New York

1-4105

16-0345235

(State or other jurisdiction of

(Commission File

(IRS Employer Identification

incorporation)

Number)

Number)

o

Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o

Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

•

The terms ‘‘Bausch & Lomb,’’ ‘‘Company,’’ ‘‘we,’’ ‘‘us’’ and ‘‘our’’ refer to Bausch & Lomb Incorporated and its consolidated subsidiaries.

•

The term ‘‘Parent’’ refers to WP Prism Inc., a Delaware corporation and direct parent of Merger Sub, which is wholly owned by affiliates of the Sponsor and the co-investors.

•

The term ‘‘Merger Sub’’ refers to WP Prism Merger Sub Inc., a New York corporation and wholly owned subsidiary of Parent.

•

The term ‘‘Merger’’ refers to the merger of Merger Sub with and into Bausch & Lomb Incorporated, with Bausch & Lomb Incorporated continuing as the surviving corporation after the merger.

•

The term ‘‘Transactions’’ refers to the Merger and related financing transactions.

•

The terms ‘‘Sponsor’’ and ‘‘Warburg Pincus’’ refer to the investment funds affiliated with Warburg Pincus Private Equity IX, L.P., which, together with its co-investors, has committed to provide the equity investment to fund a portion of the Transactions.

•

The term ‘‘closing date’’ refers to the date of the closing of the Merger.

•

our inability to achieve our various marketing and selling objectives or to manage expenses;

•

our inability to recoup lost lens care market share following the MoistureLoc recall;

•

the amount of costs, fees, expenses and charges related to the MoistureLoc recall and related litigation;

•

changes in market acceptance of products offered by us or the industry following recalls or other regulatory actions;

2

•

changes in the competitive landscape;

•

general global and local economic, political and sociological conditions including, without limitation, periods of localized disease outbreak and the effect on economic, commercial, social and political systems caused by natural disasters (such as, without limitation, earthquakes, hurricanes/typhoons, tornadoes and tsunamis) and changes in such conditions;

•

the impact of competition, seasonality and general economic conditions in the global lens and lens care, ophthalmic cataract and refractive and pharmaceutical markets where our businesses compete;

•

effects of war or terrorism;

•

changing currency exchange rates;

•

the general political climate existing between and within countries throughout the world;

•

events affecting our ability to timely deliver our products to customers, including those which affect our carriers’ ability to perform delivery services;

•

changing trends in practitioner and consumer preferences and tastes;

•

changes in technology and medical developments relating to the use of our products;

•

competitive conditions, including entries into our lines of business by new or existing competitors, some of whom may possess resources equal to or greater than our own;

•

the impact of product performance or failure on our other products and lines of business;

•

success of our compliance initiatives to detect and prevent violations of law or regulations;

•

the results of pending or future investigations by us of our alleged failure to comply with applicable laws or regulations;

•

legal proceedings initiated by or against us, including those related to securities and corporate governance matters, products and product liability, tax matters, commercial transactions, patents and other intellectual property, whether in the United States or elsewhere throughout the world;

•

the impact of our performance on our financing costs;

•

enactment of new legislation or regulations or changes in application or interpretation of existing legislation or regulations that affect us;

•

changes in government regulation of our products and operations;

•

our compliance with, and changes in governmental laws and regulations relating to the import and export of products;

•

government pricing changes and initiatives with respect to healthcare products in the United States and throughout the world;

•

changes in private and regulatory schemes providing for the reimbursement of patient medical expenses;

•

changes in our credit ratings or the cost of access to sources of liquidity;

3

•

our ability to maintain positive relationships with third-party financing sources;

•

the financial well-being and commercial success of key customers, development partners and suppliers;

•

changes in the availability of and other aspects surrounding the supply of raw materials used in the manufacture of our products;

•

the performance by third parties upon whom we rely for the provision of goods or services;

•

changes in tax rates or policies or in rates of inflation;

•

the uncertainty surrounding the future realization of deferred tax assets;

•

changes in accounting principles and the application of such principles to us;

•

our ability to successfully execute marketing strategies;

