate activities, including possible future acquisitions.
o Through our worldwide global trading arrangement, the Company reduced its
effective tax rate to 24 percent and expects to extend its net operating
loss carryforwards through 2006.
o Forbes Magazine ranked Cooper 37th on its list of the best 200 small
companies for 2003. In addition, they ranked our board of directors in the
top 4 percent of companies in its index for corporate governance.
Looking Ahead
We expect Cooper's momentum to continue in 2004. We anticipate revenue of about
$465 million to $477 million and earnings per share in the range of $2.48 to
$2.51. At CooperVision, we expect recently introduced contact lens products and
geographic expansion in Europe and Japan to drive our incremental growth. At
CooperSurgical, we will continue to pursue our strategy to profitably
consolidate the medical device segment of the women's healthcare market.
Thank you for your continued support.
A. Thomas Bender Allan E. Rubenstein
A. Thomas Bender Allan E. Rubenstein, M.D.
Chairman of the Board, Vice Chairman of the Board
President and Chief Executive Officer and Lead Director
January 28, 2004
16
<Page>
BUSINESS REVIEW
The Cooper Companies, Inc. In 2003, The Cooper Companies reported sales of $412
million, a 31 percent increase over 2002. CVI's revenue grew to $330 million, up
35 percent. CSI's revenue grew to $82 million, a 15 percent increase that
includes revenue from product lines added through acquisition during the past 12
months. Earnings per share grew 36 percent to $2.13. Cash flow (pretax income
from continuing operations plus depreciation and amortization) per share reached
$3.19, up from $2.45 the previous year.
17
<Page>
COOPERVISION
[GRAPHIC]
We estimate that the worldwide soft contact lens market grew about 14 percent
in 2003 to about $3.5 billion. In the United States, about 40 percent of the
worldwide market, revenue grew about 8 percent to $1.4 billion, while
revenue in countries outside the United States grew 18 percent to $2.1
billion.
18
<Page>
CooperVision
Japan and the Pacific Rim countries, about $950 million or 27 percent of the
world market, grew about 15 percent. Europe, about $850 million or 24 percent
of the market, grew about 17 percent.
Favorable demographics, an increase in the reported incidence of myopia and a
continuing shift in practitioner preferences from low-featured "commodity"
lenses to higher-value specialty lenses support a favorable world market
outlook.
CooperVision is particularly strong in the specialty lens segments of the
market: toric lenses that correct astigmatism, cosmetic lenses that change or
enhance the appearance of the color of the eye, lenses for patients who
experience dry eye, long-term extended wear lenses and multifocal lenses for
presbyopia - the blurring of near vision that occurs with aging.
These product lines offer contact lens practitioners more profitable and faster
growing opportunities than those provided by commodity spherical lenses that
correct only near- and farsightedness. CooperVision estimates that specialty
lenses currently account for about 30 percent of the worldwide soft contact
lens market -- about 40 percent of the market in the U.S. and about 20 percent
outside of the U.S. where, with its broad specialty product line, CVI has an
exceptional opportunity to expand their acceptance.
CVI's 2003 Revenue Growth
Note: In February 2002, CVI purchased the contact lens business of
Biocompatibles, plc. In order to measure CVI's organic growth, the revenue
comparisons in this report include Biocompatibles' sales for November of 2001
through February of 2002 when CVI did not own them.
CVI's revenue grew 23 percent in 2003 on a pro forma basis. In contrast, we
estimate that the world market grew about 14 percent before currency translation
adjustment of about 6 percent. CVI's revenue in the United States grew 20
percent and 25 percent in markets outside the U.S. CVI now holds about 13
percent of the United States market and about 10 percent of the worldwide
market, twice its share three years ago.
19
<Page>
CooperVision
[GRAPHIC]
Incorporating phosphorylcholine into Proclear lenses creates a biocompatible
layer of synthetic lipids similar to that found in human cell membranes. By
mimicking the eye's natural cell components, the material closely binds water
in and around the lens.
PHOSPHORYLCHOLINE TECHNOLOGY AND CONTACT LENSES
At the Royal Free Hospital in London during the 1970's, Professor Dennis
Chapman and his colleagues studied phosphorylcholine (PC), a substance found
in the human cell membrane, and identified it as one of the primary natural
materials responsible for biocompatibility: the ability of a material to
interface within the body without provoking an adverse biological response.
PC resides in the inner and outer layers of cell membranes and binds water
tightly around it, making it difficult for other materials to interact with
the PC surface. A surface that resists adhesion and deposits is very desirable
for devices such as contact lenses that are in constant contact with body
fluids such as tears.
Incorporating PC technology into Cooper's omafilcon A contact lens material
has significantly improved the wearing experience for patients who experience
periodic dry eye symptoms, particularly at the end of the day. Following
clinical trials reviewed by the U.S. Food and Drug Administration, omafilcon A
received clearance for the claim: "...may provide improved comfort for contact
lens wearers who experience mild discomfort or symptoms relating to dryness
during lens wear." It is the only lens on the U.S. market with this claim.
CooperVision markets omafilcon A lenses worldwide under the Proclear brand in
both spherical and toric formats.
20
<Page>
CooperVision
Specialty Contact Lenses
Specialty contact lenses meet the visual correction needs of patients whose
requirements go beyond the correction of near- and farsightedness. In the United
States, we estimate sales of specialty products at $600 million, 43 percent of
the total U.S. market. In addition to toric and cosmetic lenses, multifocal
lenses, lenses for patients with dry eye syndrome, and long-term extended wear
lenses also offer attractive specialty lens opportunities.
In 2003, sales of CVI's toric lenses, its most extensive product line, grew 21
percent and now account for about 40 percent of its total revenue. We estimate
that the worldwide toric market grew about 20 percent during this period.
Worldwide, growth in the cosmetic lens market flattened, primarily, we believe,
due to the weak economic conditions around the world. We estimate sales of
approximately $275 million in this category -- about $200 million in the United
States.
CVI's line of disposable cosmetic contact lenses that change or enhance the
appearance of the color of the eye -- called Frequency Expressions in the United
States and Frequency Colors in the rest of the world -- continued to gain
acceptance with practitioners during 2003, and the line was expanded to eight
lens colors.
New Specialty Contact Lens Products
During 2003, CVI expanded its product offerings.
o Frequency Multifocal, a disposable product for patients with presbyopia,
the blurring of near vision that occurs with aging, is now available in all
major markets worldwide.
o Proclear Toric disposable lenses broadened its customer base in the United
States.
o Enhancement Colors, disposable cosmetic products that accentuate the
natural color of the eye, are now available worldwide. These products
complement our line of opaque lenses that change the appearance of the
color of the eye.
o In Japan, Rohto Pharmaceutical Company, Ltd., introduced CVI's line of
frequently replaced spherical lenses and are preparing to introduce its
two-week disposable toric product line in the first calendar quarter of
2004.
In the future, the Proclear material will lead to a new generation of lenses
including Proclear Aspheric, and Proclear Multifocal.
21
<Page>
CooperVision
CVI Growth in Markets Outside the United States
In 2003, CVI's revenue in markets outside the United States grew 25 percent and
now represents about 50 percent of its sales.
Europe
CVI's European revenue grew about 20 percent over 2002 with strength in sales of
toric lenses, which grew 27 percent. CVI estimates that it is now the third
largest contact lens supplier in Europe, with business units in Holland, Italy,
Scandinavia, Spain and the United Kingdom, a subsidiary and an exclusive
distributor in France and an exclusive distributor in Germany.
Far East
With approximately 10 million contact lens wearers, Japan is the second largest
contact lens market in the world after the United States, and soft lens
popularity continues to grow. CVI estimates that the total market for soft
contact lenses in Japan and the Pacific Rim today is about $950 million,
compared to about $1.4 billion in the United States. The Japanese market,
growing at about 10 percent per year, is currently divided equally between daily
and two-week disposable lenses.
The incidence of nearsightedness in Japan is one of the highest in the world.
About 80 percent of the nearsighted population has some degree of astigmatism,
significantly greater than the 50 percent rate reported in the United States.
About half of those with astigmatism are potential candidates for toric lenses.
The Japanese toric segment, currently a smaller percentage of the total market
than it is in the U.S., is expected to grow rapidly as newer generations of
toric lenses are introduced.
Looking Ahead
CVI's business goals are to grow its revenue at one and a half times the rate of
the world market and to become the world's largest specialty contact lens
provider by mid decade. In 2004, we expect revenue of about $375 million at CVI.
22
<Page>
COOPERSURGICAL
[GRAPHIC}
Historically, many small medical device companies have supplied the women's
healthcare market with a wide range of products through a fragmented
distribution system. CSI's strategy is to identify and acquire selected smaller
companies and product lines that improve its existing market position or serve
new clinical areas, particularly opportunities in aging and infertility.
Cooper's strong cash flow allows CSI to readily compete for these opportunities,
and CSI is now a leader in women's healthcare, having added 22 major products or
product lines since 1994.
23
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CooperSurgical
Women's Health Background
Medical economists expect patient visits to obstetricians and gynecologists
(Ob/Gyns) to increase by 13 percent over the next decade. Driving this growth is
a large group of women of childbearing age and a rapidly growing middle-aged
population with emerging gynecologic concerns. Consistent with an aging
population, menopausal problems -- abnormal bleeding, incontinence and
osteoporosis -- will increase. Pregnancy, contraceptive management and general
examinations are expected to remain stable. The trend toward delaying the age of
childbearing to the mid-thirties and beyond will drive increasing treatment for
infertility.
Women between the ages of 18 and 44 generate the highest number of office visits
and hospital admissions of both sexes and all age groups. While general medical
practitioners play an important role in women's primary care, 29 percent of all
office visits for this age group are to the Ob/Gyn who are, therefore, the
primary market target for associated medical devices. There are nearly 30,000
Ob/Gyn's under the age of 65 practicing at nearly 13,700 locations in the United
States. Women account for nearly 60 percent of all U.S. inpatient hospital
stays.
Some significant features of this market are:
o Two-thirds of patient visits are for annual checkups, cancer screening,
menstrual disorders, vaginitis (inflammation of vaginal tissue),
osteoporosis and the management of menopause. The remainder are for
pregnancy.
o Osteoporosis (reduction in bone mass) and incontinence have become frequent
diagnoses as the female population ages. Early identification and treatment
of these conditions will both improve women's health and help reduce costs.
Each of these conditions costs the U.S. healthcare system about $15 billion
annually according to government estimates.
o Sterilization, performed primarily in the outpatient setting, is the most
frequently performed surgical procedure -- about 700,000 annually. Each
year, an estimated 4.5 million patients visit physicians for monitoring and
treatment of abnormal Pap smears.
o About 1.2 million women and their partners consult medical practitioners
for infertility annually, with the Ob/Gyn usually providing the initial
evaluation. Ovulatory drugs and intrauterine insemination (IUI) are used to
treat the majority of these cases. In addition, about 400 assisted
reproductive technology clinics in the U.S. perform nearly 100,000 embryo
transfer procedures each year that result in nearly 35,000 infants.
24
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CooperSurgical
ASSISTED REPRODUCTIVE TECHNOLOGIES
[GRAPHIC]
Magnified view of a human egg at the time of fertilization using assisted
reproductive technology.
CSI 2003 Performance
During 2003, CSI revenue grew 15 percent to $82 million. CSI now represents 20
percent of Cooper's revenue. Its operating margin reached 22 percent for the
fiscal year, up from 20 percent in 2002.
Acquisitions and New Products
During fiscal 2003, CSI acquired two companies:
o Prism Healthcare, a developer and manufacturer of quality medical devices
for the neonatal, labor and delivery and gynecological markets.
o Avalon Medical Products, the United States distributor of the Filshie Clip,
a device used worldwide to perform female sterilization.
After the close of the fiscal year, CSI purchased from SURx, Inc., the worldwide
license rights and assets associated with its Radio Frequency Bladder Neck
Suspension System, which uses radio frequency thermal energy instead of implants
to treat stress incontinence.
You can read more about these companies in the adjacent section "Profiles of
Recent Acquisitions."
Outlook
With the addition of these product lines, CSI expects revenue in 2004 to range
from $90 million to $92 million. Over the next several years, CSI expects to
complete one or two acquisitions annually and, with these, achieve double-digit
growth.
25
<Page>
CooperSurgical
[GRAPHIC]
Prism recently introduced the Mystic, a disposable pump designed for use by one
operator, to complement the Mityvac system.
Profiles of Recent Acquisitions
Prism Healthcare
Prism Healthcare expands CSI's position in the obstetrics and neonatal care
segments of the women's healthcare market. Prism, a leading supplier of
proprietary medical devices and disposable products, had 2002 revenues of about
$9 million. Its product line includes a variety of vacuum assisted delivery
birthing systems, heel warmers, exothermic heat packs, gynecological catheters
and other disposable obstetric products.
Vacuum assisted delivery (VAD) birthing systems, which include a variety of
disposable vacuum delivery cups, VAD systems and reusable pumps, represent about
60 percent of its revenue, and a portfolio of disposable obstetric, neonatal and
gynecological products make up the remainder.
Prism's Mityvac and WarmGel brands are often the products of choice for
obstetricians, obstetric nurses and teaching hospitals throughout North America.
[GRAPHIC]
TransWarmer mattresses provide an optimal environment for neonatal transport.
Assisted Delivery Systems
The use of vacuum assisted deliveries is increasing. In 2000, forceps or vacuum
assisted delivery systems accounted for approximately 9 percent of U.S. births.
During vaginal births -- about 80 percent of the U.S. total in 2000 -- forceps
deliveries have decreased from 18 percent in 1980 to 4 percent in 2000, while
vacuum assisted deliveries have increased from less than one percent in 1980 to
over 8 percent in 2000. In the coming years, the number of cesarean births is
expected to decline, as their high cost and potential for complications have
recently become a concern, and declining cesarean rates will increase the number
of vacuum assisted procedures.
The World Health Organization recommends a cesarean rate of 10 percent to 15
percent and the U.S. Department of Health and Human Services recommends a rate
of no more than 15 percent in American hospitals.
26
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CooperSurgical
[GRAPHIC]
Prism WarmGel infant heel warmers provide consistent and reliable heat to the
infant's heel to facilitate blood sampling.
Exothermic Heat Products
Prism's exothermic sodium-acetate based heat packs and warming mattresses
provide temporary, instant warming for infant and adult patients. The patented
gel-based technology offers an advantage over liquid-based products in that the
Prism products form to the body and supply superior heat dissipation. This
technology has been successfully applied to infant heel warmers that help
technicians extract blood for testing from very young infants in hospital
intensive care units and in newborn nurseries. Adult packs are used in labor and
delivery, post partum, rehabilitation, operating room, emergency room and
oncology settings.
Prism's new product development efforts include VAD systems; infant warming and
transport devices; disposable inter-uterine test instruments; and gynecological
catheters.
[GRAPHIC]
[GRAPHIC]
Titanium silicone lined Filshie Clips are easily placed and provide secure
closure of the fallopian tube to insure sterilization.
Avalon Medical Products
The acquisition of Avalon Medical brings CSI a premier surgical device used
successfully in over four million female sterilization procedures throughout the
world since its introduction in 1981.
The cost-effective Filshie System includes single-use titanium clips lined with
silicone rubber plus specially designed reusable handles and applicators for a
variety of surgical approaches used for the procedure including laparoscopy and
small open incisions.
Female sterilization using the Filshie System is performed in the outpatient
setting under local or general anesthesia. Unlike recently introduced operative
hysteroscopy methods, sterilization with the Filshie System is immediate. It
does not require specialized training. The patient does not require an
additional expensive confirmatory procedure or contraception until sterilization
is confirmed, as with hysteroscopy.
Operative hysteroscopy can only be used in about half of the 700,000 female
sterilization procedures performed annually in the U.S. while the Filshie System
can be used in nearly all of them.
27
<Page>
CooperSurgical
[GRAPHIC]
Filshie Clip applicators facilitate clip placement for a variety of surgical
approaches.
The Filshie Clip has demonstrated higher success rates and lower failure rates
than the hysteroscopic method. Sterilization reversal in Filshie Clip patients
is well documented. Insurance reimbursement has been established.
U.K.-based FemCare, manufacturer of the Filshie Clip, received U.S. Food and
Drug Administration (FDA) clearance for the device in May 1996 and appointed
Avalon Medical as the exclusive U.S. distributor. CSI has successfully
negotiated a long-term supply agreement with FemCare for the U.S. market.
[GRAPHIC]
The SURx generator and single use applicators provide an innovative treatment
for female incontinence.
SURx, Inc.
In December, Cooper purchased from privately held SURx, Inc., the worldwide
license rights and assets associated with its Radio Frequency (RF) Bladder Neck
Suspension System, which uses radio frequency thermal energy instead of implants
to restore continence. The SURx System has received U.S. FDA clearance and
Common Procedural Terminology Codes for Medicare reimbursement.
