SEC Filing - CooperCompanies

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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

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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, 1993 COMMISSION FILE NO. 1-8597

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THE COOPER COMPANIES, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

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DELAWARE 94-2657368
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION) IDENTIFICATION NO.)
1 BRIDGE PLAZA, FORT LEE, NEW JERSEY 07024
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)

201-585-5100
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)

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SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:

NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
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Common Stock, $.10 Par Value New York Stock Exchange
and associated Rights Pacific Stock Exchange
10 5/8% Convertible Subordinated New York Stock Exchange
Reset Debentures due 2005 Pacific Stock Exchange
10% Senior Subordinated Secured Pacific Stock Exchange
Notes due 2003

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]

Aggregate market value of the voting stock held by non-affiliates of the
registrant as of December 31, 1993: Common Stock, $.10 Par Value -- $15,467,238

Number of shares outstanding of the registrant's common stock, as of
December 31, 1993: 30,129,125

DOCUMENTS INCORPORATED BY REFERENCE:
None

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PART I
ITEM 1. BUSINESS.

INTRODUCTION

The Cooper Companies, Inc. ('TCC' or the 'Company'), through its
subsidiaries, develops, manufactures and markets healthcare products, including
a range of contact lenses, ophthalmic pharmaceutical products and diagnostic and
surgical instruments and accessories, and provides healthcare services through
the ownership and operation of certain psychiatric facilities and the management
of other such facilities. TCC is a Delaware corporation which was organized on
March 4, 1980.

BUSINESS EXPANSION

TCC disposed of a number of businesses during the 1980s, and by 1989 all of
its revenues were derived from the sale of contact lenses. Since that time, the
Company has pursued a strategy of diversification into other businesses. As a
result, total operating revenues have grown significantly and for fiscal 1993
can be allocated among the Company's businesses as follows: Hospital Group of
America, Inc. (including PSG Management, Inc.) -- $45,283,000, CooperVision,
Inc. -- $32,120,000, CooperSurgical, Inc. -- $14,679,000 and CooperVision
Pharmaceuticals, Inc. -- $570,000.

During fiscal 1990, TCC, through various subsidiaries, acquired rights to
(i) certain materials used to manufacture contact lenses, (ii) cryosurgical
instruments and diagnostic devices, (iii) manufacture, distribute and sell a
hard and soft intraocular lens and the injector used to insert the soft
intraocular lens (which rights were subsequently sold), and (iv) two ophthalmic
products.

Early in fiscal 1991, a newly-formed subsidiary, CooperVision
Pharmaceuticals, Inc., obtained an exclusive license for the ophthalmic use of
Verapamil, a Class I calcium channel blocker being developed as a topical
therapeutic to treat ocular hypertension, or glaucoma, which could lead to
damaged eye tissue and loss of vision. At about the same time, CooperSurgical,
Inc., another newly-formed subsidiary, purchased a company whose primary product
is an office hysteroscopy system. Shortly thereafter, CooperSurgical, Inc.
acquired another company, which develops and markets surgical instruments
principally used for performing gynecologic procedures.

In May 1992, another newly-formed subsidiary of TCC acquired all of the
issued and outstanding capital stock of Hospital Group of America, Inc.
('Original HGA'), a corporation indirectly owned by Nu-Med, Inc. ('Nu-Med'). In
June 1992, Original HGA was merged with and into TCC's subsidiary, with that
subsidiary surviving such merger and changing its name to Hospital Group of
America, Inc. ('HGA'). Pursuant to the acquisition, HGA acquired facilities
providing both psychiatric and substance abuse treatment for children,
adolescents and adults.

In addition, PSG Management, Inc., another newly-formed subsidiary of TCC
('PSG Management'), entered into a three-year management services agreement (the
'Management Services Agreement') in May 1992, pursuant to which it provides
management and administrative services to three facilities still owned by Nu-Med
subsidiaries. Those facilities provide a range of specialized treatments for
children, adolescents and adults, including programs for women, older adults,
survivors of psychological trauma and alcohol and drug abusers. Treatments at
both the owned and managed facilities are provided on an inpatient, outpatient
and partial hospitalization basis.