•

our ability to secure and maintain intellectual property protections, including patent rights, with respect to key technologies in the United States and throughout the world;

•

our ability to secure and maintain copyright protections relative to our customer-valued names, trademarks, trade names and other designations in the United States and throughout the world;

•

the extent to which our investment in research and development yields innovative, commercial, marketable technological developments;

•

difficulties or delays in the development, laboratory and clinical testing, regulatory approval, manufacturing, release or marketing of products;

•

the successful completion and integration of our acquisitions;

•

the successful relocation of certain manufacturing processes;

•

our implementation of changes in internal controls;

•

the occurrence of any material weakness or significant deficiency in our internal controls over financial reporting, which could result in a material misstatement of our financial statements, and our ability to correct any such weakness;

•

our success in continuing to introduce and implement our enterprise-wide information technology initiatives, including the corresponding impact on internal controls and reporting;

•

the effect of changes within our organization, including the selection and development of our management team;

•

the effects on us of incurring a substantial amount of indebtedness under our new senior secured credit facilities and new unsecured indebtedness;

•

the effects on us of complying with the covenants contained in our new senior secured credit facilities and our new unsecured indebtedness;

•

restrictions that the terms and conditions of our new senior secured credit facilities or our new unsecured indebtedness may place on our ability to respond to changes in our business or to take certain actions;

4

•

the effects on us and our business as a result of uncertainty surrounding the Merger, including our ability to retain employees; and

•

the outcome of legal proceedings instituted against us and others that have been or may be instituted following announcement of the Merger Agreement.

Sources of funds:

Uses of funds:

(in millions)

Available cash and cash equivalents⁽¹⁾

$341.1

Consideration paid to existing

New senior secured credit facilities:

shareholders⁽⁸⁾

$3,678.1

U.S. term loan facility⁽²⁾

1,200.0

Repayment and repurchase of

Euro term loan facility⁽³⁾

575.0

existing long-term debt⁽⁹⁾

785.1

Revolving credit facility⁽⁴⁾

—

Transactions fees and expenses⁽¹⁰⁾

184.9

Delayed draw term loan facility⁽⁵⁾

—

Other obligations⁽¹¹⁾

11.4

New senior unsecured indebtedness⁽⁶⁾

648.4

Cash equity⁽⁷⁾

Total sources

Total uses

(1)

As of June 30, 2007, the Company had $547.7 million of available cash and cash equivalents. The Company expects to have at least that amount available on the closing date. The amount of cash currently projected to be required on the closing date to consummate the Transactions is approximately $400.0 million.

5

(2)

On the closing date, the Company expects to enter into a U.S. dollar-denominated term loan facility in the aggregate principal amount of $1,200.0 million. The Company expects to borrow the term loan in full at the closing date. The term loan is expected to have a seven and one-half-year maturity and to amortize at 1% per annum, with the balance payable at maturity.

(3)

On the closing date, the Company expects to enter into a euro-denominated term loan facility in the aggregate principal amount equivalent to approximately $575.0 million. The Company expects to borrow this term loan in full through its Dutch subsidiary, Bausch & Lomb B.V., on the closing date. The term loan is expected to have a seven and one-half-year maturity and to amortize at 1% per annum, with the balance payable at maturity.

(4)

On the closing date, the Company expects to enter into a $500.0 million senior secured revolving credit facility with a six-year maturity, which the Company expects will be undrawn on the closing date.

(5)

The Company expects that its senior secured credit facilities will include a $300.0 million senior secured delayed draw term loan facility with a seven and one-half-year maturity, which will be undrawn on the closing date.

(6)

Represents $650.0 million aggregate principal amount of new senior unsecured indebtedness, which will be issued at an offering price of 99.75%.

(7)

Represents new cash equity investments to be made by affiliates of the Sponsor and other equity co-investors. Certain members of current management may also participate in the equity ownership following the completion of the Transactions, but discussions concerning such arrangements have not resulted in any agreements at this time.