RF Bladder Neck Suspension is a minimally invasive procedure used to treat
genuine stress incontinence (GSI). Using low power, bipolar radio frequency
energy, the procedure shrinks tissue in the pelvic floor to lift the urethra and
bladder neck to a more normal anatomical position. This procedure can be
performed using either a laparoscopic or a transvaginal approach.
Genuine stress incontinence is a medical condition that results in urine leakage
during activities such as laughing, walking, sneezing or lifting. Women with GSI
have tissues stretched by pregnancy, childbirth, athletic or physical activity,
menopause, surgery or obesity. These stretched tissues cause the bladder and
urethra to slightly drop and upset the continence mechanism.
The SURx Radio Frequency Bladder Neck Suspension System uses precisely
controlled, low power radio frequency energy to heat and shrink stretched tissue
near the bladder and urethra to restore the continence mechanism. No artificial
implants or materials such as surgical mesh, cadaver tissue, bone screws or
staples remain in the body.
28
<Page>
INDEX TO FINANCIAL INFORMATION
[GRAPHIC]
30 Five Year Financial Highlights
31 Two Year Quarterly Financial Data
31 Quarterly Common Stock Price Range
32 Management's Discussion and Analysis of Financial Condition and Results of
Operations
44 Forward-Looking Statements
45 Independent Auditors' Report
46 Management's Statement Regarding Financial Reporting
47 Consolidated Statements of Income
48 Consolidated Balance Sheets
49 Consolidated Statements of Cash Flows
51 Consolidated Statements of Comprehensive Income
52 Notes to Consolidated Financial Statements
<Page>
The Cooper Companies Inc. and Subsidiaries
Five-Year Financial Highlights
Consolidated Operations
<TABLE>
<CAPTION>
Years Ended October 31,
(In thousands, except per share amounts) 2003 2002 2001 2000 1999
- ---------------------------------------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net sales $411,790 $315,306 $234,572 $201,217 $168,155
======== ======== ======== ======== ========
Gross profit $265,202 $199,493 $153,368 $133,117 $109,146
======== ======== ======== ======== ========
Income from continuing operations
before income taxes $ 90,487 $ 65,169 $ 52,128 $ 42,127 $ 32,712
Provision for income taxes 21,717 16,294 14,992 12,727 10,711
-------- -------- -------- -------- --------
Income before items below 68,770 48,875 37,136 29,400 22,001
Discontinued operations -- -- -- -- 3,099
Cumulative effect of change in
accounting principle -- -- -- (432) --
-------- -------- -------- -------- --------
Net income $ 68,770 $ 48,875 $ 37,136 $ 28,968 $ 25,100
======== ======== ======== ======== ========
Diluted earnings per share:
Continuing operations $ 2.13 $ 1.57 $ 1.22 $ 1.01 $ 0.77
Discontinued operations -- -- -- -- 0.11
Cumulative effect of change in
accounting principle -- -- -- (0.01) --
-------- -------- -------- -------- --------
Earnings per share $ 2.13 $ 1.57 $ 1.22 $ 1.00 $ 0.88
======== ======== ======== ======== ========
Average number of shares used to
compute diluted earnings per share 32,274 31,189 30,491 29,019 28,625
======== ======== ======== ======== ========
</TABLE>
Consolidated Financial Position
<TABLE>
<CAPTION>
October 31,
(In thousands) 2003 2002 2001 2000 1999
- ---------------------------------------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Current assets $264,224 $198,910 $155,205 $112,685 $100,461
Property, plant and equipment, net 116,277 87,944 61,028 47,933 40,319
Goodwill 282,634 238,966 131,732 96,905 65,443
Other intangible assets, net 15,888 14,651 13,890 13,949 15,075
Other assets 26,541 30,644 34,994 51,093 64,575
-------- -------- -------- -------- --------
$705,564 $571,115 $396,849 $322,565 $285,873
======== ======== ======== ======== ========
Short-term debt $ 20,658 $ 36,333 $ 8,249 $ 8,094 $ 4,888
Other current liabilities 97,656 90,348 59,724 57,181 37,008
Long-term debt 165,203 127,318 60,553 40,257 57,067
Other liabilities -- 5,674 12,039 18,595 22,767
-------- -------- -------- -------- --------
Total liabilities 283,517 259,673 140,565 124,127 121,730
Stockholders' equity 422,047 311,442 256,284 198,438 164,143
-------- -------- -------- -------- --------
$705,564 $571,115 $396,849 $322,565 $285,873
======== ======== ======== ======== ========
</TABLE>
30
<Page>
The Cooper Companies Inc. and Subsidiaries
Two-Year Quarterly Financial Data
<TABLE>
<CAPTION>
First Second Third Fourth
(In thousands, except per share amounts) Quarter Quarter Quarter Quarter
- ---------------------------------------- ------- ------- -------- --------
(Unaudited)
<S> <C> <C> <C> <C>
2003
Net sales $94,014 $96,368 $108,442 $112,966
======= ======= ======== ========
Gross profit $59,367 $62,420 $ 68,632 $ 74,783
======= ======= ======== ========
Income before income taxes $18,473 $20,282 $ 24,046 $ 27,686
Provision for income taxes 4,618 5,071 5,383 6,645
------- ------- -------- --------
Net income $13,855 $15,211 $ 18,663 $ 21,041
======= ======= ======== ========
Diluted earnings per share* $ 0.44 $ 0.48 $ 0.58 $ 0.64
======= ======= ======== ========
Number of shares used to compute diluted
earnings per share 31,601 31,789 32,398 33,033
======= ======= ======== ========
2002
Net sales $58,112 $71,910 $ 90,563 $ 94,721
======= ======= ======== ========
Gross profit $37,485 $44,164 $ 55,719 $ 62,125
======= ======= ======== ========
Income before income taxes $13,250 $13,224 $ 18,302 $ 20,393
Provision for income taxes 3,845 3,306 4,941 4,202
------- ------- -------- --------
Net income $ 9,405 $ 9,918 $ 13,361 $ 16,191
======= ======= ======== ========
Diluted earnings per share $ 0.30 $ 0.32 $ 0.43 $ 0.52
======= ======= ======== ========
Number of shares used to compute diluted
earnings per share 31,075 31,128 31,210 31,335
======= ======= ======== ========
</TABLE>
* The sum of earnings per share for the four quarters is different from the
full year amount because we base our calculations on the weighted average
number of common shares outstanding in each respective period.
Quarterly Common Stock Price Range
<TABLE>
<CAPTION>
Years Ended October 31, 2003 2002
- ----------------------- --------------- ---------------
Quarter Ended High Low High Low
------ ------ ------ ------
<S> <C> <C> <C> <C>
January 31 $31.47 $23.10 $25.37 $21.02
------ ------ ------ ------
April 30 $31.01 $25.12 $26.79 $21.19
------ ------ ------ ------
July 31 $36.30 $27.75 $27.55 $19.17
------ ------ ------ ------
October 31 $44.75 $32.03 $28.95 $20.32
------ ------ ------ ------
</TABLE>
At December 31, 2003, there were 825 common stockholders of record and 865 at
December 31, 2002.
31
<Page>
The Cooper Companies Inc. and Subsidiaries
Management's Discussion and Analysis of Financial Condition and Results of
Operations
Note numbers refer to the "Notes to Consolidated Financial Statements" beginning
on page 52 of this report.
RESULTS OF OPERATIONS
In this section we discuss the results of our operations for fiscal 2003 and
compare them with those for fiscal 2002 and 2001. Certain prior period amounts
have been reclassified to conform to the current period's presentation. We
discuss our cash flows and current financial condition under "Capital Resources
and Liquidity."
Highlights: Fiscal Year 2003 vs. Fiscal Year 2002
o Net sales up 31% to $411.8 million.
o Gross profit up 33%; gross margin up by 1 percentage point to 64% of net
sales.
o Operating income up 42% to $95.2 million. Operating margin at 23% of net
sales up by 2 percentage points.
o Effective tax rate (provision for income taxes divided by income before
income taxes "ETR") down to 24% from 25%.
o Diluted earnings per share up 36% to $2.13 from $1.57.
Selected Statistical Information - Percentage of Net Sales and Growth
<TABLE>
<CAPTION>
Years Ended October 31, 2003 % Growth 2002 % Growth 2001
- ----------------------------------- ---- -------- ---- -------- ----
<S> <C> <C> <C> <C> <C>
Net sales 100% 31% 100% 34% 100%
Cost of sales 36% 27% 37% 43% 35%
--- --- ---
Gross profit 64% 33% 63% 30% 65%
Selling, general and administrative 40% 29% 40% 41% 38%
Research and development 1% 29% 1% 18% 2%
Amortization -- 4% 1% (71%) 2%
--- --- ---
Operating income 23% 42% 21% 22% 23%
=== === ===
</TABLE>
Net Sales
Cooper's two business units, CooperVision (CVI) and CooperSurgical (CSI)
generate all its sales:
o CVI develops, manufactures and markets a broad range of soft contact lenses
for the vision care market worldwide.
o CSI markets medical devices, diagnostic products and surgical instruments
and accessories used primarily by gynecologists and obstetricians.
32
<Page>
The Cooper Companies Inc. and Subsidiaries
Management's Discussion and Analysis of Financial Condition and Results of
Operations
Our consolidated net sales grew by 31% in 2003 and 34% in 2002. Net sales for
both CVI and CSI have grown consistently over the three-year period:
<TABLE>
<CAPTION>
Growth
($ in millions) 2003 vs. 2002 2002 vs. 2001
- --------------- ------------------ ------------------
<S> <C> <C> <C> <C>
Business Unit
CVI $85.7 35% $67.8 38%
===== == ===== ==
CSI $10.8 15% $13.0 22%
===== == ===== ==
</TABLE>
2003 Compared with 2002
CVI Net Sales
Practitioner and patient preferences in the worldwide contact lens market
continue to change. The major shifts are from:
o Conventional lenses replaced annually to disposable and frequently replaced
lenses. Disposable lenses are designed for either daily, two-week or
monthly replacement; frequently replaced lenses are designed for
replacement after one to three months.
o Commodity lenses to specialty lenses including toric lenses, cosmetic
lenses, multifocal lenses and lenses for patients experiencing the symptoms
of dry eye syndrome.
o Commodity spherical lenses to value-added spherical lenses such as lenses
with aspherical optical properties.
These shifts favor CVI's line of specialty products, which comprise over 60% of
CVI's revenue.
Definitions: Lens revenue consists of sales of spherical lenses, which include
aspherically designed lenses and specialty lenses - toric, cosmetic, multifocal
lenses and lenses for patients with dry eyes.
o Aspheric lenses correct only for near- and farsightedness, but they have
additional optical properties that help improve visual acuity in low light
conditions and can correct low levels of astigmatism and low levels of
presbyopia, an age-related vision defect.
o Toric lenses are designed to correct astigmatism by adding the additional
optical properties of cylinder and axis.
o Cosmetic lenses are opaque and color enhancing lenses that alter the
natural appearance of the eye.
o Multifocal lenses are designed to correct presbyopia.
o Proclear lenses help enhance tissue/device compatibility for patients
experiencing mild discomfort relating to dry eyes during lens wear.
The primary reasons for the 2003 revenue growth were:
o 21% increase in toric lens sales.
o Continued momentum in Europe with sales up 20%.
o Growth in disposable spheres up 37%.
33
<Page>
The Cooper Companies Inc. and Subsidiaries
CVI reported net sales include Biocompatibles revenue beginning in March 2002.
In the following table, we adjust CVI reported sales by adding Biocompatibles'
sales for the four-month period in fiscal 2002 that we did not own them (as
shown on the Biocompatibles' unaudited ledgers) to the year's actual results.
The total represents the lens business we now own.
Since the acquisition of Biocompatibles, CVI has actively marketed Proclear
lenses. In many cases, practitioners now recommend Proclear lenses rather than
older CVI products.
CVI Net Sales
<TABLE>
<CAPTION>
($ in Millions) 2003 2002 Growth
- --------------- ------ ------ ------
<S> <C> <C> <C>
Reported:
U.S. $164.8 $131.3 26%
International 164.8 112.6 46%
------ ------
Total reported $329.6 $243.9 35%
====== ======
</TABLE>
<TABLE>
<CAPTION>
Four Months Ended February 28, 2002
- -----------------------------------
<S> <C>
Adjustments - To include Biocompatibles sales for comparable periods:
U.S. $ 6.3
International 18.8
-----
$25.1
=====
</TABLE>
<TABLE>
<CAPTION>
2003 2002 Growth
------ ------ ------
<S> <C> <C> <C>
As adjusted:
U.S. $164.8 $137.6 20%
International 164.8 131.4 25%
------ ------
Total as adjusted $329.6 $269.0 23%
====== ======
</TABLE>
Total adjusted worldwide sales grew 23% (16% in constant currency) in 2003.
International sales grew 25% (12% in constant currency) to $164.8 million in the
year, led by sales of two-week and monthly sphere products, which grew $24.7
million, or 40%. Also, sales of two-week and monthly toric products grew 42% or
$10 million.
Adjusted sales in the United States grew 20% in fiscal 2003, primarily due to
sales of two-week and monthly sphere products, which grew 33% to $14.4 million.
Also, sales of two-week and monthly toric products grew 47% to $14 million. The
acquisition of Biocompatibles product lines, especially the sales of Proclear
and other specialty lenses, enhanced the revenue growth.
34
<Page>
The Cooper Companies Inc. and Subsidiaries
Management's Discussion and Analysis of Financial Condition and Results of
Operations
CVI New Products and Markets
CVI expects to expand its product lines and broaden its geographic presence. In
fiscal 2003, CVI:
o Launched Proclear disposable multifocal contact lenses in Europe and plans
to launch it in the United States in the first part of 2004.
o Launched Enhancement Colors, a line of cosmetic products that accentuates
the natural color of the eye, in Europe. These products complement our line
of opaque lenses that change the appearance of the color of the eyes.
o Received approval to sell our disposable lenses in Japan and will
distribute these through Rohto Pharmaceutical Co. Ltd.
In 2005, CVI plans to introduce a long-term or continuous-wear product made from
the Proclear material.
Outlook
We believe that CVI will continue to compete successfully in the worldwide
contact lens market with its disposable and frequently replaced lenses (DPR),
toric lenses, aspheric lenses and newer specialty lenses including Proclear
products for lens wearers who experience mild dry eye discomfort, cosmetic
lenses (both those that change and those that accentuate the eye's natural
color) and multifocal lenses. Market demographics are favorable, as the teenaged
population, the age when most contact lens wear begins, is projected to grow
considerably over the next two decades, and the reported incidence of myopia
continues to increase. We expect greater market penetration in Europe and the
Far East as practitioners increasingly prescribe more specialty lenses.
We anticipate that CVI will continue its revenue growth at one and a half times
the rate of the world market with fiscal 2004 revenue of about $375 million.
CSI Net Sales
Women's healthcare products used primarily by obstetricians and gynecologists
generate about 90% of CSI's sales. The balance are sales of medical devices
outside of women's healthcare where CSI does not actively market. In 2003, CSI's
sales increased 15% to $82.2 million, $10.8 million above 2002, primarily due to
recent acquisitions. The reported growth was slowed by declining sales in more
mature product lines, softness in the equipment portion of the market and a
delay in replacing an in-vitro fertilization catheter that CSI could no longer
market when an exclusive distributor relationship ended.
Results of operations of acquired companies are included in our consolidated
results beginning on the acquisition date. We discuss acquisitions completed in
fiscal 2003 below. Acquisitions completed in fiscal 2002 or late in fiscal 2001
are discussed under "2002 Compared with 2001" in the "CSI Revenue" section.
2003 CSI Acquisitions (See Note 2)
o In May, acquired Prism Enterprises, LP, which develops, manufacturers and
markets medical devices and disposable products for the obstetric, neonatal
and gynecological market.
o In October, acquired Avalon Medical Corporation the United States
distributor of the Filshie Clip, a device used worldwide to perform female
sterilization.
35
<Page>
The Cooper Companies Inc. and Subsidiaries
Demographics
Favorable demographic trends also support CSI's business. The women of the
"baby-boomer" generation are now reaching the age when gynecological procedures
are performed most frequently, and CSI has, through both acquisition and
internal development, built an extensive product line to diagnose and treat
these patients.
Outlook
We anticipate that CSI will continue to consolidate the women's healthcare
market. Fiscal 2004 revenue is expected to range from $90 million to $92
million, with mid-twenty percent operating margins.
2002 Compared with 2001
CVI Net Sales ($ in Millions)
CVI's worldwide sales grew 38% in fiscal 2002.