In April 1993, CooperVision, Inc. acquired all of the stock of CoastVision,
Inc., which manufactures and markets soft toric contact lenses designed to
correct astigmatism.

INVESTMENT COMPANY ACT

The Investment Company Act of 1940, as amended (the 'Investment Company
Act'), places restrictions on the capital structure of, and the business
activities that may be undertaken by, investment companies. The Investment
Company Act defines an investment company as, among other things and subject to
certain exceptions, an issuer that is engaged in the business of investing or
trading in

securities and which owns 'investment securities' (as such term is defined in
the Investment Company Act) having a value exceeding 40% of the 'value' (as such
term is defined in the Investment Company Act) of such company's total assets
(exclusive of government securities and cash items) on an unconsolidated basis.
Following the completion in 1989 of the Company's divestiture program, a
substantial percentage of the Company's assets consisted of cash, cash
equivalents and marketable securities, which the Company used or intended to be
used primarily for working capital purposes, to reduce further the Company's
debt and to fund acquisitions.

The Division of Investment Management of the Securities and Exchange
Commission (the 'SEC') has raised an issue as to whether the Company may be an
investment company under the above definition. The Company has advised the SEC
that its consolidated balance sheets at July 31, 1992 and at the last day of
each fiscal quarter thereafter demonstrate that less than 40% of the value of
the Company's total assets (exclusive of government securities and cash items)
consists of investment securities, and that, if such balance sheets had been
presented on an unconsolidated basis, the value (for purposes of the Investment
Company Act) of the Company's investments in and advances to its subsidiaries
that are actively engaged in various aspects of the healthcare business would
have been significantly in excess of the carrying value of the underlying assets
of those subsidiaries that was included in the consolidated balance sheets. The
Company has provided the SEC with information regarding the Company's
unconsolidated balance sheets at April 30 and July 31, 1993. The Company
believes that this information also demonstrates that the Company is not an
investment company within the meaning of the Investment Company Act. As of the
date hereof, the Company is continuing to work with the SEC to clarify the
Company's status under the Investment Company Act. If the Company were found to
be an investment company, the Company believes that such status would have a
materially adverse effect upon the Company due to the restrictions which would
be placed on its capital structure and business activities.

COOPERVISION

The Company, through its CooperVision, Inc. subsidiary ('CooperVision'),
develops, manufactures and markets a range of hard and soft contact lenses in
the United States and Canada. Sales of soft contact lenses represent 98% of
CooperVision's total lens sales. Of CooperVision's line of soft contact lenses,
approximately 75% of the lenses sold are conventional daily or flexible wear
lenses and approximately 25% constitute frequent replacement lenses.

CooperVision's major brand name lenses are Preference'r', Vantage'r',
Permaflex'r', Permalens'r', Cooper Clear'tm' and Hydrasoft'r'. These and other
products enable CooperVision to fit the needs of a diverse group of wearers by
offering lenses formulated from a variety of polymers containing varying amounts
of water, having different design parameters, diameters, base curves and lens
edges and different degrees of oxygen permeability. Certain lenses offer special
features such as protection against ultraviolet light, color tint or aphakic
correction. Lenses are also available in a wide range of prices.

Preference'r' is a frequent replacement product developed using the
Tetrafilcon A polymer. When Preference'r' was compared to other leading planned
replacement contact lenses, in two studies conducted at an aggregate of 22
investigative sites using 505 patients, Tetrafilcon A demonstrated superior
resistance to the formation of deposits on lens surfaces. Preference'r' was test
marketed during the fourth quarter of fiscal 1991 and introduced in fiscal 1992.

CooperVision acquired CoastVision, Inc. ('CoastVision'), a contact lens
company which designs, manufactures and markets high quality soft toric lenses
(the majority of which are custom made) designed to correct astigmatism. The
acquisition enables CooperVision to expand into an additional niche in the
contact lens market and to enlarge its customer base.

CooperVision is continuing to explore opportunities to expand and diversify
its business into additional niche markets.