(8)

Reflects the number of shares outstanding as of June 30, 2007, plus in-the-money and vested equity awards as of that date. The Merger Agreement provides that, upon the closing of the Transactions, each outstanding share of the Company’s common stock and Class B stock, other than any dissenting shares, shares held by Parent, Merger Sub, the Company or any of their respective subsidiaries and treasury shares, will be cancelled and converted into the right to receive $65.00 in cash, without interest, less any applicable withholding taxes.

(9)

Represents repayment and repurchase of certain of our existing indebtedness, consisting of the Company’s publicly traded debt securities and Bausch & Lomb B.V.'s existing bank loan due 2010. The amount set forth in the table assumes all of the Company’s publicly traded debt securities will be tendered for purchase in the tender offers. The Company currently does not expect to refinance its outstanding Japanese unsecured term loan, which had a carrying value of $45.3 million at June 30, 2007, in connection with the Transactions.

(10)

Reflects the Company’s estimate of fees and expenses associated with the Transactions, including fees and expenses associated with the repayment and repurchase of certain of its existing indebtedness, advisory fees and other transaction costs and professional fees.

(11)

Represents estimated amounts required to pay obligations associated with certain of the Company’s existing deferred compensation and other post-retirement plans required upon a change of control as defined in the respective plan documents.

6

(1)

Bausch & Lomb Incorporated, the Guarantors and certain subsidiaries of Bausch & Lomb B.V. will provide secured guarantees of the euro-denominated $575 million-equivalent term loan facility of Bausch & Lomb B.V.

(2)

The Guarantors will provide unsecured guarantees of our $650 million senior indebtedness as well as, together with Parent (who will not guarantee our $650 million senior indebtedness), secured guarantees of our new senior secured credit facilities.

(3)

Limited recourse guarantor of our new senior secured credit facilities.

7

8

Assets

Cash and cash equivalents

$547.7

$(341.1)

(A)

$206.6

Trade receivables, net

488.6

—

488.6

Inventories, net

251.2

238.8

(B)

490.0

Other current assets

164.2

—

164.2

Deferred income taxes

(B)

Total Current Assets

1,509.1

(103.0)

1,406.1

Property, Plant and Equipment, net

619.3

230.7

(B)

850.0

Goodwill

857.1

(857.1)

(B)

1,662.6

1,662.6

(B)

Other Intangibles, net

266.3

(266.3)

(B)

1,716.0

1,716.0

(B)

Other Long-Term Assets

113.6

(2.5)

(B)

111.1

Debt Issuance Costs

—

64.9

(C)

64.9

Deferred Income Taxes

(B)

Total Assets

Liabilities and Shareholders’ Equity

Notes payable

$0.2

$—

$0.2

Current portion of existing long-term debt

133.9

(133.9)

(D)

—

Current portion of new long-term debt

—

17.8

(E)

17.8

Accounts payable

82.8

—

82.8

Accrued liabilities

518.9

(10.2)

(F)

508.7

Federal, state and foreign income taxes payable

66.6

—

66.6

Deferred income taxes

(B)

Total Current Liabilities

802.9

(78.8)

724.1

Existing Long-Term Debt, less current portion

696.5

(651.2)

(D)

45.3

New Long-Term Debt, less current portion

—

2,405.6

(E)

2,405.6

Other Long-Term Liabilities

182.5

(11.4)

(G)

171.1

Income Tax Liabilities

88.4

—

88.4

Deferred Income Taxes

(B)

Total Liabilities

1,895.3

2,307.0

4,202.3

Minority Interest

17.7

—

17.7

Total Shareholders’ Equity

(H)

Total Liabilities and Shareholders’ Equity

9

Consideration paid to shareholders

$3,678.1

⁽¹⁾

Direct acquisition costs

⁽²⁾

Total consideration

Historical shareholders’ equity

1,468.2

Less Bausch & Lomb transaction costs

⁽³⁾

Historical shareholders’ equity, adjusted

1,399.9

Adjustments to state acquired assets at fair value:

Increase carrying value of inventories

238.8

⁽⁴⁾

Increase carrying value of property, plant and equipment

230.7

⁽⁵⁾

Write-off historical goodwill

(857.1)

Write-off historical intangible assets

(266.3)