CVI's 2002 net sales include Biocompatibles beginning in March 2002, when we
acquired it. To present CVI's 2002 growth, we have adjusted reported revenue in
the following table by adding Biocompatibles revenue for the eight months ended
October 31, 2001. (This data was derived from the unaudited ledgers of
Biocompatibles for those periods.) Because we adjusted year-to-date 2001 revenue
for eight months, our 2002 revenue does not require any adjustments to be
comparable. We think that adjusting the eight-month period is more meaningful
because we did not begin to control Biocompatibles' operations until we acquired
it. Adjusted sales grew 9% in 2002.
Sales in 2001 included $3.6 million of initial stocking sales to Rohto
Pharmaceuticals, Ltd. Less than 10% of these sales were repeated in fiscal 2002.
Excluding the Rohto stocking sales in 2001, sales increased 10%.
<TABLE>
<CAPTION>
2002 2001 Growth
------ ------ ------
<S> <C> <C> <C>
Reported:
U.S. $131.3 $111.4 18%
International 112.6 64.7 74%
------ ------
Total reported $243.9 $176.1 38%
====== ======
</TABLE>
<TABLE>
<CAPTION>
Eight Months Ended October 31, 2001
- -----------------------------------
<S> <C>
Adjustments - To include Biocompatibles revenue for comparable periods:
U.S. $11.2
International 37.3
-----
$48.5
=====
</TABLE>
<TABLE>
<CAPTION>
2002 2001 Growth
------ ------ ------
<S> <C> <C> <C>
As adjusted:
U.S. $131.3 $122.6 7%
International 112.6 102.0 10%
------ ------
Total as adjusted $243.9 $224.6 9%
====== ======
</TABLE>
36
<Page>
The Cooper Companies Inc. and Subsidiaries
Management's Discussion and Analysis of Financial Condition and Results of
Operations
The 74% growth in reported international sales, from $64.7 million to $112.6
million, was largely due to international sales of Biocompatibles products of
$41.7 million in the eight months for which Biocompatibles' revenue has been
consolidated with our results. Our $3.6 million initial stocking sales to Rohto
in 2001 lowered the adjusted international market percentage growth in the 2002
period to 10% from 14%.
Reported sales in the United States, up 18%, included $14.2 million of
Biocompatibles revenue. On an adjusted basis, U.S. sales grew 7%, due primarily
to increased sales in toric, cosmetic and other specialty lenses.
CSI Revenue
CSI's revenue grew 22% in fiscal 2002. About 8% of this was generated by
internal or organic growth, with the rest from acquisitions completed in the
last two fiscal years.
In October 2002, CSI acquired Sage BioPharma, Inc., (Sage) a developer and
manufacturer of products used in assisted reproductive therapy.
In May 2002, CSI acquired privately held Ackrad Laboratories, Inc. (Ackrad), a
developer and manufacturer of disposable medical devices used primarily to
assess infertility and other gynecologic disorders.
Ackrad's principal product, accounting for about 65 percent of its revenue, is
the H/S Elliptosphere Catheter, used in the noninvasive assessment of the female
reproductive system, primarily for fertility studies, and also to assess
abnormal uterine bleeding and pelvic pain.
In April 2002, CSI acquired the assets of the bone densitometry business of
Norland Medical Systems (Norland). Norland's densitometry products are used in
the evaluation of osteoporosis. CSI had been a distributor of these products
since November 2000. The Norland business offers both peripheral and central
bone density measurement systems.
Cost of Sales/Gross Profit
<TABLE>
<CAPTION>
Gross Profit % of Net Sales 2003 2002 2001
- --------------------------- ---- ---- ----
<S> <C> <C> <C>
CVI 67% 67% 69%
CSI 54% 51% 55%
Consolidated 64% 63% 65%
</TABLE>
CVI's gross margin for fiscal 2003, at 67%, was equal to 2002. CVI manufactures
about 66% of its lenses in the United Kingdom. The favorable impact of currency
on revenue is offset by the unfavorable impact on manufacturing costs. In
addition, we have lower gross margin on sales to Asia-Pacific distributors,
which increased 88%. Last year's gross margin reflects lower gross margin sales
of certain products. Gross margins improved as CVI has lowered manufacturing
costs and customers continue to shift to higher gross margin Proclear products.
CVI's 2002 gross margin decreased 2 percent from fiscal 2001, primarily due to
the acquisition of Biocompatibles in February, whose more mature product line
generates lower margins.
37
<Page>
The Cooper Companies Inc. and Subsidiaries
For fiscal 2004, we anticipate that CVI's gross margins will remain about the
same as sales in lower-margin international markets expand, including increased
sales to distributors such as Rohto in Japan, and are offset by increased
margins from improved manufacturing efficiencies.
CSI's gross margin was 54%, compared with 51% last year. In the third quarter
last year, we phased out the Cerveillance colposcope system (Cerveillance), and
recorded a charge against cost of sales (primarily a write down of inventory,
distribution rights and prepaid royalties) of about $2 million. Excluding this
charge, last year's margin was 54%.
Cerveillance was phased out because the superior optics of the Leisegang Prism
system, acquired with the purchase of Leisegang Medical Inc. in 2000, is favored
by customers.
CSI's 2002 gross margin was 51% of sales, down from 55% in 2001. CSI's 2002
margin was impacted by the phase out of Cerveillance, as noted above.
CSI's 2002 gross margin from recurring activities (excluding the charge
described above) was 54%, down from 55% in 2001, primarily because of the lower
margins of certain acquired products.
For fiscal 2004, absent the impact of future acquisitions, we expect that CSI
gross margins from recurring activities will improve as we complete integration
of recent acquisitions.
Selling, General and Administrative Expense (SGA)
<TABLE>
<CAPTION>
($ in Millions) 2003 2002 2001
- --------------- ------ ------ -----
<S> <C> <C> <C>
CVI $127.4 $ 98.9 $65.1
CSI 23.7 20.3 18.0
Headquarters 11.8 7.5 6.7
------ ------ -----
$162.9 $126.7 $89.8
====== ====== =====
</TABLE>
Consolidated SGA increased by 29% in 2003 and 41% in 2002. As a percentage of
net sales, consolidated SGA was 40% in fiscal 2003 and 2002 and 38% in 2001.
CVI's SGA increased 29% in 2003 and 52% in 2002. The increases resulted
primarily from the acquisition of Biocompatibles, including certain additional
costs incurred during the integration period (integration costs) of about $1.7
million for fiscal 2002. SGA as a percentage of revenue improved to 39% in 2003
from 41% in 2002 as Biocompatibles was successfully integrated. In addition,
selling, promotion and distribution costs to introduce new products continued in
2003.
CSI's 2003 SGA increased 16% over the 2002 levels, which support the increase in
sales. In 2002, SGA increased 13%, significantly below the 22% sales growth.
Reported SGA in fiscal 2001 includes about $800,000 of one-time costs for
facility relocation and acquisition integration. Excluding these charges
from 2001 SGA, the 2002 increase was 19%, closer to sales growth.
38
<Page>
The Cooper Companies Inc. and Subsidiaries
Management's Discussion and Analysis of Financial Condition and Results of
Operations
Headquarters' SGA increased to 2.9% of consolidated revenue from 2.4% in 2002
and 2.9% in 2001. Corporate headquarters' 2003 expenses, which increased 58% to
$11.8 million, include continued expenses for various projects associated with
the Company's global trading arrangement. These expenses are expected to flatten
and then decline in the future, but costs to comply with recently enacted and
proposed corporate governance requirements are expected to increase in 2004.
Research and Development Expense
Research and development expense was 1% of net sales in fiscal 2003 and 2002 and
2% in 2001: $5.6 million in 2003, $4.3 million in 2002 and $3.7 million in 2001.
In 2002, we initiated development projects for both new and improved contact
lens products. During the 2003 to 2005 period, CVI plans to invest in two new
research programs: the development of an extended wear contact lens and an
improved contact lens technology. Most of our R&D expense, other than the two
new programs, is for clinical, regulatory and other product development
activities and not for basic research.
Amortization of Intangibles
Amortization of intangibles was $1.5 million in 2003 and 2002 and $5.2 million
in 2001. Amortization expense decreased in fiscal 2003 and 2002, primarily
because we no longer amortize goodwill following our adoption of Statement of
Financial Accounting Standards (SFAS) No. 142. Goodwill amortization reduced
operating income by $4.1 million in 2001.
Operating Income
Operating income grew $40.4 million or 74% between 2001 and 2003:
<TABLE>
<CAPTION>
Years Ended October 31,
($ in millions) 2003 2002 2001
- ----------------------- ------ ----- -----
<S> <C> <C> <C>
CVI $ 88.8 $60.4 $51.4
CSI 18.2 14.1 10.1
Headquarters (11.8) (7.5) (6.7)
------ ----- -----
$ 95.2 $67.0 $54.8
====== ===== =====
Percent growth 42% 22%
====== =====
</TABLE>
Other Income, Net
<TABLE>
<CAPTION>
Years Ended October 31,
(In thousands) 2003 2002 2001
- --------------------------------- ------ ------ ------
<S> <C> <C> <C>
Interest income $ 246 $ 179 $ 443
Gain on sale of Quidel stock 621 1,168 --
Gain on Litmus/Quidel transaction -- 2,075 719
Foreign exchange gain 1,815 1,774 34
Settlement of dispute (500) -- --
Other 27 (124) (88)
------ ------ ------
$2,209 $5,072 $1,108
====== ====== ======
</TABLE>
39
<Page>
The Cooper Companies Inc. and Subsidiaries
Gain on Sale of Quidel Stock
In fiscal 2003 and 2002, we sold 250,000 and 592,000 shares of Quidel stock, and
realized gains of approximately $621,000 and $1.2 million, respectively (see
Note 7).
Gain on Litmus/Quidel Transaction
In the first quarter of 2001, Quidel Corporation (Quidel) acquired Litmus
Concepts, Inc. (Litmus) through an exchange of common stock. Cooper held a
preferred equity position in Litmus, which equated to approximately a 10 percent
ownership. As a result of this transaction, we received 1,138,725 shares of
Quidel's common stock, and at that time, we recorded a gain of $719,000, as the
market value of the Quidel shares received exceeded the carrying value of our
investment in Litmus. In the third quarter of 2002, we received an additional
334,727 shares of Quidel that were held in escrow and recorded a gain of $2.1
million, based on the fair market value of Quidel shares on the day we received
them.
Foreign Exchange
When we acquired Biocompatibles, we inherited intercompany accounts in various
currencies, primarily pounds sterling. In 2003, the pound strengthened against
the dollar, resulting in a net gain of about $1.8 million. We have taken steps
to minimize this exposure. Our policy continues to be to hedge foreign exchange
exposure whenever possible.
In 2002, the acquisition of Biocompatibles and additional capitalization for
international operations provided about $21 million in pounds sterling to a U.K.
affiliate for short-term financing. While the loans were outstanding, the pound
strengthened against the dollar, and a net gain of about $1.5 million resulted
when the loan was repaid. $300,000 of additional gains resulted from currency
exposures that were acquired and not hedged.
Settlement of Dispute
In 2003, we paid a one-time fee of $500,000 to settle a legal dispute.
Interest Expense
Interest expense was $7 million in 2003, $6.9 million in 2002 and $3.7 million
in 2001. Interest expense increased in 2002 because of higher debt levels
required to fund acquisitions, partially offset by lower interest rates.
40
<Page>
The Cooper Companies Inc. and Subsidiaries
Management's Discussion and Analysis of Financial Condition and Results of
Operations
Provision for Income Taxes
Our effective tax rate for fiscal 2003 was 24%, down from fiscal 2002's ETR of
25% and fiscal 2001's ETR of 29%. The reduction of our ETR resulted from a
greater percent of our income coming from our international operations
(including the international operations of Biocompatibles). Assuming no major
acquisitions, we expect our ETR to be 23% for fiscal 2004.
With anticipated faster growth outside the U.S. and a favorable mix of products
manufactured outside the U.S., Cooper now expects that its net operating loss
carryforward (NOLs) in the U.S. will last through 2006.
We implemented a global trading arrangement in fiscal 1999 to minimize both the
taxes reported in our statement of income and the actual taxes we will have to
pay when we use all the benefits of our NOLs. The global trading arrangement
consisted of a restructuring of legal ownership for the CooperVision foreign
sales and manufacturing subsidiaries.
The stock of those subsidiaries is now owned by a single foreign holding
company, which centrally directs much of the activities of those subsidiaries.
The foreign holding company has applied for and received the benefits of a
reduced tax rate under a special tax regime available in its country of
domicile. Assuming no other major acquisitions or large stock issuance, we
currently expect that this plan will extend the cash flow benefits of the
existing NOLs through 2006, and that actual cash payments of taxes will average
less than 5% of pretax profits over this period. After 2006, actual cash
payments of taxes are expected to average less than 20% of pretax profits.
CAPITAL RESOURCES & LIQUIDITY
Year 2003 Highlights
o Operating cash flow $79.6 million vs. $55.9 million in 2002.
o Completed four acquisitions, made contractual payments for prior
acquisitions and paid other acquisition costs totaling $75.2 million.
o Expenditures for purchases of property, plant and equipment $33.9 million
vs. $23.4 million in 2002.
o Issued $115 million of 20-year 2.625% convertible senior debentures.
o Amended our $225 million credit facility with KeyBank National Association
(KeyBank), retaining favorable interest rates, extending the revolver
portion of the credit facility by two years, and relaxing certain covenant
restrictions.
41
<Page>
The Cooper Companies Inc. and Subsidiaries
<TABLE>
<CAPTION>
Comparative Statistics
October 31,
($ in millions) 2003 2002
- -------------------------------------------- ------- ------
<S> <C> <C>
Cash and cash equivalents $ 47.4 $ 10.3
Total assets $ 705.6 $571.1
Working capital $ 145.9 $ 72.2
Total debt $ 185.9 $163.7
Stockholders' equity $ 422.0 $311.4
Ratio of debt to equity 0.44:1 0.53:1
Debt as a percentage of total capitalization 31% 34%
</TABLE>
Operating Cash Flows
Our major source of liquidity continues to be cash flow from operating
activities. Operating cash flow for fiscal 2003 was $79.6 million vs. $55.9
million in 2002. Cooper continued to improve its receivable collections
following difficulties experienced in late 2001 and early 2002 caused by the
installation of a new enterprise resource planning system at CVI. These problems
resulted in an unusually high level of days of sales outstanding (DSO's) at the
end of 2001 and the first quarter of 2002. At the end of the current year,
Cooper's DSO's declined to 67 days from 71 days at October 31, 2002 and 86 days
reported at the end of the first quarter 2002, an improvement of 22% over the
first quarter 2002 period. Looking forward, we expect that DSO's will remain in
the high 60's to low 70's range, although continued international expansion
could tend to increase DSO's moderately.
Major uses of cash for operating activities included payments of $7.3 million
for income taxes, $5.8 million in interest payments, $4.5 million on a
previously accrued dispute settlement with Medical Engineering Corporation, a
subsidiary of Bristol-Myers Squibb Company, pursuant to a 1993 settlement
agreement and $2.6 million to fund 2002 entitlements under Cooper's bonus plans.
Our working capital increased by $73.7 million in fiscal 2003, driven in part by
the weak U.S. dollar, which triggered increases in trade receivables and
inventory and refinancing of about $15.7 million of short-term debt.
Investing Cash Flows
The cash outflow of $107.4 million for investing activities was driven by
payments of $75.2 million on acquisitions, including $22.4 million paid to the
Aspect noteholders, the final payment for the Aspect acquisition and capital
expenditures of $33.9 million. The cash outflow was partially offset by $1.6
million of cash received from the sale of Quidel shares.
42
<Page>
The Cooper Companies Inc. and Subsidiaries
Management's Discussion and Analysis of Financial Condition and Results of
Operations
Financing Cash Flows
Financing activities provided $64.6 million of cash primarily from increased
borrowing. In the third quarter, we issued $115 million principal amount of
2.625% convertible senior debentures in a private placement (see Note 6, "Debt"
under "Convertible Senior Debentures"). Proceeds from the debenture were used to
repay the majority of the revolving portion of our line of credit, which
included borrowing for the acquisition of Prism (see Note 2, "Acquisitions").
Also, we received cash of $24 million from the exercises of stock options, we
repaid net other debt of about $14 million, and we paid dividends on our common
stock of $2 million in fiscal 2003.