COOPERVISION PHARMACEUTICALS

CooperVision Pharmaceuticals, Inc. ('CVP'), a development stage business,
develops and markets ophthalmic pharmaceuticals. In February 1993, CVP sold its
EYEscrub'tm' product line while retaining

the right to market two medical product kits which include EYEscrub'tm'. Several
other products discussed below are in various stages of clinical development.

In 1993, CVP continued the clinical development of Verapamil, a Class I
calcium channel blocker, as a potential anti-glaucoma compound. CVP received
U.S. Food and Drug Administration ('FDA') clearance to begin human clinical
trials in June 1991. Phase I clinical trials were initiated in 1991 and
completed in 1992. Phase II clinical trials were initiated in 1992 and have been
completed. Phase III clinical trials commenced during 1993.

Rose Bengal, Phenyltrope'r' and other products are being developed as
diagnostic aids for use by eye-care professionals. During 1993, a filing was
made with the FDA seeking clearance to begin marketing Rose Bengal. A New Drug
Application for Phenyltrope'r' will be submitted to the FDA in fiscal 1994.

In 1993, CVP began to market a line of prescription and over-the-counter
ophthalmic pharmaceuticals. The prescription line consists of antibacterial
products, anti-inflammatory products, glaucoma treatment products and diagnostic
dilating agents. The non-prescription offerings are intended to be used as tear
replacements.

COOPERSURGICAL

CooperSurgical, Inc. ('CooperSurgical') was established in November 1990 to
compete in niche segments of the rapidly expanding worldwide market for
diagnostic and surgical instruments and accessories. Its business is developing,
manufacturing and distributing electrosurgical, cryosurgical and general
application diagnostic and surgical instruments and equipment used selectively
in both traditional and minimally invasive surgical procedures. Unlike
traditional surgical instruments, electrosurgical instruments, which operate by
means of high radio frequency, dissect and cause coagulation, making them useful
in surgical procedures to minimize blood loss. Cryosurgical equipment is
differentiated by its ability to apply cold or sub-zero temperatures to the body
in order to cause adhesion, provoke an inflammatory response or destroy diseased
tissue.

CooperSurgical's loop electrosurgical excision procedure products, marketed
under the LEEP'tm' brand name, are viewed as an improvement over existing laser
treatments for primary use in the removal of cervical and vaginal pre-cancerous
tissue and benign external lesions. Unlike laser ablation which tends to destroy
tissue, the electrosurgery procedure removes affected tissue with minimal
charring, thereby improving the opportunity to obtain an accurate histological
analysis of the patient's condition by producing a viable tissue specimen for
biopsy purposes. In addition, the loop electrosurgical excision procedure is
less painful than laser ablation and is easily learned by practitioners. Because
this procedure enables a gynecologist to both diagnose and treat a patient in
one office visit, patients incur lower costs.

CooperSurgical's LEEP System 6000'tm' branded products include an
electrosurgical generator, sterile single application LEEP Electrodes'tm', the
CooperSurgical Smoke Evacuation System 6080, a single application LEEP
RediKit'r', a series of educational video tapes and a line of coated LEEP'tm'
surgical instruments.

CooperSurgical's Euro-Med mail order business offers over 400 products for
use in gynecologic and general surgical procedures. Over 60% of these products
are exclusive to Euro-Med, including its 'signature' instrument series, cervical
biopsy punches, clear plastic instruments used for unobstructed viewing,
titanium instruments used in laser surgeries, colposcopy procedure kits and
instrument care and sterilization systems. Euro-Med recently introduced its FNA
21'tm' for fine needle aspiration from the breast, thyroid and salivary glands
of lymphoma and other tumors.

The CooperSurgical Diagnostic Office Hysteroscopy System 3000'tm' is
designed for in-office use by gynecologists. The system includes a hysteroscope,
light source, monitor, solid state video camera and the Diagnostic Hysteroscopy
RediKit'r', a prepackaged, disposable procedure kit.