Record intangibles acquired

1,716.0

⁽⁶⁾

Adjust deferred income tax accounts

(554.5)

⁽⁷⁾

Record assets acquired related to in-process research and development

⁽⁸⁾

Net assets acquired at fair value

Excess purchase price recorded as goodwill

(1)

The pro forma consideration payable as of June 30, 2007 was calculated as follows:

Common and Class B shares outstanding

55,444,582

^(a)

Shares subject to stock options and other rights to receive stock

3,295,026

^(b)

Restricted stock grants included above that will not accelerate

^(a)

Total shares and rights to receive shares

58,674,608

Per share merger consideration

$3,813.9

Less: gross exercise price of stock options

(138.1)

^(b)

Add: consideration for “look-back” rights on certain options

^(c)

Total consideration payable

10

(a)

Includes 244,002 unvested restricted stock grants, of which 179,002 vested upon shareholder approval of the Merger and 65,000 of which will not accelerate.

(b)

Comprised of 3,224,776 in-the-money stock options with a weighted average exercise price of $42.83 per share and 70,250 restricted stock units that vested upon shareholder approval of the Merger.

(c)

Represents additional consideration of $1.10 per share to be paid with respect to 2,107,890 stock options containing a “look-back” provision. A portion of the options awarded under the Company’s 1990 Stock Incentive Plan and 2003 Long-Term Incentive Plan have “look-back” rights which would entitle electing holders to surrender such options for a cash payment in an amount equal to (1) the difference between (a) the higher of $65.00 and the highest reported sales price of a share of Company common stock on the NYSE during the 60-day period prior to and ending upon the date of shareholder approval of the Merger (or, in the case of options awards under the Company’s 1990 Stock Incentive Plan, during the 60-day period prior to and ending on the effective date of the Merger) and (b) the exercise price per share of such option multiplied by (2) the number of shares underlying such option. The $1.10 per share represents the difference between the $65.00 consideration and $66.10, the highest reported selling price of Company shares in the 60 days preceding shareholder approval of the Merger.

(2)

Reflects estimated fees and expenses directly associated with the Transactions, including legal, investment banking and other transaction costs and professional fees.

(3)

Represents estimated merger expenses and costs to terminate existing long-term debt that we will expense on or prior to the closing of the Transactions. The total is comprised of: $27.3 of investment banking and legal fees; $36.4 of change of control premiums related to the repayment of our existing convertible bonds due 2023; $2.1 of fees associated with the termination of an interest rate swap and the repayment of our existing notes due 2026; and a $2.5 non-cash charge to write-off previously recorded deferred financing costs on our existing debt, which is recorded in other long-term assets on our historical balance sheet. The change of control premiums on the convertible bonds were calculated by reference to the indenture applicable to those bonds as if the Transactions were consummated as of June 30, 2007. On September 19, 2007 we initiated tender offers for the convertible bonds at a price which will result in total change of control premiums of approximately $34.6 million if all the notes are tendered.

(4)

Reflects the estimated fair value purchase accounting adjustment for inventories based on estimated selling prices less the sum of costs of disposal and a reasonable profit allowance for the selling effort.

(5)

Reflects estimated fair value purchase accounting adjustment for property, plant and equipment based on the preliminary valuation allocation.

(6)

The preliminary estimated values and useful lives for identifiable intangible assets are as follows:

Bausch & Lomb tradename

Indefinite

$907.0

$—

Other tradenames

20 years

86.0

4.3

Technology and patents

14.5 years

526.0

36.3

Customer relationships

22-28 years

(7)

In connection with the purchase accounting, deferred taxes are established for the differences between the book and tax bases of our assets (except goodwill) and our liabilities, after giving effect to purchase accounting adjustments. Amount reflects the estimated impact on deferred tax accounts resulting from the pro forma purchase accounting adjustments at estimated blended statutory rates of 38.3% in the U.S. and 31.7% in foreign jurisdictions. We currently have not provided for a tax benefit associated with the merger expenses to be incurred. Any such tax benefit will be determined after the closing date and recorded as part of the final purchase accounting. In addition, we have not provided deferred taxes that may result if the Company can no longer support its position that unremitted earnings of non-U.S. subsidiaries are indefinitely re-invested. The cumulative unremitted earnings of non-U.S. subsidiaries was $219.1 as of December 30, 2006. It is not practicable to estimate the amount of additional tax that might be payable on this undistributed foreign income.