Contractual Obligations and Commercial Commitments
As of October 31, 2003, we had the following contractual obligations and
commercial commitments:
<TABLE>
<CAPTION>
Payments Due by Period
(In millions) 2004 2005 & 2006 2007 & 2008 2009 & Beyond
- ----------------------------- ----- ----------- ----------- -------------
<S> <C> <C> <C> <C>
Contractual obligations:
Long-term debt $19.1 $41.7 $ 9.7 $112.4
Capital leases 1.5 1.5 -- --
Operating leases 7.0 9.7 7.4 16.0
Dispute settlement 3.0 -- -- --
----- ----- ----- ------
Total contractual obligations 30.6 52.9 17.1 128.4
Commercial commitments:
Hedging contracts 0.8 -- -- --
Stand-by letters Of credit 3.6 -- -- --
----- ----- ----- ------
Total $35.0 $52.9 $17.1 128.4
===== ===== ===== ======
</TABLE>
Risk Management (See Note 1)
Most of our operations outside of the United States have their reporting
currency as their functional currency. We are exposed to risks caused by changes
in foreign exchange principally on balances denominated in other than the
locations' functional currency. We have taken steps to minimize our balance
sheet exposure. We are also exposed to risks associated with changes in interest
rates, as the interest rate on each of our revolving credit agreement and term
loan debt varies with the London Interbank Offered Rate. We have decreased this
risk by issuing fixed rate debt in the form of 2.625% convertible senior
debentures.
Outlook
We believe that cash and cash equivalents on hand of $47.4 million plus cash
from operating activities will fund future operations, capital expenditures,
cash dividends and smaller acquisitions. At October 31, 2003, we had $143.4
million available under the KeyBank line of credit.
Inflation and Changing Prices
Inflation had no appreciable effect on our operations in the last three years.
New Accounting Pronouncements
There have been no recent accounting pronouncements that have affected the
Company.
Estimates and Critical Accounting Policies (See Note 1)
43
<Page>
The Cooper Companies Inc. and Subsidiaries
Forward-Looking Statements
Some of the information included in this annual report contains "forward-looking
statements" as defined by the Private Securities Litigation Reform Act of 1995.
The forward-looking statements include certain statements pertaining to our
capital resources, performance and results of operations. In addition, all
statements regarding anticipated growth in our revenue, market conditions and
results of operations are forward-looking statements. To identify
forward-looking statements look for words like "believes," "expects," "may,"
"will," "should," "seeks," "intends," "plans," "estimates" or "anticipates" and
similar words or phrases. Discussions of strategy, plans or intentions often
contain forward-looking statements. These, and all forward-looking statements,
necessarily depend on assumptions, data or methods that may be incorrect or
imprecise.
Events, among others, that could cause actual results and future actions to
differ materially from those described in forward-looking statements include
major changes in business conditions, a major disruption in the operations of
our manufacturing facilities, new competitors or technologies, significant
delays in new product introductions, the impact of an undetected virus on our
computer systems, acquisition integration delays or costs, increases in interest
rates, foreign currency exchange exposure, investments in research and
development and other start-up projects, dilution to earnings per share from
acquisitions or issuing stock, worldwide regulatory issues, including product
recalls and the effect of healthcare reform legislation, cost of complying with
new corporate governance requirements, changes in tax laws or their
interpretation, changes in geographic profit mix effecting tax rates,
significant environmental cleanup costs above those already accrued, litigation
costs including any related settlements or judgments, cost of business
divestitures, the requirement to provide for a significant liability or to write
off a significant asset, including impaired goodwill, changes in accounting
principles or estimates, including the potential cost of expensing stock
options, and other events described in our Securities and Exchange Commission
filings, including the "Business" section in our Annual Report on Form 10-K for
the year ended October 31, 2003. We caution investors that forward-looking
statements reflect our analysis only on their stated date. We disclaim any
intent to update them except as required by law.
44
<Page>
The Cooper Companies Inc. and Subsidiaries
Independent Auditors' Report
The Board of Directors and Stockholders
The Cooper Companies, Inc:
We have audited the accompanying consolidated balance sheets of The Cooper
Companies, Inc. and subsidiaries as of October 31, 2003 and 2002, and the
related consolidated statements of income, comprehensive income and cash flows
for each of the years in the three-year period ended October 31, 2003. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards 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. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of The Cooper
Companies, Inc. and subsidiaries as of October 31, 2003 and 2002, and the
results of their operations and their cash flows for each of the years in the
three-year period ended October 31, 2003, in conformity with accounting
principles generally accepted in the United States of America.
As discussed in Note 1 to the consolidated financial statements, effective
November 1, 2001, the Company adopted Statement of Financial Accounting
Standards No. 142, "Goodwill and Other Intangible Assets."
KPMG LLP
San Francisco, California
December 10, 2003
45
<Page>
The Cooper Companies Inc. and Subsidiaries
Management's Statement Regarding Financial Reporting
We prepared the financial statements in this annual report according to
accounting principles generally accepted in the United States of America, and we
are responsible for them. They include estimates based on our informed judgment.
Our accounting systems include controls to provide reasonable, but not absolute,
assurance that Cooper's assets are properly safeguarded and the Company's
accounting records may be relied upon to produce financial statements that
conform to accounting principles generally accepted in the United States of
America. The concept of reasonable assurance recognizes that the cost of a
system of internal control should not exceed the benefits derived and that
management makes estimates and judgments of these cost/benefit factors.
We supplement these controls by hiring and retaining qualified personnel and by
providing for appropriate separation of duties. Other financial information in
this report has been derived from the same books and records used to prepare our
financial statements and are subject to the same system of financial controls.
The Board of Directors, through its Audit and Finance Committee of three
independent directors, determines whether we fulfill our responsibilities to
prepare financial statements and maintain financial controls.
This committee recommends to the Board of Directors appointment of the Company's
independent certified public accountants. It meets regularly with management and
the independent accountants. The independent accountants have access to the
committee without management present to discuss auditing and financial
reporting. Each committee member is familiar with finance and accounting, and
the chair is an audit committee financial expert. KPMG LLP has been the
Company's independent certified public accountants since 1980, when the Company
incorporated. KPMG provides objective, independent review of the fairness of
reported operating results and financial position.
A. Thomas Bender Robert S. Weiss
A. Thomas Bender Robert S. Weiss
Chairman, President and Chief Executive Vice President and Chief
Executive Officer Financial Officer
46
<Page>
The Cooper Companies Inc. and Subsidiaries
Consolidated Statements of Income
<TABLE>
<CAPTION>
Years Ended October 31,
(In thousands, except per share amounts) 2003 2002 2001
- --------------------------------------------- -------- -------- --------
<S> <C> <C> <C>
Net sales $411,790 $315,306 $234,572
Cost of sales 146,588 115,813 81,204
-------- -------- --------
Gross profit 265,202 199,493 153,368
Selling, general and administrative expense 162,852 126,730 89,770
Research and development expense 5,573 4,315 3,658
Amortization of intangibles 1,535 1,477 5,182
-------- -------- --------
Operating income 95,242 66,971 54,758
Other income, net 2,209 5,072 1,108
Interest expense 6,964 6,874 3,738
-------- -------- --------
Income before income taxes 90,487 65,169 52,128
Provision for income taxes 21,717 16,294 14,992
-------- -------- --------
Net income $ 68,770 $ 48,875 $ 37,136
======== ======== ========
Basic earnings per share $ 2.20 $ 1.60 $ 1.25
======== ======== ========
Diluted earnings per share $ 2.13 $ 1.57 $ 1.22
======== ======== ========
Number of shares used to compute earnings per
share:
Basic 31,226 30,568 29,673
======== ======== ========
Diluted 32,274 31,189 30,491
======== ======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
47
<Page>
The Cooper Companies Inc. and Subsidiaries
Consolidated Balance Sheets
<TABLE>
<CAPTION>
October 31,
(In thousands) 2003 2002
- ------------------------------------------------------------ -------- --------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 47,433 $ 10,255
Trade accounts receivable, net of allowances of $5,924 in
2003 and $3,883 in 2002 84,607 74,545
Inventories 89,718 76,279
Deferred tax assets 14,616 17,781
Marketable securities 5,746 2,750
Prepaid expenses and other current assets 22,104 17,300
-------- --------
Total current assets 264,224 198,910
-------- --------
Property, plant and equipment, at cost 175,023 150,785
Less accumulated depreciation and amortization 58,746 62,841
-------- --------
116,277 87,944
-------- --------
Goodwill 282,634 238,966
Other intangibles 15,888 14,651
Deferred tax assets 22,367 26,806
Other assets 4,174 3,838
-------- --------
$705,564 $571,115
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Short-term debt $ 20,658 $ 36,333
Accounts payable 16,227 15,212
Employee compensation and benefits 15,846 13,415
Accrued acquisition costs 15,299 24,773
Accrued income taxes 18,771 12,261
Other accrued liabilities 31,513 24,687
-------- --------
Total current liabilities 118,314 126,681
-------- --------
Long-term debt 165,203 127,318
Other liabilities -- 5,674
-------- --------
Total liabilities 283,517 259,673
-------- --------
Commitments (see Note 11)
Stockholders' equity:
Preferred stock, 10 cents par value, shares authorized:
1,000; zero shares issued or outstanding
Common stock, 10 cents par value, shares authorized: -- --
70,000; issued: 32,679 and 31,525 at October 31,
2003 and 2002, respectively 3,268 3,153
Additional paid-in capital 309,666 285,619
Accumulated other comprehensive income (loss) and
other 14,119 (4,474)
Retained earnings 104,139 37,236
Treasury stock at cost: 596 and 658 shares at October
31, 2003 and 2002, respectively (9,145) (10,092)
-------- --------
Stockholders' equity 422,047 311,442
-------- --------
$705,564 $571,115
======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
48
<Page>
The Cooper Companies Inc. and Subsidiaries
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
Years Ended October 31,
(In thousands) 2003 2002 2001
- ------------------------------------------------------------ --------- --------- --------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 68,770 $ 48,875 $ 37,136
Adjustments to reconcile net income to net cash provided
by operating activities:
Deferred income taxes 7,268 11,736 12,895
Depreciation expense 10,990 9,892 5,806
Provision for doubtful accounts 1,598 944 251
Amortization expense 1,535 1,477 5,182
Change in operating assets and liabilities excluding effects
from acquisitions:
Receivables (12,266) (1,377) (20,982)
Inventories (12,860) (8,111) (11,581)
Other assets 599 (10,128) (1,721)
Accounts payable 467 (1,377) 2,499
Accrued liabilities 8,857 3,821 (566)
Income taxes payable 6,510 4,195 200
Other long-term liabilities (1,912) (4,000) (3,500)
--------- --------- --------
Cash provided by operating activities 79,556 55,947 25,619
--------- --------- --------
Cash flows from investing activities:
Acquisitions of assets and businesses (75,158) (136,138) (48,217)
Purchases of property, plant and equipment (33,872) (23,434) (16,757)
Sale of marketable securities 1,609 4,382 --
Other (7) 97 (234)
--------- --------- --------
Cash used by investing activities (107,428) (155,093) (65,208)
--------- --------- --------
</TABLE>
See accompanying notes to consolidated financial statements.
49
<Page>
The Cooper Companies Inc. and Subsidiaries
Consolidated Statements of Cash Flows - Concluded
<TABLE>
<CAPTION>
Years Ended October 31,
(In thousands) 2003 2002 2001
- ----------------------------------------------------------------- --------- --------- --------
<S> <C> <C> <C>
Cash flows from financing activities:
Proceeds from long-term line of credit $ 136,700 $ 219,978 $ 32,839
Repayment of long-term line of credit (200,643) (117,326) (11,000)
Proceeds from debenture offering 112,181 -- --
Issuance costs of debenture offering (1,162) -- --
Principal payments on long-term obligations (1,987) (6,686) (2,082)
Net borrowings (repayments) under short-term agreements (2,519) (4,239) 355
Exercise of stock options 23,986 6,125 18,912
Dividends on common stock (1,952) (1,527) (1,038)
--------- --------- --------
Cash provided by financing activities 64,604 96,325 37,986
--------- --------- --------
Effect of exchange rate changes on cash and cash equivalents 446 148 (77)
Net increase (decrease) in cash and cash equivalents 37,178 (2,673) (1,680)
Cash and cash equivalents at beginning of year 10,255 12,928 14,608
--------- --------- --------
Cash and cash equivalents at end of year $ 47,433 $ 10,255 $ 12,928
========= ========= ========
Supplemental disclosures of cash flow information:
Cash paid for:
Interest (net of amounts capitalized) $ 5,797 $ 8,787 $ 3,179
========= ========= ========
Income taxes $ 7,288 $ 1,311 $ 1,534
========= ========= ========
</TABLE>
See accompanying notes to consolidated financial statements.
50
<Page>
The Cooper Companies Inc. and Subsidiaries
Consolidated Statements of Comprehensive Income
<TABLE>
<CAPTION>
Years Ended October 31,
(In thousands) 2003 2002 2001
- ----------------------------------------------------- ------- ------- -------
<S> <C> <C> <C>
Net income $68,770 $48,875 $37,136
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustment 16,504 2,135 (194)
Change in value of derivative instruments 96 516 (741)
Additional minimum pension liability (950) (1,081) --
Unrealized gain on marketable securities:
Gain (loss) arising during period 3,244 (1,918) 1,188
Reclassification adjustment* (372) (743) --
------- ------- -------
Unrealized gain (loss) on marketable securities 2,872 (2,661) 1,188
------- ------- -------
Other comprehensive income (loss), net of tax 18,522 (1,091) 253
------- ------- -------
Comprehensive income $87,292 $47,784 $37,389
======= ======= =======
</TABLE>
Analysis of changes in accumulated other comprehensive income (loss):
<TABLE>
<CAPTION>
Unrealized
Foreign Change in Gain
Currency Value of (loss) on Minimum
Translation Derivative Marketable Pension
Adjustment Instruments Securities Liability Total
----------- ----------- ---------- --------- -------
<S> <C> <C> <C> <C> <C>
Balance October 31, 2000 $(3,558) $ -- $ -- $ -- $(3,558)
2001 activity (194) (741) 1,188 -- 253
------- ----- ------- ------- -------
Balance October 31, 2001 (3,752) (741) 1,188 -- (3,305)
2002 activity 2,135 516 (2,661) (1,081) (1,091)
------- ----- ------- ------- -------
Balance October 31, 2002 (1,617) (225) (1,473) (1,081) (4,396)
2003 activity 16,504 96 2,872 (950) 18,522
------- ----- ------- ------- -------
Balance October 31, 2003 $14,887 $(129) $ 1,399 $(2,031) $14,126
======= ===== ======= ======= =======
</TABLE>
* To address realization of gain on sales of marketable securities. Realized
gains appear in net income. Unrealized gains and losses are in other
comprehensive income.
See accompanying notes to consolidated financial statements.
51
<Page>
The Cooper Companies Inc. and Subsidiaries
Notes To Consolidated Financial Statements
Note 1. Summary of Significant Accounting Policies
General
The Cooper Companies, Inc. ("Cooper" or "we" and similar pronouns), through its
two business units, develops, manufactures and markets healthcare products.
CooperVision (CVI) markets a range of specialty contact lenses to correct
visual defects, including toric lenses to correct astigmatism, cosmetic lenses
to change or enhance the appearance of the eyes' natural color, multifocal
lenses designed to correct presbyopia, an age-related vision defect, and lenses
for patients experiencing mild discomfort relating to dry eyes during lens wear.
CVI's leading products are disposable planned replacement toric and spherical
lenses. CooperSurgical (CSI) markets medical devices, diagnostic products and
surgical instruments and accessories used primarily by gynecologists and
obstetricians.
Estimates and Critical Accounting Policies
Estimates and judgments made by management are an integral part of financial
statements prepared in accordance with accounting principles generally accepted
in the United States of America (GAAP). Actual results may be different from
estimated amounts included in our financial statements. Certain prior period
amounts have been reclassified to conform to current period's presentation. We
believe that the following critical accounting policies address the significant
estimates required of management when preparing our consolidated financial
statements in accordance with GAAP:
o Revenue recognition - In general, we recognize revenue upon shipment of our
products, when risk of ownership transfers to our customers. We record,
based on historical statistics, appropriate provisions for shipments to
customers who have the right of return.
o Adequacy of allowance for doubtful accounts - In accordance with GAAP, our
reported balance of accounts receivable, net of the allowance for doubtful
accounts, represents our estimate of the amount that will be realized in
cash. We review the adequacy of our allowance for doubtful accounts on an
ongoing basis, using historical payment trends and the age of the
receivables, complemented by individual knowledge of our customers. If and
when our analyses indicate, we increase or decrease our allowance
accordingly.
o Net realizable value of inventory - GAAP states that inventories be stated
at the lower of cost or market. On an ongoing basis, we review the carrying
value of our inventories, measuring number of months on hand and other
indications of salability and reduce the carrying value, if required, to
report in accordance with GAAP.
o Valuation of goodwill - We evaluate our goodwill balances and test them for
impairment in accordance with the provisions of Statement of Financial
Accounting Standards No. 142, "Goodwill and Other Intangible Assets."