CooperSurgical's Frigitronics'r' instruments for cryosurgery are used
primarily in dermatologic procedures to treat skin cancers, in ophthalmic
procedures to treat retinal detachments and remove cataracts, and in certain
gynecologic, cardiovascular and general surgical procedures. The primary

products bearing the Frigitronics brand name are the Model 310 Zoom Colposcope,
the CCS-200 Cardiac Cryosurgical System, the Model 2000 Ophthalmic Cryosurgical
System and the Cryo-Plus System.

Since October 1992, CooperSurgical has also offered its CooperEndoscopy
line of endoscopic instruments which enable physicians to conduct abdominal and
thoracic exploration using minimally invasive procedures. Included in that line
are the LSS'tm' 500 Electronic Laparoscopic Insufflator, the LSS'tm' 600
Electronic Auto Shutter Endoscopic Camera System and the LSS'tm' 700 High
Intensity Xenon Light Source.

HOSPITAL GROUP OF AMERICA

On May 29, 1992, HGA acquired three psychiatric facilities through the
acquisition of Original HGA: Hartgrove Hospital in Chicago, Illinois (119
licensed beds), Hampton Hospital in Rancocas, New Jersey (100 licensed beds),
and MeadowWood Hospital in New Castle, Delaware (50 licensed beds). In addition,
the Company, through its subsidiary, PSG Management, entered into the Management
Services Agreement with three indirectly owned subsidiaries of Nu-Med under
which it assumed the management of three psychiatric facilities owned by such
subsidiaries: Northwestern Institute of Psychiatry in Fort Washington,
Pennsylvania (146 licensed beds), Malvern Institute for Psychiatric and Alcohol
Studies in Malvern, Pennsylvania (36 licensed beds), and Pinelands Hospital in
Nacogdoches, Texas (40 licensed beds).

The HGA facilities provide intensive and structured treatment for children,
adolescents and adults suffering from a variety of mental illnesses and/or
chemical dependencies. Services include comprehensive psychiatric and chemical
dependency evaluations, inpatient and outpatient treatment and partial
hospitalization. In response to market demands for an expanded continuum of
care, HGA is in the process of expanding its outpatient and partial
hospitalization programs.

The following is a comparison of certain statistical data relating to
inpatient treatment for fiscal years 1991, 1992 and 1993 for the psychiatric
facilities owned by HGA:

FISCAL YEAR ENDED OCTOBER 31,
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1993 1992(1) 1991(1)
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Total patient days................ 72,054 78,119 79,104
Admissions........................ 4,310 3,726 3,168
Average length of stay (in
days)........................... 16.8 21.0 25.0
Average occupancy................. 76.2 % 82.6 % 85.9 %

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(1) Reflects operations of HGA when owned by Nu-Med and, after May 29, 1992, by
TCC.

Each psychiatric facility is accredited by the Joint Commission of
Accreditation of Healthcare Organizations (JCAHO), a voluntary national
organization which periodically undertakes a comprehensive review of a
facility's staff, programs, physical plant and policies and procedures for
purposes of accreditation of such healthcare facility. Accreditation generally
is required for patients to receive insurance company reimbursement and for
participation by the facility in government sponsored provider programs.

HGA periodically conducts audits of the facilities of its subsidiaries to
ensure compliance with applicable practices, procedures and regulations. In the
course of an ongoing audit that was recently commenced, HGA has learned that
there may be certain irregularities at Hampton Hospital (the primary facility
operated by HGA's subsidiary, Hospital Group of New Jersey, Inc.) with respect
to certain billings for clinical services. The provision of clinical services at
Hampton Hospital, as well as the billing for such services, are the
responsibility of an independent medical group under contract to Hampton
Hospital. Consequently, HGA has not yet been able to determine if any billing
irregularities have occurred. It is, however, currently investigating this
matter and has requested the production of the billing records. To date, the
independent medical group has refused to cooperate. HGA considers this refusal
to be a breach of the contract between the parties and is in the process of
evaluating its options.