(8)

Represents amounts assigned to tangible and intangible assets to be used in particular research and development projects that have not reached technological feasibility and that have no alternative future use. These amounts will be expensed immediately following the Merger, in accordance with purchase accounting rules. See also Note H.

11

Notes due 2007

$133.2

Notes due 2008

50.0

Convertible bonds due 2023

160.0

Notes due 2026

0.4

Debentures due 2028

66.5

Bank Term Loan due 2010

Principal outstanding at June 30, 2007

785.1

Current portion

Long-term portion

Senior secured term loans

$1,775.0

Senior unsecured indebtedness

New debt face value

2,425.0

Original issue discount on the senior unsecured indebtedness

Net proceeds from new debt financing

12

Reflects the impact of the transactions on our shareholders’ equity:

New cash equity contribution

$1,895.0

⁽¹⁾

Non-recurring charges:

In-process research and development

(144.0)

⁽²⁾

Merger expenses

⁽³⁾

Pro forma shareholders’ equity

$1,743.0

Historical shareholders’ equity

Pro forma adjustment to shareholders’ equity

(1)

Represents new cash equity investments to be made by affiliates of Warburg Pincus and other equity co-investors. Certain members of current management may also participate in the equity ownership following the completion of the Transactions, however discussions about such arrangements have not resulted in any agreements at this time and no estimate of any such management participation has been reflected in the pro forma financial statements.

(2)

See Note B above.

(3)

Represents fees associated with financing the Transactions that we will expense subsequent to the Merger closing date.

13

Net Sales

$2,292.4

$—

$2,292.4

Costs and Expenses (A)

Cost of products sold

1,004.5

27.8

(B)

1,028.4

(3.9)

(C)

Selling, administrative and general

977.3

24.1

(B)

997.3

(4.1)

(C)

Research and development

196.6

4.0

(B)

198.3

(C)

Operating Income

114.0

(45.6)

68.4

Other (Income) Expense

Interest and investment income

(31.3)

18.0

(D)

(13.3)

Interest expense

72.1

168.8

(E)

240.9

Foreign currency, net

Income before Income Taxes and Minority Interest

67.5

(232.4)

(164.9)

Provision for income taxes

53.8

(115.0)

(F)

(61.2)

Minority interest in subsidiaries

Net Income (Loss)

14

Net Sales

$1,228.4

$—

$1,228.4

Costs and Expenses(A)

Cost of products sold

521.3

11.0

(B)

531.1

(1.2)

(C)

Selling, administrative and general

511.0

13.4

(B)

516.6

(7.8)

(C)

Research and development

105.2

1.5

(B)

105.9

(C)

Operating Income

90.9

(16.1)

74.8

Other (Income) Expense

Interest and investment income

(18.7)

11.6

(D)

(7.1)

Interest expense

30.8

84.0

(E)

114.8

Foreign currency, net

Income before Income Taxes and Minority Interest

76.6

(111.7)

(35.1)

Provision for income taxes

41.2

(58.5)

(F)

(17.3)

Minority interest in subsidiaries

Net Income (Loss)

15

Net Sales

$1,117.5

$—

$1,117.5

Costs and Expenses(A)

Cost of products sold

488.6

13.9

(B)

500.6

(1.9)

(C)

Selling, administrative and general

486.9

11.0

(B)

495.9

(2.0)

(C)

Research and development

93.5

2.1

(B)

94.4

(C)

Operating Income

48.5

(21.9)

26.6

Other (Income) Expense

Interest and investment income

(15.5)

7.7

(D)

(7.8)

Interest expense

34.3

85.9

(E)

120.2

Foreign currency, net

Income before Income Taxes and Minority Interest

26.5

(115.5)

(89.0)

Provision for income taxes

30.2

(63.1)