52
<Page>
The Cooper Companies Inc. and Subsidiaries
Notes To Consolidated Financial Statements
o Income taxes - As part of the process of preparing our consolidated
financial statements, we are required to estimate our income taxes in each
of the jurisdictions in which we operate. This process involves estimating
our current tax exposures in each jurisdiction including the impact, if
any, of additional taxes resulting from tax examinations as well as making
judgments regarding the recoverability of deferred tax assets. To the
extent recovery of deferred tax assets is not likely based on our
estimation of future taxable income in each jurisdiction, a valuation
allowance is established. Tax exposures can involve complex issues and may
require an extended period to resolve. We are required to estimate
full-year income and the related income tax expense in each jurisdiction to
arrive at our estimated effective tax rate, which is adjusted for the tax
related to significant unusual items. Changes in the geographic mix or
estimated level of annual pre-tax income can affect the overall effective
tax rate.
Consolidation
The financial statements in this report include the accounts of all of Cooper's
consolidated entities. Intercompany transactions and balances are eliminated in
consolidation.
Foreign Currency Translation
Most of our operations outside of the United States have their reporting
currency as their functional currency. We translate these assets and liabilities
into U.S. dollars at year-end exchange rates. We translate income and expense
accounts at weighted average rates for each year. We record gains and losses
from the translation of financial statements in foreign currencies into U.S.
dollars in other comprehensive income. We record gains and losses from changes
in exchange rates on transactions denominated in currencies other than each
reporting location's functional currency in net income for each period. Net
foreign exchange gains included in the determination of net income for the years
ended October 31, 2003, 2002 and 2001 were $1.8 million, $1.8 million and
$34,000, respectively.
Derivatives
We use derivatives to reduce market risks associated with changes in foreign
exchange and interest rates. We do not use derivatives for trading or
speculative purposes. We believe that the counterparty with which we enter into
forward exchange contracts and interest rate swap agreements is financially
sound and that the credit risk of these contracts is negligible.
Cash and Cash Equivalents
Cash and cash equivalents include commercial paper and other short-term income
producing securities with maturity dates of three months or less. These
investments are readily convertible to cash and are carried at cost, which
approximates market value.
53
<Page>
The Cooper Companies Inc. and Subsidiaries
Inventories, at the Lower of Average Cost or Market
<TABLE>
<CAPTION>
October 31,
(In thousands) 2003 2002
- --------------- ------- -------
<S> <C> <C>
Raw materials $15,392 $13,176
Work-in-process 13,792 14,067
Finished goods 60,534 49,036
------- -------
$89,718 $76,279
======= =======
</TABLE>
Property, Plant and Equipment
<TABLE>
<CAPTION>
October 31,
(In thousands) 2003 2002
- -------------------------- -------- --------
<S> <C> <C>
Land and improvements $ 1,662 $ 1,545
Buildings and improvements 23,023 26,418
Machinery and equipment 150,338 122,822
-------- --------
$175,023 $150,785
======== ========
</TABLE>
We compute depreciation using the straight-line method in amounts sufficient to
write off depreciable assets over their estimated useful lives. We amortize
leasehold improvements over their estimated useful lives or the period of the
related lease, whichever is shorter. We depreciate buildings over 35 to 40 years
and machinery and equipment over 3 to 15 years.
We expense costs for maintenance and repairs and capitalize major replacements,
renewals and betterments. We eliminate the cost and accumulated depreciation of
depreciable assets retired or otherwise disposed of from the asset and
accumulated depreciation accounts and reflect any gains or losses in operations
for the period.
Earnings Per Share (EPS)
We determine basic EPS by using the weighted average number of shares
outstanding and then add outstanding dilutive stock options to determine diluted
EPS (see Note 4).
Stock-Based Compensation
We account for stock-based compensation in accordance with Statement of
Financial Accounting Standards (SFAS) No. 123, "Accounting for Stock-Based
Compensation," as amended by SFAS No. 148, "Accounting for Stock-Based
Compensation - Transition and Disclosure, an Amendment of FASB Statement No.
123." These statements establish financial accounting and reporting standards
for stock-based compensation, including employee stock option plans.
54
<Page>
The Cooper Companies Inc. and Subsidiaries
Notes To Consolidated Financial Statements
As allowed by SFAS No. 123, we continue to measure compensation expense under
Accounting Principles Board (APB) Opinion No. 25, "Accounting for Stock Issued
to Employees," and related interpretations (see Note 9). Accordingly, no
compensation cost has been recognized for our employee stock option plans. Had
compensation cost for our stock-based compensation plans been determined under
the fair value method included in SFAS No. 123, as amended by SFAS No. 148, our
net income and earnings per share would have been reduced to the pro forma
amounts indicated below:
<TABLE>
<CAPTION>
Years Ended October 31,
(In thousands, except per share amounts) 2003 2002 2001
- ------------------------------------------------------------- ------- ------- -------
<S> <C> <C> <C>
Net income, as reported $68,770 $48,875 $37,136
Deduct: Total stock-based employee compensation expense
determined under fair value based method for all awards
granted since February 1, 1995, net of related tax effects (8,730) (3,107) (1,671)
------- ------- -------
Pro forma net income $60,040 $45,768 $35,465
======= ======= =======
Basic earnings per share
As reported $ 2.20 $ 1.60 $ 1.25
Pro forma $ 1.92 $ 1.50 $ 1.20
Diluted earnings per share
As reported $ 2.13 $ 1.57 $ 1.22
Pro forma $ 1.88 $ 1.50 $ 1.18
</TABLE>
The fair value of each option grant is estimated on the date of grant using the
Black-Scholes option-pricing model with the following weighted average
assumptions used for grants in fiscal 2003, 2002 and 2001: dividend yield:
0.215%, 0.417% and 0.229%; expected volatility: 37%, 55% and 45%; expected
option lives of 3.5 years for all three years and risk-free interest rates of
2.6%, 3.0% and 3.6%, respectively.
Pro Forma Earnings Per Share (EPS)
In accordance with SFAS No. 142, we no longer amortize goodwill. Actual
information for fiscal 2003 and 2002 and pro forma EPS for fiscal 2001 are
presented below:
<TABLE>
<CAPTION>
Years Ended October 31,
(In thousands, except for earnings per share) 2003 2002 2001
- ---------------------------------------------------- ------- ------- -------
<S> <C> <C> <C>
Net income $68,770 $48,875 $37,136
Add back goodwill amortization* -- -- 2,962
------- ------- -------
Pro forma net income $68,770 $48,875 $40,098
======= ======= =======
Pro forma earnings per share:
Basic $ 2.20 $ 1.60 $ 1.35
======= ======= =======
Diluted $ 2.13 $ 1.57 $ 1.32
======= ======= =======
Number of shares used to compute earnings per share:
Basic 31,226 30,568 29,673
======= ======= =======
Diluted 32,274 31,189 30,491
======= ======= =======
</TABLE>
* Net of tax, assuming an effective tax rate of 27% for 2001.
55
<Page>
The Cooper Companies Inc. and Subsidiaries
Note 2. Acquisitions
All acquisitions disclosed here have been accounted for as purchases.
Accordingly, results of operations for acquired companies are included in our
consolidated results of operations from the date of acquisition. The Company is
in the process of obtaining a third party valuation of the fair value of
identifiable assets of Avalon and Prism; thus, the allocation for the purchase
price is subject to refinement. All of these acquisitions were made to further
the business objectives of CVI or CSI:
CVI: To continue to grow revenue at one and one-half times the rate of the
world market and to become the world's largest specialty contact lens
provider by mid decade.
CSI: To identify and acquire selected smaller companies and product lines
that can improve its existing market position in women's healthcare or
offer opportunities in new clinical areas.
Acquisition of Avalon Medical Corporation
On October 28, 2003, CSI acquired Avalon Medical Corporation (Avalon), the
United States distributor of the Filshie Clip System, a device used worldwide to
perform female sterilization.
We paid $10 million in cash at closing for Avalon. Initially, we have ascribed
$8.7 million to goodwill, a negative $200,000 to a working capital deficit
(including acquisition costs of $705,000), $1.6 million to other intangibles and
$44,000 to property, plant and equipment.
U.K.-based FemCare Limited, manufacturer of the Filshie Clip, received U.S. Food
and Drug Administration clearance to market the device in May 1996. CSI has
successfully negotiated a long-term supply agreement with FemCare for the U.S.
market.
Acquisition of Prism Enterprises, LP
On May 5, 2003, CSI acquired privately held Prism Enterprises, LP. Prism
develops, manufactures and markets medical devices and other disposable products
for the obstetric, neonatal and gynecological markets.
We paid about $23 million for Prism. Initially, we have ascribed $21.2 million
to goodwill, $1.3 million to working capital (including acquisition costs of
$620,000), $474,000 to other intangible assets and $300,000 to property, plant
and equipment.
Disposable products accounted for virtually all of Prism's 2002 revenue. In
2002, disposable vacuum assisted delivery (VAD) systems accounted for about 60%
of Prism's revenue, and its disposable obstetric, neonatal and gynecological
products made up the remainder.
Acquisition of Biocompatibles
On February 28, 2002, CVI acquired the contact lens business of Biocompatibles
International plc. (Biocompatibles), comprised of its wholly owned subsidiaries
Hydron Limited (Hydron), Biocompatibles Eye Care Inc. (BE Inc.) and
Biocompatibles Canada Inc. (BE Canada). Under an International Share Sale
Agreement
56
<Page>
The Cooper Companies Inc. and Subsidiaries
Notes To Consolidated Financial Statements
(the Sale Agreement) dated January 15, 2002, among Biocompatibles, Cooper and
Cooper's wholly owned subsidiary Aspect Vision Holdings Limited (AVH),
Biocompatibles sold all of the outstanding shares of Hydron to AVH and all of
the outstanding shares of BE Inc. and BE Canada to Cooper.
Biocompatibles had worldwide revenue in calendar 2001 of about $70 million, with
about 70% outside of North America. Biocompatibles products are manufactured in
Norfolk, Virginia; Farnborough, United Kingdom; Adelaide, Australia and Madrid,
Spain.
The aggregate consideration paid for the shares and to repay outstanding
indebtedness of the acquired business was (pound)70 million (about $99 million)
plus transaction costs. In the purchase price allocation, $84.4 million has been
ascribed to goodwill, which is not being amortized, and other intangible assets
of $1.1 million being amortized over 8 years. The purchase price allocation also
included $26.5 million of working capital, $25 million of accrued acquisition
costs and $11.7 million of property, plant and equipment.
The following unaudited pro forma consolidated condensed results of operations
for years ended October 31, 2002 and 2001 are presented as if Biocompatibles had
been acquired at the beginning of each period presented. The unaudited pro forma
information is not indicative of either the results of operations that would
have occurred if Biocompatibles had been purchased during the periods presented
or of future results of the combined operations. Pro forma net income does not
include goodwill amortization expense in any period. We used a 27% effective tax
rate for all periods.
<TABLE>
<CAPTION>
Years Ended October 31,
(In thousands, except for earnings per share) 2002 Pro Forma 2001 Pro Forma
- --------------------------------------------- -------------- --------------
<S> <C> <C>
Net sales $339,947 $305,194
======== ========
Net income $49,764 $ 35,089
======== ========
EPS:
Basic $ 1.63 $ 1.18
======== ========
Diluted $ 1.60 $ 1.15
======== ========
Shares outstanding for:
Basic 30,568 29,673
======== ========
Diluted 31,189 30,491
======== ========
</TABLE>
Acquisition of Ackrad Laboratories
On May 21, 2002, CSI acquired privately held Ackrad Laboratories, Inc., (Ackrad)
a developer and manufacturer of disposable medical devices used primarily in the
assessment of infertility and other gynecologic disorders.
We paid $12 million at closing for Ackrad. The purchase price allocation
ascribed $11.5 million to goodwill, $1.6 million to working capital (including
accrued acquisition costs of $2.4 million), $442,000 to net property, plant and
equipment and $847,000 to deferred tax assets.
57
<Page>
The Cooper Companies Inc. and Subsidiaries
Ackrad's principal product is the H/S Elliptosphere Catheter, used in
hysterosalpingography and saline contrast hysterosonography, the noninvasive
assessment of the female reproductive anatomy. It is used primarily for
fertility studies, and also to assess abnormal uterine bleeding and pelvic pain.
Acquisition of Norland Medical Systems
On April 15, 2002, CSI acquired the assets of the bone densitometry business of
Norland Medical Systems (Norland). Norland's densitometry products are used in
the evaluation of osteoporosis.
Cooper paid $5 million for Norland, and may pay additional amounts not to exceed
a maximum purchase price of $12 million based on performance over three years.
The initial purchase price allocation ascribed $6.4 million to goodwill, a
negative $2.2 million to a working capital deficit (including accrued
acquisition costs of $1.6 million), $200,000 to property, plant and equipment
and $600,000 to deferred tax assets.
Acquisition of Medscand Medical
On August 27, 2001, CSI purchased Medscand Medical AB, a Swedish corporation,
and Medscand (USA), Inc., an affiliated company (collectively, Medscand).
Medscand develops, manufactures and markets specimen collection products that
are used to help physicians diagnose cervical disease.
Cooper paid $12 million for Medscand. In the purchase price allocation, $10.4
million was ascribed to goodwill, which is not being amortized, with other
intangible assets of $450,000 being amortized over 5-7 years. The purchase price
allocation included working capital of $1.5 million, plant, property and
equipment of $500,000 and net acquisition accrual of $800,000.
Medscand markets its products to clinicians, clinics, hospitals, laboratories
and test manufacturers throughout the world. About 85 percent of Medscand's
revenue is generated in the United States. Its products are used in the top 25
cancer centers in the United States.
Acquisition of CL Tinters Oy
On May 29, 2001, CVI completed the acquisition of privately held CL-Tinters Oy
(CLT), a leading manufacturer of cosmetic contact lenses, that also applies the
color tints to CVI's aspheric cosmetic contact lenses. The total acquisition
cost was about $27 million, including $14 million cash paid at closing, future
payments and other costs associated with the acquisition. The purchase price
allocation was established at $1 million for patents, and $23.2 million for
goodwill and was being amortized over 40 years through the end of fiscal 2001.
The purchase price allocation included working capital of $1.6 million;
property, plant and equipment of $2 million and $800,000 of other acquisition
costs.
Acquisition of LuMax Product Line from MedAmicus
On April 25, 2001, CSI completed the purchase of the LuMax System from
MedAmicus, Inc. Cooper paid approximately $4 million in cash at closing, with
$700,000 due at a later date, for the LuMax System. Of the $4.7 million purchase
price, $3.6 million has been ascribed to goodwill and was being amortized over
20 years through the end of fiscal 2001.
58
<Page>
The Cooper Companies Inc. and Subsidiaries
Notes To Consolidated Financial Statements
Accrued Acquisition Costs
In conjunction with recording acquisitions, we accrue for the estimated costs of
severance, legal, consulting, due diligence, plant/office closure and deferred
acquisition payments. The chart below shows the balance at October 31, 2002 and
activity recorded in 2003.
<TABLE>
<CAPTION>
Balance Balance
Description 10/31/2002 Additions Payments 10/31/2003
- -------------------------- ---------- --------- -------- ----------
<S> <C> <C> <C> <C>
Plant shutdown $ 7,807 $ 824 $ (1,940) $ 6,691
Severance 8,965 80 (3,437) 5,608
Hold back due 4,333 2,473 (5,725) 1,081
Preacquisition liabilities -- 1,959 (969) 990
Legal and consulting 3,542 1,331 (4,582) 291
Other 126 572 (60) 638
------- ------ -------- -------
Total $24,773 $7,239 $(16,713) $15,299
======= ====== ======== =======
</TABLE>
Note 3. Intangible Assets
<TABLE>
<CAPTION>
(In thousands) CVI CSI Total
- ------------------------------------------------ -------- ------- --------
<S> <C> <C> <C>
Goodwill:
Balance as of November 1, 2002 $170,842 $68,124 $238,966
Additions during the year ended October 31, 2003 6,389 31,667 38,056
Other adjustments* 5,612 -- 5,612
-------- ------- --------
Balance as of October 31, 2003 $182,843 $99,791 $282,634
======== ======= ========
</TABLE>
* Primarily translation differences in goodwill denominated in foreign currency.
<TABLE>
<CAPTION>
As of October 31, 2003 As of October 31, 2003
------------------------ ------------------------ Weighted
Gross Accumulated Gross Accumulated Average
Carrying Amortization Carrying Amortization Amortization
Amount & Translation Amount & Translation Period
-------- ------------- -------- ------------- ------------
(In thousands) (In years)
--------------------------------------------------- ------------
<S> <C> <C> <C> <C> <C>
Other intangible assets:
Trademarks $ 578 $ 171 $ 578 $ 144 22
Patents 13,200 5,072 12,711 4,289 14
License and distribution rights 8,454 2,083 6,654 1,602 14
Other 1,145 163 778 35 10
------- ------- ------ -------
23,377 $ 7,489 20,721 $ 6,070 14
======= ======= ====== =======
Less accumulated amortization
and translation 7,489 6,070
-------- -------
Other intangible assets, net $15,888 $14,651
======== =======
</TABLE>
Estimated annual amortization expense is about $1.6 million for each of the
years in the five-year period ending October 31, 2008.