The Management Services Agreement provides for the contracting subsidiaries
to pay to PSG Management a $6,000,000 fee (the 'Management Fee') in equal
monthly installments over the three-

year term (subject to prior termination in accordance with its terms, upon which
termination all or a portion of such Management Fee becomes immediately due and
payable). Payments of the Management Fee are jointly and severally guaranteed by
Nu-Med and its subsidiary PsychGroup, Inc., the parent of the contracting
subsidiaries. On January 6, 1993, Nu-Med (but not any of its direct or indirect
subsidiaries) filed a voluntary petition under Chapter 11 of the United States
Bankruptcy Code. Neither the Company nor any of its subsidiaries filed a proof
of claim in the Nu-Med Chapter 11 proceeding, and the bar date (the time for
filing proofs of claim) has past. None of the Nu-Med subsidiaries have filed
under Chapter 11 and, to date, they have paid the Management Fee on a timely
basis, although representatives of Nu-Med and its subsidiaries have alleged in
writing that PSG Management has breached the Management Services Agreement
(which contention PSG Management vigorously disputes). Moreover, Nu-Med's
Proposed Disclosure Statement to accompany its Second Amended Plan of
Reorganization, filed with the United States Bankruptcy Court for the Central
District of California, indicates that PsychGroup, Inc. is commencing
performance of certain administrative functions performed by PSG Management on a
parallel basis.

On October 9, 1992, HGA filed a complaint against Nu-Med and several of its
subsidiaries asserting claims in excess of $4 million and asserted additional
claims against the same defendants in excess of an additional $6 million that
are to be resolved by an independent auditor. In both instances, HGA's claims
arose from the defendants' alleged breaches of certain provisions in the
acquisition agreement pursuant to which the HGA facilities were acquired. As
indicated, the Company and its subsidiaries did not file a proof of claim
against Nu-Med, and the bar date has passed. Since Nu-Med's subsidiaries have
not filed under Chapter 11, the bar date is not applicable with respect to the
Company's claims against Nu-Med's subsidiaries and those claims are still
pending.

Patient and Third Party Payments. HGA receives payment for its psychiatric
services either from patients, from their health insurers or through the
Medicare, Medicaid and Civilian Health and Medical Program of Uniformed Services
('CHAMPUS') governmental programs. Medicare is a federal program which entitles
persons 65 and over to a lifetime benefit of up to 190 days as an inpatient in
an acute psychiatric facility. Persons defined as disabled, regardless of age,
also receive this benefit. Medicaid is a joint federal and state program
available to persons with limited financial resources. CHAMPUS is a federal
program which provides health insurance for active and retired military
personnel and their dependents.

While other programs may exist or be adopted in different jurisdictions,
the following four categories include all methods by which HGA's three owned
facilities receive payment for services:

(a) Standard reimbursement, consisting of payment by patients and
their health insurers, is based on a facility's schedule of rates and is
not subject to negotiation with insurance companies, competitive bidding or
governmental limitation.

(b) Negotiated rate reimbursement is at prices established in advance
by negotiation or competitive bidding for contracts with insurers and other
payors such as managed care companies, health maintenance organizations
('HMO'), preferred provider organizations ('PPO') and similar organizations
which can provide a reasonable number of referrals.

(c) Cost-based reimbursement is predicated on the allowable cost of
services, plus, in certain cases, an incentive payment where costs fall
below a target rate. It is used by Medicare, Medicaid and certain Blue
Cross insurance programs to provide reimbursement in amounts lower than the
schedule of rates in effect at an HGA facility.

(d) CHAMPUS reimbursement is at either (1) regionally set rates, (2) a
national rate adjusted upward periodically on the basis of the Medicare
Market Basket Index or (3) a fixed discount rate per day at certain
facilities where CHAMPUS contracts with a benefit administration group.

The approximate percentages of HGA's net patient revenue by payment source
are as follows:

FISCAL YEAR ENDED OCTOBER 31,
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1993 1992(1) 1991(1)
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Commercial
Insurance........... 34.4 % 51.4 % 55.8 %
HMO/PPO............... 19.2 % 11.8 % 6.7 %
Blue Cross............ 13.2 % 18.8 % 22.2 %
Medicare.............. 15.2 % 14.8 % 10.6 %
Medicaid.............. 9.9 % 2.4 % 3.9 %
Other(2).............. 8.1 % .8 % .8 %

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(1) Reflects operations of HGA when owned by Nu-Med and, after May 29, 1992, by
TCC.