(F)

(32.9)

Minority interest in subsidiaries

Net Income (Loss)

16

Net Sales

$2,403.3

$—

$2,403.3

Costs and Expenses(A)

Cost of products sold

1,037.2

24.9

(B)

1,058.9

(3.2)

(C)

Selling, administrative and general

1,001.4

26.5

(B)

1,018.0

(9.9)

(C)

Research and development

208.3

3.4

(B)

209.8

(C)

Operating Income

156.4

(39.8)

116.6

Other (Income) Expense

Interest and investment income

(34.5)

21.9

(D)

(12.6)

Interest expense

68.6

166.9

(E)

235.5

Foreign currency, net

Income before Income Taxes and Minority Interest

117.6

(228.6)

(111.0)

Provision for income taxes

64.8

(110.4)

(F)

(45.6)

Minority interest in subsidiaries

Net Income (Loss)

17

Twelve Months Ended December 30, 2006

Pro forma depreciation

$86.8

$39.2

$12.0

Historical depreciation

(59.0)

(33.5)

(8.0)

Pro forma amortization

—

48.5

—

Historical amortization

Pro forma adjustment

Six Months Ended June 30, 2007

Pro forma depreciation

$43.4

$19.6

$6.0

Historical depreciation

(32.4)

(14.6)

(4.5)

Pro forma amortization

—

24.3

—

Historical amortization

Pro forma adjustment

Six Months Ended July 1, 2006

Pro forma depreciation

$43.4

$19.6

$6.0

Historical depreciation

(29.5)

(17.7)

(3.9)

Pro forma amortization

—

24.3

—

Historical amortization

Pro forma adjustment

Twelve Months Ended June 30, 2007

Pro forma depreciation

$86.8

$39.2

$12.0

Historical depreciation

(61.9)

(30.4)

(8.6)

Pro forma amortization

—

48.5

—

Historical amortization

Pro forma adjustment

18

Twelve Months Ended December 30, 2006

Pension and postretirement benefits⁽¹⁾

Six Months Ended June 30, 2007

Pension and postretirement benefits⁽¹⁾

$(1.2)

$(1.3)

$(0.8)

Costs incurred in contemplation of the Transactions⁽²⁾

Pro forma adjustment

Six Months Ended July 1, 2006

Pension and postretirement benefits⁽¹⁾

Twelve Months Ended June 30, 2007

Pension and postretirement benefits⁽¹⁾

$(3.2)

$(3.4)

$(1.9)

Costs incurred in contemplation of the Transactions⁽²⁾

Pro forma adjustment

(1)

Reflects the estimated decrease to pension and post-retirement benefits expense resulting from the elimination of amortization of unrecognized actuarial losses and prior service costs.

(2)

Represents portion of estimated merger expenses that were expensed in our historical financial statements.

Twelve Months
Ended

Twelve Months
Ended

New long-term debt⁽¹⁾

$214.7

$107.3

$107.3

$214.7

Amortization of debt issuance costs⁽²⁾

15.2

5.0

7.6

12.6

Commitment fees⁽³⁾

Interest expense on new debt

235.8

115.8

117.7

233.9

Interest expense on retired debt

Pro forma adjustment to interest expense

(2)

Reflects non-cash interest expense related to $64.9 estimated capitalized debt issuance costs and $1.6 of original issue discount on the new senior unsecured indebtedness, to be amortized over the terms of the related facilities.

(3)

Reflects estimated commitment fees on our new $500.0 revolving credit facility and our new $300.0 delayed drawn term loan. For purposes of this pro forma presentation we have assumed that these facilities remain undrawn during each of the periods presented. The assumed commitment fee on the new revolving credit facility was 0.5% and on the new delayed draw term loan is 1.0% for the

19

Twelve Months
Ended

Twelve Months
Ended

Senior secured term loans

$2.2

$1.1

$1.1

$2.2

20

BAUSCH & LOMB INCORPORATED

Date: October 22, 2007

By:

/s/ EFRAIN RIVERA

Name:

Efrain Rivera

Title:

Senior Vice President &
Chief Financial Officer

21