59
<Page>
The Cooper Companies Inc. and Subsidiaries
Note 4. Earnings Per Share
<TABLE>
<CAPTION>
Years Ended October 31,
(In thousands, except per share amounts) 2003 2002 2001
- ---------------------------------------- ------- ------- -------
<S> <C> <C> <C>
Net income $68,770 $48,875 $37,136
======= ======= =======
Basic:
Weighted average common shares 31,226 30,568 29,673
======= ======= =======
Basic earnings per common share $ 2.20 $ 1.60 $ 1.25
======= ======= =======
Diluted:
Weighted average common shares 31,226 30,568 29,673
Effect of dilutive stock options 1,048 621 818
------- ------- -------
Diluted weighted average common shares 32,274 31,189 30,491
======= ======= =======
Diluted earnings per share $ 2.13 $ 1.57 $ 1.22
======= ======= =======
</TABLE>
We excluded the following options to purchase Cooper's common stock from the
computation of diluted EPS because their exercise prices were above the average
market price.
<TABLE>
<CAPTION>
October 31, 2003 2002 2001
- ------------------------- ------------- ------------- -------------
<S> <C> <C> <C>
Number of shares excluded 850,000 1,633,500 859,000
============= ============= =============
Range of exercise prices $35.69-$41.44 $24.40-$31.11 $25.18-$31.11
============= ============= =============
</TABLE>
Because we have the option to redeem the Debentures for cash, there was no
impact on our earnings per share calculation as of October 31, 2003. The
Debentures become potentially dilutive to our fully diluted earnings per share
upon the occurrence of certain circumstances and our common stock price reaching
$53.28.
60
<Page>
The Cooper Companies Inc. and Subsidiaries
Notes To Consolidated Financial Statements
Note 5. Income Taxes
The components of income before income taxes and the income tax provision
related to income from all operations in the consolidated statements of income
consists of:
<TABLE>
<CAPTION>
Years Ended October 31,
(In thousands) 2003 2002 2001
- --------------------------- ------- ------- -------
<S> <C> <C> <C>
Income before income taxes:
United States $25,080 $33,512 $38,485
Outside the United States 65,407 31,657 13,643
------- ------- -------
$90,487 $65,169 $52,128
======= ======= =======
Income tax provision $21,717 $16,294 $14,992
======= ======= =======
</TABLE>
The income tax provision related to income in the consolidated statements of
income consists of:
<TABLE>
<CAPTION>
Years Ended October 31,
(In thousands) 2003 2002 2001
- ----------------------- ------- ------- -------
<S> <C> <C> <C>
Current:
Federal $ 8,300 $ -- $ 918
State 346 990 (205)
Foreign 6,270 3,568 1,384
------- ------- -------
14,916 4,558 2,097
======= ======= =======
Deferred:
Federal 7,278 11,736 11,283
State -- -- 1,612
Foreign (477) -- --
------- ------- -------
6,801 11,736 12,895
------- ------- -------
$21,717 $16,294 $14,992
======= ======= =======
</TABLE>
61
<Page>
The Cooper Companies Inc. and Subsidiaries
We reconcile the provision for income taxes attributable to income from
operations and the amount computed by applying the statutory federal income tax
rate of 35% to income from before income taxes as follows:
<TABLE>
<CAPTION>
Years Ended October 31,
(In thousands) 2003 2002 2001
- ------------------------------------------------------------------ -------- ------- -------
<S> <C> <C> <C>
Computed expected provision for taxes $ 31,670 $22,809 $18,245
Increase (decrease) in taxes resulting from:
Income outside the United States subject to different tax rates (11,181) (7,512) (2,626)
Amortization of intangibles -- -- 412
Foreign source income subject to U.S. tax 1,811 513 --
State taxes, net of federal income tax benefit 346 644 588
Reversal of prior years' estimated state tax liabilities
no longer required -- -- (1,026)
Change in valuation allowance (85) -- (948)
Other, net (844) (160) 347
-------- ------- -------
Actual provision for income taxes $ 21,717 $16,294 $14,992
======== ======= =======
</TABLE>
The tax effects of temporary differences that give rise to the deferred tax
assets and liabilities are:
<TABLE>
<CAPTION>
October 31,
(In thousands) 2003 2002
- ------------------------------------------------------------------------ ------- -------
<S> <C> <C>
Deferred tax assets:
Accounts receivable, principally due to allowances for doubtful accounts $ 630 $ 943
Inventories 2,473 2,374
Litigation settlements 1,050 2,625
Accrued liabilities, reserves and compensation accruals 4,689 6,217
Foreign deferred tax assets 477 --
Unrealized loss on marketable securities -- 793
Net operating loss carryforwards 32,219 34,406
Capital loss carryforwards 2,617 2,617
Tax credit carryforwards 2,473 2,284
------- -------
Total gross deferred tax assets 46,628 52,259
Less valuation allowance (4,288) (4,795)
------- -------
Deferred tax assets 42,340 47,464
------- -------
Deferred tax liabilities:
Goodwill book/tax difference in net book value (1,857) (919)
Plant and equipment (2,747) (1,958)
Unrealized gain on marketable securities (753) --
------- -------
Total gross deferred tax liabilities (5,357) (2,877)
------- -------
Net deferred tax assets $36,983 $44,587
======= =======
</TABLE>
62
<Page>
The Cooper Companies Inc. and Subsidiaries
Notes To Consolidated Financial Statements
Cooper has provided a valuation allowance on those deferred tax assets that it
believes will not, more likely than not, be realized. The net decrease in the
total valuation allowance for the years ended October 31, 2003, 2002 and 2001
was $507,000, $745,000 and $948,000, respectively.
The Company has not provided federal income tax on approximately $122.2 million
of undistributed earnings of its foreign subsidiaries since the Company intends
to reinvest this amount outside the U.S. indefinitely.
At October 31, 2003, Cooper had net operating loss and tax credit carryforwards
for federal tax purposes that expire as follows:
<TABLE>
<CAPTION>
Net
Year of Expiration Operating Tax
(In thousands) Losses Credits
- ------------------ --------- -------
<S> <C> <C>
2003 $ 1,187 $ 330
2004 83 --
2005 47 --
2006 9,358 --
2007 22,058 --
2008 49,535 --
2009 6,553 --
2010 1,318 --
2018 823 --
2019 1,092 --
Indefinite life -- 2,143
------- ------
$92,054 $2,473
======= ======
</TABLE>
Note 6. Debt
<TABLE>
<CAPTION>
October 31,
(In thousands) 2003 2002
- ----------------------------------- -------- --------
<S> <C> <C>
Short-term:
Notes payable to banks $ -- $ 2,519
Current portion of long-term debt 20,658 33,814
-------- --------
$ 20,658 $ 36,333
======== ========
Long-term:
Convertible senior debentures $112,181 $ --
KeyBank line of credit 68,625 132,310
Capitalized leases 2,983 4,471
County of Monroe Industrial
Development Agency (COMIDA) Bond 1,645 1,899
Promissory notes - Aspect -- 22,291
Other 427 161
-------- --------
185,861 161,132
Less current portion 20,658 33,814
-------- --------
$165,203 $127,318
======== ========
</TABLE>
63
<Page>
The Cooper Companies Inc. and Subsidiaries
Our long-term debt matures as follows over the next five years:
<TABLE>
<CAPTION>
(In thousands) Long-Term Debt
- -------------- --------------
<S> <C>
2004 $20,658
2005 24,041
2006 19,111
2007 9,575
2008 120
</TABLE>
Convertible Senior Debentures
In the third quarter of 2003, we issued $115 million of 2.625% convertible
senior debentures (Debentures) due on July 1, 2023, in a private placement
pursuant to Rule 144A and Regulation S of the Securities Act of 1933. The
Debentures are convertible at the holder's option under certain circumstances
into 22.5201 shares of our common stock per $1,000 principal amount of
Debentures, approximately $44.40 per share, or approximately 2.6 million shares.
When converted, we have the right to deliver, in lieu of shares of our common
stock, cash or a combination of cash and shares of common stock. The Debentures
rank equally in right of payment with all of our other unsecured and
unsubordinated indebtedness and are effectively subordinated to the indebtedness
and other liabilities of our subsidiaries, including trade creditors. We may
redeem the Debentures (in whole or in part) for cash on or after July 1, 2008 at
a price equal to 100% of the principal amount. Holders may require us to
repurchase the Debentures on July 1, 2008, 2013 and 2018, at a repurchase price
equal to 100% of the principal amount.
We used the proceeds primarily to reduce amounts drawn under our revolving
credit facility and to fund acquisitions, with the remaining held for general
corporate purposes.
Because we have the option to redeem the Debentures for cash, there was no
impact on our earnings per share calculation as of October 31, 2003. The
Debentures become potentially dilutive to our fully diluted earnings per share
upon the occurrence of certain circumstances and our common stock price reaching
$53.28.
The $112.2 million proceeds reflect the discount of $2.8 million that is
amortized over the life of the Debentures. The $1.2 million cost of issuing the
Debentures is carried in other assets and is being amortized to interest expense
over its life.
KeyBank Line of Credit
On May 1, 2002, Cooper obtained a $225 million syndicated bank credit facility.
The facility consists of a $75 million five-year term loan with an interest only
payment in the first year then fully amortized in the next four years, and a
$150 million three-year revolving credit facility. KeyBank National Association
(KeyBank) is the agent for the eleven-bank syndication.
On July 31, 2003, the facility was amended to relax certain restrictions and
extend the revolving credit facility maturity to April 30, 2007 from April 30,
2005.
64
<Page>
The Cooper Companies Inc. and Subsidiaries
Notes To Consolidated Financial Statements
Interest rates under the new facility are based on the London Interbank Offered
Rate (LIBOR) plus additional basis points determined by Cooper's ratio of debt
to its earnings before interest, taxes, depreciation and amortization (EBITDA).
These range from 125 to 225 basis points for the term loan and from 100 to 200
basis points for the revolver. As of October 31, 2003, the additional basis
points were 175 on the term loan and 150 on the revolver. At the Company's
option, it can choose to pay a base rate that is within a range above the prime
rate.
Terms include a first security interest in all Cooper assets. The credit
agreement:
o Limits Cooper's debt to a maximum of 50% of its total capitalization, which
is defined as the sum of total debt plus stockholders' equity.
o Limits cash dividends on our common stock to $5 million per fiscal year.
o Requires that the ratio of EBITDA to fixed charges (as defined in the
agreement) be at least 1.3 to 1.
o Requires that the ratio of total debt to pro forma EBITDA (as defined) be
no higher than 2.75 to 1 through January 30, 2003, 2.5 to 1 January 31
through July 30, 2003 and 3 to 1 thereafter.
At October 31, 2003, Cooper's debt was 31% of total capitalization, its ratio of
EBITDA to fixed charges (as defined) was 1.7 to 1 and its ratio of debt to
EBITDA was 1.69 to 1.
The $3 million cost of acquiring the new credit facility is carried in other
assets and amortized to interest expense over its life.
At October 31, 2003, we had $143.4 million available under the KeyBank line of
credit:
<TABLE>
<CAPTION>
(In millions)
- -----------------
<S> <C>
Amount of line $215.6
Outstanding loans (72.2)*
------
Available $143.4
======
</TABLE>
* Includes $3.6 million in letters of credit backing other debt.
Aspect Promissory Notes
In 1997, we acquired Aspect Vision Care Ltd., and issued 'L' 14.2 million of
promissory notes to the selling stockholders. The promissory notes carried
interest of 8% and were repaid December 2, 2002.
65
<Page>
The Cooper Companies Inc. and Subsidiaries
Capitalized Leases
The obligation under capitalized leases at October 31, 2003, was $3 million. The
leases primarily relate to manufacturing equipment in the U.S. and the United
Kingdom and are secured by those assets. They carry interest rates from 7% to 9%
and mature between 2004 and 2006.
COMIDA Bond
The COMIDA bond is a $3 million Industrial Revenue Bond (IRB) to finance the
cost of plant expansion, building improvements and the purchase of equipment
related to CVI's Scottsville, New York, facility. The interest rate has been
effectively fixed at 4.88% through a rate swap transaction (see Note 7).
Principal is repaid quarterly, from July 1997 to October 2012. The IRB is
secured by substantially all of CVI's rights to the facility.
KeyBank issued a letter of credit to support certain obligations under the
COMIDA bond. CVI is obligated to repay KeyBank for draws under and expenses
incurred in connection with the letter of credit, under a reimbursement
agreement, which Cooper guarantees. The agreement contains customary provisions
and covenants, including certain required ratios and levels of net worth. CVI
and COMIDA have granted a mortgage lien on the building and real estate located
in Scottsville and a first lien security interest on the equipment purchased
under the bond proceeds to KeyBank to secure payment under the reimbursement
agreement.
Note 7. Financial Instruments
The fair value of each of our financial instruments, including cash and cash
equivalents, trade receivables, lines of credit and accounts payable,
approximated its carrying value as of October 31, 2003 and 2002 because of the
short maturity of these instruments. We believe that there are no significant
concentrations of credit risk in trade receivables.
The 2.625% convertible senior debentures are traded occasionally in public
markets. The carrying value and estimated fair value of these obligations as of
October 31, 2003 are $112 million and $138 million, respectively. The fair value
of our other long-term debt approximated the carrying value at October 31, 2003
and 2002 because we believe that we could obtain similar financing with similar
terms.
Marketable securities represent Quidel Corporation common stock available for
sale at fair value at each year-end. We received Quidel shares as a result of a
transaction involving Litmus Concepts, Inc., in 2001 and additional shares upon
release of escrow in 2002.
66
<Page>
The Cooper Companies Inc. and Subsidiaries
Notes To Consolidated Financial Statements
We have sold shares of Quidel stock from time to time:
<TABLE>
<CAPTION>
Years Ended October 31,
(In thousands) 2003 2002
- ------------------------------- ------ ------
<S> <C> <C>
Sale of Quidel Shares
Proceeds from sale $2,044 $4,382
Carrying value 1,423 3,214
------ ------
Gross realized gain in earnings 621 1,168
Tax 249 425
------ ------
Reclassification adjustment* $ 372 $ 743
====== ======
</TABLE>
* Reflected in comprehensive income
Derivatives
On a selective basis, Cooper enters into interest rate swap agreements to reduce
the potential negative impact of increases in interest rates on our outstanding
variable-rate debt under the IRB. We recognize in our results of operations over
the life of the contract, as interest expense, the amortization of contract
premiums incurred from buying interest rate swaps. We record net payments or
receipts resulting from these agreements as adjustments to interest expense. The
effect of interest rate instruments on our results of operations in fiscal years
ended October 31, 2003, 2002 and 2001 was not significant. As of October 31,
2003, we had an interest rate swap agreement with a notional amount totaling
$1.6 million that matures on January 1, 2012.
We obtained the fair value of the swap agreement through KeyBank's derivative
department. The fair value indicated that termination of the swap agreement at
October 31, 2003 would have resulted in a $129,000 loss. A liability for this
amount has been accrued in other current liabilities. As this swap agreement
qualifies as an effective hedge, changes in fair value during 2003 of $129,000
have been recorded as a component of other comprehensive income (OCI).
67
<Page>
The Cooper Companies Inc. and Subsidiaries
Note 8. Stockholders' Equity
<TABLE>
<CAPTION>
Common Shares Retained
---------------------- Common Paid-In Earnings Treasury
(In thousands) Outstanding Treasury Stock Capital (Deficit) Stock
- --------------------------- ----------- -------- ------ -------- --------- --------
<S> <C> <C> <C> <C> <C> <C>
Balance at October 31, 2000 28,921 729 $2,966 $256,547 $(46,210) $(11,178)
Exercise of stock options 1,467 (44) 138 18,099 -- 675
Treasury stock used for
acquisitions 42 (20) 6 (38) -- 302
Restricted stock/stock
option amortization and
share issuance -- -- -- 251 -- --
Tax benefit from exercise
of stock options -- -- -- 2,078 -- --
Dividends on common stock -- -- -- -- (1,038) --
Net income -- -- -- -- 37,136 --
------ --- ------ -------- -------- --------
Balance at October 31, 2001 30,430 665 3,110 276,937 (10,112) (10,201)
Exercise of stock options 421 -- 42 6,086 -- --
Treasury stock used for
acquisitions 14 (7) 1 (1) -- 109
Restricted stock/stock
option amortization and
share issuance 2 -- -- 47 -- --
Tax benefit from exercise
of stock options -- -- -- 2,553 -- --
Dividends on common stock -- -- -- -- (1,527) --
Other -- -- -- (3) -- --
Net income -- -- -- -- 48,875 --
------ --- ------ -------- -------- --------
Balance at October 31, 2002 30,867 658 3,153 285,619 37,236 (10,092)
Exercise of stock options 1,210 (56) 115 23,016 -- 855
Restricted stock/stock
option amortization and
share issuance 6 (6) -- 81 -- 92
Tax benefit from exercise
of stock options -- -- -- 1,035 -- --
Dividends on common stock -- -- -- (85) (1,867) --
Net income -- -- -- -- 68,770 --
------ --- ------ -------- -------- --------
Balance at October 31, 2003 32,083 596 $3,268 $309,666 $104,139 $ (9,145)
====== === ====== ======== ======== ========
</TABLE>
68
<Page>
The Cooper Companies Inc. and Subsidiaries
Notes To Consolidated Financial Statements
Cash Dividends
Cooper paid quarterly dividends of 1 cent per share beginning July 5, 1999
through January 5, 2001. In the first quarter of fiscal 2001, Cooper increased
its dividend and paid semiannual dividends of 2.5 cents per share beginning July
5, 2001. In November 2002, Cooper's Board of Directors increased the annual
dividend rate from 5 cents per share to 6 cents per share, see Note 13,
"Subsequent Events," regarding cash dividend declared.
Treasury Stock
<TABLE>
<CAPTION>
Purchase
(In thousands) Shares Price
- --------------------------- ------ --------
<S> <C> <C>
Balance at October 31, 2000 729 $11,178
Reissued in fiscal 2001(3) (64) (977)
Reissued in fiscal 2002(2) (7) (109)
Reissued in fiscal 2003(1) (62) (947)
--- -------
596 $ 9,145
=== =======
</TABLE>
(1) Issued 61,750 shares of treasury stock upon the exercise of stock options
and issuance of restricted shares. Treasury stock was credited for $947,000
for the average cost of the treasury stock, and $81,000 was charged to
additional paid in capital.
(2) Issued 7,117 treasury shares related to the MedaSonics acquisition.
Treasury stock was credited for $109,000 and charged to the acquisition
accrual upon issuance of the treasury stock.
(3) Issued 63,721 shares of treasury stock:
(A) 19,721 treasury shares related to the MedaSonics acquisition.
(B) 44,000 treasury shares upon the exercise of stock options.
Treasury stock was credited for $977,000 for the average cost of the treasury
stock, and $32,000 was charged to additional paid in capital.
Stockholders' Rights Plan
Under our stockholders' rights plan, each outstanding share of our common stock
carries one-half of one preferred share purchase right (a Right). The Rights
will become exercisable only under certain circumstances involving acquisition
of beneficial ownership of 20% or more of the our common stock by a person or
group (an Acquiring Person) without the prior consent of Cooper's Board of
Directors. If a person or group becomes an Acquiring Person, each Right would
then entitle the holder (other than an Acquiring Person) to purchase, for the
then purchase price of the Right (currently $145, subject to adjustment), shares
of Cooper's common stock, or shares of common stock of any person into which we
are thereafter merged or to which 50% or more of our assets or earning power is
sold, with a market value of twice the purchase price. The Rights will expire in
October 2007 unless earlier exercised or redeemed. The Board of Directors may
redeem the Rights for $.01 per Right prior to any person or group becoming an
Acquiring Person.
69
<Page>
The Cooper Companies Inc. and Subsidiaries
Note 9. Employee Stock Plans
At October 31, 2003, Cooper had two stock-based compensation plans:
Amended and Restated 2001 Long-Term Incentive Plan (2001 LTIP)
We designed the 2001 LTIP to increase Cooper's stockholder value by attracting,
retaining and motivating key employees and consultants who directly influence
our profitability. Stockholders approved the 2001 LTIP in March 2001.
The 2001 LTIP authorized either a committee of three or more individuals not
eligible to participate in the 2001 LTIP or Cooper's Board of Directors to grant
to eligible individuals during a three-year period, stock options for up to 4.7
million shares of common stock, subject to adjustment for future stock splits,
stock dividends, expirations, forfeitures and similar events. Options generally
vest based on Cooper's stock price, however, in some cases, both stock price and
time are the criteria. As of October 31, 2003, 2,222,000 shares remained
available under the 2001 LTIP for future grants. Approximately 6 million shares
of stock options and restricted stock were granted under a predecessor plan.
1996 Long-Term Incentive Plan for Non-Employee Directors (1996 NEDRSP)
The 1996 NEDRSP provides for annual grants of stock options and restricted stock
to non-employee directors on November 1 and November 15, respectively, of each
fiscal year. Specifically, each non-employee director will be awarded the right
to purchase 1,000 restricted shares of the Company's common stock for $0.10 per
share. The restrictions on the restricted stock will lapse when the stock
reaches certain target values or by the fifth anniversary of the date of grants.
Each non-employee director will also be awarded options to purchase common
stock. Each non-employee director was granted an option to purchase 30,000
shares of Cooper's common stock in fiscal 2003 and 2002 (or, in the case of the
Vice Chairman and Lead Director of the Board who was a non-employee director,
32,500 shares). On October 29, 2003, the NEDRSP was amended to reduce the number
of stock options granted annually to non-employee directors and the Company's
lead director to 17,500 and 18,700, respectively. In fiscal 2001, each
non-employee director was granted an option to purchase 20,000 shares (or, in
the case of the Vice Chairman and Lead Director of the Board who was a
non-employee director, 22,500 shares). 1,320,000 shares of Cooper's common stock
had been reserved for this, of which 596,203 shares are held in treasury. As of
October 31, 2003, 433,830 shares remained available under the 1996 NEDRSP for
future grants. Restricted shares of 6,000, 1,924 and 2,688 were granted under
the 1996 NEDRSP in fiscal 2003, 2002 and 2001, respectively. There were no
restricted shares with restrictions in place outstanding at October 31, 2003.
The weighted-average fair value of restricted stock issued in fiscal 2003 was
$28.85 per share on grant-date. The 1996 NEDRSP was amended October 24, 2001,
increasing the shares available for the plan from 520,000 shares to 1,320,000
and extending the expiration date to November 16, 2005. The amendment also
increased the options to be granted to each non-employee director from 20,000
shares to 30,000 shares (or, in the case of a non-employee Vice Chairman and
Lead Director of the Board, from 22,500 to 32,500).
70
<Page>
The Cooper Companies Inc. and Subsidiaries
Notes To Consolidated Financial Statements
Common stock activity under these plans was:
<TABLE>
<CAPTION>
2003 2002 2001
--------------------------------------------------------------------
Weighted Weighted Weighted
Average Average Average
Exercise Exercise Exercise
Years Ended October 31, Options Price Options Price Options Price
- ---------------------------- ---------- -------- --------- -------- ---------- --------
<S> <C> <C> <C> <C> <C> <C>
Outstanding at beginning
of year 3,378,776 $21.46 2,871,942 $19.11 3,683,664 $15.79
Granted 1,370,500 35.64 938,500 25.60 679,500 23.66
Exercised (1,210,082) 19.81 (420,666) 14.58 (1,467,222) 12.89
Forfeited (11,000) 23.54 (11,000) 24.72 (24,000) 19.51
---------- ------ --------- ------ ---------- ------
Outstanding at end of year 3,528,194 $27.52 3,378,776 $21.46 2,871,942 $19.11
---------- ------ --------- ------ ---------- ------
Options exercisable at
year end 1,935,807 $22.18 1,588,944 $17.10 1,792,610 $15.92
---------- ------ --------- ------ ---------- ------
Weighted average fair value
per option granted during
the year $ 9.61 $10.56 $ 8.62
------ ------ ------
</TABLE>
The options outstanding at October 31, 2003 for the stock option plans are:
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
------------------------------------ ----------------------
Weighted
Average Weighted Weighted
Number Remaining Average Number Average
Outstanding Contractual Exercise Outstanding Exercise
Exercise Prices at 10/31/03 Life Price at 10/31/03 Price
- --------------- ----------- ----------- -------- ----------- --------
<S> <C> <C> <C> <C> <C>
$2.96-7.25 40,332 2.45 $ 4.90 40,332 $ 4.90
$11.72-15.35 194,000 5.65 12.83 194,000 12.83
$17.55-19.86 633,000 5.74 18.79 576,334 18.52
$21.60-26.75 1,437,862 8.17 25.67 982,195 25.64
$29.50-35.69 523,000 8.31 31.69 142,946 30.81
$41.44 700,000 9.99 41.44 -- --
--------- ---- ------ --------- ------
$2.96-41.44 3,528,194 7.91 $27.52 1,935,807 $22.18
========= ==== ====== ========= ======
</TABLE>
71
<Page>
The Cooper Companies Inc. and Subsidiaries
The excess of market value over $.10 per share of restricted shares on
respective dates of grant is initially recorded as unearned compensation and
charged to operations as earned. Restricted shares and other stock compensation
charged against operating income for the years ended October 31, 2003, 2002 and
2001 was $257,000, $114,000 and $235,000, respectively.
Note 10. Employee Benefits
Cooper's Retirement Income Plan
Cooper's Retirement Income Plan (the Plan) covers substantially all full-time
United States employees. Cooper's contributions are designed to fund normal cost
on a current basis and to fund over 30 years the estimated prior service cost of
benefit improvements (15 years for annual gains and losses). The unit credit
actuarial cost method is used to determine the annual cost. Cooper pays the
entire cost of the Plan and funds such costs as they accrue. Virtually all of
the assets of the Plan are comprised of participation in equity and fixed income
funds. The pension plan's intangible asset of $573,000 at October 31, 2003 is
reported in other intangible assets.
The following table sets forth the Plan's benefit obligations, fair value of the
Plan assets, the funded status of the Plan at October 31 and net periodic
pension costs for the three-year period ended October 31, 2003.
72
<Page>
The Cooper Companies Inc. and Subsidiaries
Notes To Consolidated Financial Statements
<TABLE>
<CAPTION>
Years Ended October 31,
(In thousands) 2003 2002 2001
- ---------------------------------------------------------------- ------- ------- -------
<S> <C> <C> <C>
Change in benefit obligation prior year September 1 to August 31
Projected benefit obligation at beginning of year $15,470 $13,608 $12,330
Service cost 1,036 855 757
Interest cost 1,117 996 911
Benefits paid (577) (548) (509)
Actuarial loss 1,992 559 119
------- ------- -------
Projected benefit obligation at end of period $19,038 $15,470 $13,608
======= ======= =======
Change in plan assets prior year September 1 to October 31
Fair value of plan assets at beginning of year $ 9,893 $10,925 $10,899
Actual return on plan assets 1,317 (830) (187)
Employer contributions 2,372 346 722
Benefits paid (577) (548) (509)
------- ------- -------
Fair value of plan assets at end of year $13,005 $ 9,893 $10,925
======= ======= =======
Funded status $(6,033) $(5,577) $(2,683)
Unrecognized transition amount 234 260 286
Unrecognized prior service cost 339 368 398
Unrecognized net loss 4,603 3,003 653
------- ------- -------
Accrued pension liability August 31 (857) (1,946) (1,346)
Contributions between September 1 and October 31 -- 157 --
------- ------- -------
Accrued benefit cost October 31 $ (857) $(1,789) $(1,346)
======= ======= =======
Reconciliation of accrued pension liability
Accrued cost at November 1 $(1,789) $(1,346) $(1,345)
Net periodic pension cost for year (1,440) (946) (723)
Contributions made during year 2,372 503 722
------- ------- -------
Accrued cost at October 31 $ (857) $(1,789) $(1,346)
======= ======= =======
Actuarial assumptions
Discount rate 6.5% 7.25% 7.5%
Expected return on assets 9.0% 9.0% 9.0%
Average compensation increase 4.0% 4.0% 4.0%
Cost of living 3.5% 3.5% 3.5%
Net periodic pension costs
Service cost $ 1,036 $ 855 $ 757
Interest cost 1,117 996 911
Asset return (1,317) 830 187
Amortization
Net transition obligations 25 26 25
Prior service cost 30 30 30
Gain/(loss) 549 (1,791) (1,187)
------- ------- -------
Net periodic pension cost total $ 1,440 $ 946 $ 723
======= ======= =======
</TABLE>
The measurement date for all periods presented in the above table is August 31.
73
<Page>
The Cooper Companies Inc. and Subsidiaries
Cooper's 401(k) Savings Plan
Cooper's 401(k) Savings Plan provides for the deferral of compensation as
described in the Internal Revenue Code and is available to substantially all
full-time United States employees of Cooper. Employees who participate in the
401(k) Plan may elect to have from 1% to 50% of their pre-tax salary or wages
deferred and contributed to the trust established under the Plan. Cooper's
contribution on account of participating employees, net of forfeiture credits,
was $784,000, $623,000 and $576,000 for the years ended October 31, 2003, 2002
and 2001, respectively.
Cooper's Incentive Payment Plan
Cooper's Incentive Payment Plan is available to officers and other key
employees. Participants may, in certain years, receive bonuses based on
performance. Total bonuses earned for the years ended October 31, 2003, 2002 and
2001, were approximately $3.1 million, $2.6 million and $1.8 million,
respectively.
Note 11. Commitments and Contingencies
Lease Commitments
Total minimum annual rental obligations (net of sublease revenue of
approximately $195,000 per year through March 2005) under noncancelable
operating leases (substantially all real property or equipment) in force at
October 31, 2003 are payable in subsequent years as follows:
<TABLE>
<CAPTION>
(In thousands)
- -------------------
<S> <C>
2004 $ 7,008
2005 5,395
2006 4,310
2007 3,919
2008 3,469
2009 and thereafter 15,969
-------
$40,070
=======
</TABLE>
Aggregate rental expense for both cancelable and noncancelable contracts
amounted to $8.1 million, $7.4 million and $4.6 million in 2003, 2002 and 2001,
respectively.
74
<Page>
The Cooper Companies Inc. and Subsidiaries
Notes To Consolidated Financial Statements
Note 12. Business Segment Information
Cooper is organized by product line for management reporting with operating
income, as presented in our financial reports, as the primary measure of segment
profitability. No costs from corporate functions are allocated to the segments'
operating income. Items below operating income are not considered when measuring
the profitability of a segment. The accounting policies used to generate segment
results are the same as our overall accounting policies.
Two business segments comprise Cooper's operations:
o CVI, which develops, manufactures and markets a broad range of soft contact
lenses for the worldwide vision care market, and
o CSI, which markets medical devices, diagnostic products and surgical
instruments and accessories for the gynecology and obstetrics markets.
Total net sales include sales to customers as reported in our consolidated
statements of income and sales between geographic areas that are priced at terms
that allow for a reasonable profit for the seller. Operating income (loss) is
total net sales less cost of sales, research and development expenses, selling,
general and administrative expenses and amortization of intangible assets.
Corporate operating loss is principally corporate headquarters expense.
Investment income, net; settlement of disputes, net; other income (expense), net
and interest expense were not allocated to individual segments. Our business
segments do not rely on any one major customer.
Identifiable assets are those used in continuing operations except cash and cash
equivalents, which are included as corporate assets.
75
<Page>
The Cooper Companies Inc. and Subsidiaries
Information by business segment for each of the years in the three-year period
ended October 31, 2003 follows:
<TABLE>
<CAPTION>
Corporate &
(In thousands) CVI CSI Eliminations Consolidated
- ----------------------------- -------- -------- ------------ ------------
<S> <C> <C> <C> <C>
2003
Net sales from non-affiliates $329,560 $ 82,230 $ -- $411,790
======== ======== ======== ========
Operating income (loss) $ 88,863 $ 18,184 $(11,805) $ 95,242
======== ======== ========
Investment income, net 246
Settlement of disputes, net (500)
Other income, net 2,463
Interest expense (6,964)
--------
Income before income taxes $ 90,487
========
Identifiable assets $462,581 $154,199 $ 88,784 $705,564
======== ======== ======== ========
Depreciation expense $ 9,339 $ 1,594 $ 57 $ 10,990
======== ======== ======== ========
Amortization expense $ 971 $ 564 $ -- $ 1,535
======== ======== ======== ========
Capital expenditures $ 32,742 $ 1,072 $ 58 $ 33,872
======== ======== ======== ========
2002
Net sales from non-affiliates $243,877 $ 71,429 $ -- $315,306
======== ======== ======== ========
Operating income (loss) $ 60,404 $ 14,050 $ (7,483) $ 66,971
======== ======== ========
Investment income, net 179
Other income, net 4,893
Interest expense (6,874)
--------
Income before income taxes $ 65,169
========
Identifiable assets $401,421 $111,998 $ 57,696 $571,115
======== ======== ======== ========
Depreciation expense $ 8,580 $ 1,262 $ 50 $ 9,892
======== ======== ======== ========
Amortization expense $ 905 $ 572 $ -- $ 1,477
======== ======== ======== ========
Capital expenditures $ 19,405 $ 3,969 $ 60 $ 23,434
======== ======== ======== ========
2001
Net sales from non-affiliates $176,118 $ 58,454 $ -- $234,572
======== ======== ======== ========
Operating income (loss) $ 51,372 $ 10,122 $ (6,736) $ 54,758
======== ======== ========
Investment income, net 443
Other income, net 665
Interest expense (3,738)
--------
Income before income taxes $ 52,128
========
Identifiable assets $246,563 $ 87,056 $ 63,230 $396,849
======== ======== ======== ========
Depreciation expense $ 5,022 $ 735 $ 49 $ 5,806
======== ======== ======== ========
Amortization expense $ 2,726 $ 2,456 $ -- $ 5,182
======== ======== ======== ========
Capital expenditures $ 14,773 $ 1,943 $ 41 $ 16,757
======== ======== ======== ========
</TABLE>
76
<Page>
The Cooper Companies Inc. and Subsidiaries
Notes To Consolidated Financial Statements
Information by geographical area by country of domicile for each of the years in
the three-year period ended October 31, 2003 follows:
<TABLE>
<CAPTION>
Rest of
World,
United Eliminations
(In thousands) States Europe & Corporate Consolidated
- ------------------------------- -------- -------- ------------ ------------
<S> <C> <C> <C> <C>
2003
Sales to unaffiliated customers $246,906 $121,011 $ 43,873 $411,790
Sales between geographic areas 1,303 87,004 (88,307) --
-------- -------- -------- --------
Net sales $248,209 $208,015 $(44,434) $411,790
======== ======== ======== ========
Operating income $ 39,440 $ 7,767 $ 48,035 $ 95,242
======== ======== ======== ========
Identifiable assets $299,682 $272,107 $133,775 $705,564
======== ======== ======== ========
2002
Sales to unaffiliated customers $199,918 $ 90,277 $ 25,111 $315,306
Sales between geographic areas 3,551 68,764 (72,315) --
-------- -------- -------- --------
Net sales $203,469 $159,041 $(47,204) $315,306
======== ======== ======== ========
Operating income $ 35,321 $ 8,413 $ 23,237 $ 66,971
======== ======== ======== ========
Identifiable assets $272,249 $218,264 $ 80,602 $571,115
======== ======== ======== ========
2001
Sales to unaffiliated customers $173,551 $ 41,740 $ 19,281 $234,572
Sales between geographic areas 354 36,196 (36,550) --
-------- -------- -------- --------
Net sales $173,905 $ 77,936 $(17,269) $234,572
======== ======== ======== ========
Operating income $ 41,271 $ (41) $ 13,528 $ 54,758
======== ======== ======== ========
Identifiable assets $169,738 $149,914 $ 77,197 $396,849
======== ======== ======== ========
</TABLE>
Note 13. Subsequent Events
Acquisition of SURx Assets
On November 26, 2003 CooperSurgical purchased from privately held SURx, Inc.,
the assets and associated worldwide license rights for the Laparoscopic (LP) and
Transvaginal (TV) product lines of its Radio Frequency Bladder Neck Suspension
technology, which uses radio frequency based thermal energy instead of implants
to restore continence.
CooperSurgical paid $2.95 million for the SURx technology. The SURx System,
consisting of the LP and TV products, received U.S. Food and Drug Administration
marketing clearance in 2002.
Cash Dividend Declared
On December 4, 2003, we declared a semi-annual dividend of 3 cents per share,
payable on January 5, 2004 to stockholders on record on December 17, 2003.
77
<Page>
CORPORATE INFORMATION
Board of Directors
A. Thomas Bender
Chairman
President and Chief Executive Officer
Allan E. Rubenstein, M.D.
Vice Chairman and Lead Director
Chief Executive Officer.
NexGenix Pharmaceuticals LLC
Michael H. Kalkstein
Managing Partner, Dechert LLP
Moses Marx
General Partner, United Equities
Donald Press
Executive Vice President.
Broadway Management Co., Inc.
Steven Rosenberg
President, Chief Executive
Officer and Chief Financial Officer,
Berkshire Bankcorp Inc.
Robert S. Weiss
Executive Vice President
and Chief Financial Officer
Stanley Zinberg, M.D.
Vice President Practice Activities,
American College of Obstetricians
and Gynecologists
Committees of the Board
Audit and Finance Committee
Steven Rosenberg (Chairman)
Michael H. Kalkstein
Stanley Zinberg, M.D.
Organization and Compensation Committee
Michael H. Kalkstein (Chairman)
Donald Press
Allan E. Rubenstein, M.D.
Nominating Committee
Allan E. Rubenstein, M.D. (Chairman)
Moses Marx
Stanley Zinberg, M.D.
Corporate Governance Committee
Donald Press (Chairman)
Steven Rosenberg
Allan E. Rubenstein, M.D.
Executive Officers
A. Thomas Bender
Chairman of the Board, President,
Chief Executive Officer and
President, CooperVision, Inc.
Robert S. Weiss
Executive Vice President and
Chief Financial Officer
David Acosta
Treasurer
B. Norris Battin
Vice President, Investor Relations
and Communications
Gregory A. Fryling
Chief Operating Officer,
CooperVision, Inc.
Carol R. Kaufman
Vice President of Legal Affairs, Secretary
and Chief Administrative Officer
Nicholas J. Pichotta
President and Chief Executive Officer,
CooperSurgical, Inc.
Paul Remmell
Chief Operating Officer,
CooperSurgical, Inc.
Stephen C. Whiteford
Vice President
and Corporate Controller
Principal Subsidiaries
CooperVision, Inc.
21062 Bake Parkway, Suite 200
Lake Forest, CA 92630
Voice: (949) 597-8130
Fax: (949) 597-0663
www.coopervision.com
CooperSurgical, Inc.
95 Corporate Drive
Trumbull, CT 06611
Voice: (203) 601-5200
Fax: (203) 601-1008
www.coopersurgical.com
Corporate Offices
The Cooper Companies, Inc.
21062 Bake Parkway, Suite 200
Lake Forest, CA 92630
Voice: (949) 597-4700 or
Toll free (888) 822-2660
Fax:(949) 597-0662
The Cooper Companies, Inc.
6140 Stoneridge Mall Road, Suite 590
Pleasanton, CA 94588
Voice: (925) 460-3600
Fax: (925) 460-3648
www.coopercos.com
Investor Information
To access without charge our current share price, recent news releases and
annual report on Securities and Exchange Commission Form 10-K without exhibits_
call 1-800-334-1986 at anytime. Information about the Company's corporate
governance program, recent investor presentations, replays of quarterly
conference calls and historical stock quotes are available on the World Wide Web
at www.coopercos.com.
Investor Relations Contact
B. Norris Battin
Vice President, Investor Relations
and Communications
21062 Bake Parkway, Suite 200
Lake Forest, CA 92630
Voice: (949) 597-4700
Fax: (949) 597-3688
E-mail: ir@coopercompanies.com
Annual Meeting
The Cooper Companies will hold its Annual Stockholders' Meeting on Tuesday,
March 23, 2004 at The Benjamin Hotel, 125 East 50th Street at Lexington Avenue,
New York, NY at 10:00 a.m.
Transfer Agent
American Stock Transfer & Trust Company
40 Wall Street
New York, NY 10005
(800) 937-5449
Trademarks
The Cooper Companies, Inc., its subsidiaries or affiliates own, license or
distribute the following registered trademarks which are italicized in this
report: Cerveillance'r', Frequency 55'r', Frequency Aspheric'r' Leisegang'r',
Mityvac'r', Proclear'r', SURx'r' and WarmGel'r'.
CV Encore Toric'TM', Enhancement Colors'TM', Frequency Colors'TM', Frequency
Expressions'TM', Frequency Multifocal'TM', H/S Elliptosphere'TM', LuMax'TM',
Mystic'TM', Proclear Aspheric'TM', Proclear Multifocal'TM' and TransWarmer'TM'
are trademarks of The Cooper Companies, Inc., its subsidiaries or affiliates.
Filshie'r' is a trademark of FemCare (Cyprus) Limited Corporation.
OptiStock is a registered service mark of Access Media Group, LLC.
Independent Auditors
KPMG LLP
Stock Exchange Listing
The New York Stock Exchange
Ticker Symbol "COO"
<Page>
THE COOPER COMPANIES, INC.
21062 Bake Parkway, Suite 200 o Lake Forest, California 92630 o (949) 597-4700
www.coopercos.com
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-21
<SEQUENCE>9
<FILENAME>ex21.txt
<DESCRIPTION>EXHIBIT 21
<TEXT>
<PAGE>
Exhibit 21
SUBSIDIARIES OF
THE COOPER COMPANIES, INC.
A DELAWARE CORPORATION
<TABLE>
<CAPTION>
JURISDICTION OF
NAME INCORPORATION
- ---- ---------------
<S> <C>
THE COOPER COMPANIES, INC. Delaware
CooperVision, Inc. New York
CooperVision, LLC Delaware
CooperVision Holdings LLC Delaware
Cooper Captive, Inc. New York
CooperVision Technology LLC Delaware
CooperVision International Holding Company, L.P. England
CooperVision Canada Corp. Canada
Aspect Vision Holdings, Limited England-Wales
CooperVision Limited England-Wales
Coopervision do Brasil Ltda Brazil
Coopervision Spain S.L. Spain
Cooper Vision Italia s.r.l. Italy
Hydron Pty Limited Australia
CooperVision Hydron S.A.S. France
Coopervision Nederland BV The Netherlands
Coopervision Manufacturing Limited England
CooperVision S.A. (Pty) Limited South Africa
CooperSurgical, Inc. Delaware
CooperSurgical Acquisition Corp. Delaware
Galenica, Inc. Ontario
Leisegang GmbH Germany
Medscand Medical AB Sweden
</TABLE>
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-23
<SEQUENCE>10
<FILENAME>ex23.txt
<DESCRIPTION>EXHIBIT 23
<TEXT>
<PAGE>
Exhibit 23
ACCOUNTANTS' CONSENT AND REPORT ON SCHEDULE
The Board of Directors
THE COOPER COMPANIES, INC.:
Under date December 10, 2003, we reported on the consolidated balance
sheets of The Cooper Companies, Inc. and subsidiaries (the "Company") as of
October 31, 2003 and 2002, and the related consolidated statements of income,
comprehensive income and cash flows for each of the years in the three-year
period ended October 31, 2003, which are incorporated herein by reference. In
connection with our audits of the aforementioned consolidated financial
statements, we also audited the related consolidated financial statement
schedule as listed in Item 15 of the Annual Report on Form 10-K. This financial
statement schedule is the responsibility of the Company's management. Our
responsibility is to express an opinion on this financial statement schedule
based on our audits. In our opinion, such financial statement schedule, when
considered in relation to the basic consolidated financial statements taken as a
whole, presents fairly, in all material respects, the information set forth
therein.
We consent to incorporation by reference in Registration Statement Nos.
33-50016, 33-11298, 333-22417, 333-25051, 333-27639, 333-40431, 333-80795,
333-48152, 333-34206 and 333-108066 on Forms S-3 and Registration Statement Nos.
333-10997, 33-27938, 33-36325, 33-36326, 333-58839, 333-67954, 333-101366 and
33-104346 on Forms S-8 of The Cooper Companies, Inc. of our reports dated
December 10, 2003, relating to the consolidated balance sheets of The Cooper
Companies, Inc. and subsidiaries as of October 31, 2003 and 2002 and the related
consolidated statements of income, comprehensive income and cash flows for each
of the years in the three-year period ended October 31, 2003, and related
schedule, which reports appear in or are incorporated by reference to the
October 31, 2003 Annual Report on Form 10-K of The Cooper Companies, Inc.
KPMG LLP
San Francisco, California
January 26, 2004
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-31
<SEQUENCE>11
<FILENAME>ex31-1.txt
<DESCRIPTION>EXHIBIT 31.1
<TEXT>
<PAGE>
Exhibit 31.1
CERTIFICATIONS
I, A. Thomas Bender, Chairman of the Board, President and Chief Executive
Officer, certify that:
1. I have reviewed this annual report on Form 10-K of The Cooper Companies, Inc.
(the "registrant");
2. Based on my knowledge, this report does not contain any untrue statement of a
material fact or omit to state a material fact necessary to make the statements
made, in light of the circumstances under which such statements were made, not
misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material respects the
financial condition, results of operations and cash flows of the registrant as
of, and for, the periods presented in this report;
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:
a) Designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our supervision, to
ensure that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this report is being
prepared;
b) Evaluated the effectiveness of the registrant's disclosure controls and
procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end of
the period covered by this report based on such evaluation; and
c) Disclosed in this report any change in the registrant's internal control
over financial reporting that occurred during the registrant's most recent
fiscal quarter (the registrant's fourth fiscal quarter in the case of an
annual report) that has materially affected, or is reasonably likely to
materially affect, the registrant's internal control over financial
reporting; and
5. The registrant's other certifying officer and I have disclosed, based on our
most recent evaluation of internal control over financial reporting, to the
registrant's auditors and the audit committee of the registrant's board of
directors (or persons performing the equivalent functions):
a) All significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are reasonably
likely to adversely affect the registrant's ability to record, process,
summarize and report financial information; and
b) Any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal control
over financial reporting.
Date: January 28, 2004
/s/ A. Thomas Bender
----------------------------------------
A. Thomas Bender
Chairman of the Board, President and Chief Executive Officer
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-31
<SEQUENCE>12
<FILENAME>ex31-2.txt
<DESCRIPTION>EXHIBIT 31.2
<TEXT>
<PAGE>
Exhibit 31.2
CERTIFICATIONS
I, Robert S. Weiss, Executive Vice President and Chief Financial Officer,
certify that:
1. I have reviewed this annual report on Form 10-K of The Cooper Companies, Inc.
(the "registrant");
2. Based on my knowledge, this report does not contain any untrue statement of a
material fact or omit to state a material fact necessary to make the statements
made, in light of the circumstances under which such statements were made, not
misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material respects the
financial condition, results of operations and cash flows of the registrant as
of, and for, the periods presented in this report;
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:
a) Designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our supervision, to
ensure that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this report is being
prepared;
b) Evaluated the effectiveness of the registrant's disclosure controls and
procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end of
the period covered by this report based on such evaluation; and
c) Disclosed in this report any change in the registrant's internal control
over financial reporting that occurred during the registrant's most recent
fiscal quarter (the registrant's fourth fiscal quarter in the case of an
annual report) that has materially affected, or is reasonably likely to
materially affect, the registrant's internal control over financial
reporting; and
5. The registrant's other certifying officer and I have disclosed, based on our
most recent evaluation of internal control over financial reporting, to the
registrant's auditors and the audit committee of the registrant's board of
directors (or persons performing the equivalent functions):
a) All significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are reasonably
likely to adversely affect the registrant's ability to record, process,
summarize and report financial information; and
b) Any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal control
over financial reporting.
Date: January 28, 2004
/s/ Robert S. Weiss
----------------------------------
Robert S. Weiss
Executive Vice President and Chief Financial Officer
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-32
<SEQUENCE>13
<FILENAME>ex32-1.txt
<DESCRIPTION>EXHIBIT 32.1
<TEXT>
<PAGE>
Exhibit 32.1
Certification of Chief Executive Officer
Pursuant to 18 U.S.C. 'SS'1350, as created by Section 906 of the
Sarbanes-Oxley Act of 2002, the undersigned officer of The Cooper Companies,
Inc. (the "Company") hereby certifies that:
(i) To his knowledge, the accompanying Annual Report on Form 10-K
of the Company for the annual period ended October 31, 2003 (the "Report")
fully complies with the requirements of Section 13(a) or Section 15(d),
as applicable, of the Securities Exchange Act of 1934, as amended; and
(ii) To his knowledge, the information contained in the Report
fairly presents, in all material respects, the financial condition and
results of operations of the Company.
Dated: January 28, 2004 /s/ A. Thomas Bender
----------------------------------------
A. Thomas Bender
Chairman of the Board, President and
Chief Executive Officer
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-32
<SEQUENCE>14
<FILENAME>ex32-2.txt
<DESCRIPTION>EXHIBIT 32.2
<TEXT>
<PAGE>
Exhibit 32.2
Certification of Chief Financial Officer
Pursuant to 18 U.S.C. 'SS'1350, as created by Section 906 of the
Sarbanes-Oxley Act of 2002, the undersigned officer of The Cooper Companies,
Inc. (the "Company") hereby certifies that:
(i) To his knowledge, the accompanying Annual Report on Form 10-K of
the Company for the annual period ended October 31, 2003 (the "Report")
fully complies with the requirements of Section 13(a) or Section 15(d), as
applicable, of the Securities Exchange Act of 1934, as amended; and
(ii) To his knowledge, the information contained in the Report fairly
presents, in all material respects, the financial condition and results of
operations of the Company.
Dated: January 28, 2004 /s/ Robert S. Weiss
----------------------------------------
Robert S. Weiss
Executive Vice President and Chief
Financial Officer
</TEXT>
</DOCUMENT>
</SEC-DOCUMENT>
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