(2) Consists of self-payors and other miscellaneous payors.

The Medicare, Medicaid and CHAMPUS programs are subject to statutory and
regulatory changes and interpretations, utilization reviews and governmental
funding restrictions, all of which may materially increase or decrease program
payments and the cost of providing services, as well as the timing of payments
to the facilities.

Existing and Proposed Legislation. In recent years, forms of prospective
reimbursement legislation have been proposed in various states but have not been
enacted into law. If legislation based on the budgeted costs of individual
hospitals were to be enacted in the future in one or more of the states in which
HGA operates psychiatric facilities, it could have an adverse effect on HGA's
business and earnings. In addition, the enactment of such legislation in states
where HGA does not now operate could have a deterrent effect on the decision to
acquire or establish facilities in such states.

RESEARCH AND DEVELOPMENT

During the fiscal years ended October 31, 1993, 1992 and 1991, expenditures
for Company-sponsored research and development were $3,209,000, $3,267,000 and
$2,268,000, respectively. During fiscal 1993, approximately 51% of those
expenditures was incurred by CVP, 24% was incurred by CooperVision and the
balance was incurred by CooperSurgical. No customer-sponsored research and
development has been conducted.

The Company employs 14 people in its research and development and
manufacturing engineering departments. Product development and clinical research
for CooperVision products are supported by outside specialists in lens design,
formulation science, polymer chemistry, microbiology and biochemistry. At
CooperVision, experienced employees work with outside consultants. Product
research and development for CooperSurgical is conducted in-house and by outside
surgical specialists, including members of both the CooperSurgical and Euro-Med
surgical advisory boards.

GOVERNMENT REGULATION

Healthcare Products. The development, testing, production and marketing of
the Company's healthcare products is subject to the authority of the FDA and
other federal agencies as well as foreign ministries of health. The Federal
Food, Drug and Cosmetic Act and other statutes and regulations govern the
testing, manufacturing, labeling, storage, advertising and promotion of such
products. Noncompliance with applicable regulations can result in fines, product
recall or seizure, suspension of production and criminal prosecution.

The Company is currently developing and marketing both medical devices and
drug products. Medical devices are subject to different levels of FDA regulation
depending upon the classification of the device. Class III devices, such as
contact lenses, require extensive premarket testing and approval procedures,
while Class I and II devices are subject to substantially lower levels of
regulation.

A multi-step procedure must be completed before a new contact lens can be
sold commercially. Data must be compiled on the chemistry and toxicology of the
lens, its microbiological profile and the proposed manufacturing process. All
data generated must be submitted to the FDA in support of an application for an
Investigational Device Exemption. Once granted, clinical trials may be initiated

subject to the review and approval of an Institutional Review Board and, where a
lens is determined to be a significant risk device, the FDA. Upon completion of
clinical trials, a Premarket Approval Application must be submitted and approved
by the FDA before commercialization may begin.

The ophthalmic pharmaceutical products under development by the Company
require extensive testing before marketing approval may be obtained. Preclinical
laboratory studies are conducted to determine the safety and efficacy of a new
drug. The results of these studies are submitted to the FDA in an
Investigational New Drug Application under which the Company seeks clearance to
commence human clinical trials. The initial clinical evaluation, Phase I,
consists of administering the drug and evaluating its safety and tolerance
levels. Phase II involves studies to evaluate the effectiveness of the drug for
a particular indication, to determine optimal dosage and to identify possible
side effects. If the new drug is found to be potentially effective, Phase III
studies, which consist of additional testing for safety and efficacy with an
expanded patient group, are undertaken. If results of the studies demonstrate
safety and efficacy, marketing approval is sought from the FDA by means of
filing a New Drug Application.

The Company, in connection with some of its new surgical products, can
submit premarket notification to the FDA under an expedited procedure known as a
510(k) application, which is available for any product that is substantially
equivalent to a device marketed prior to May 28, 1976. If the new product is not
substantially equivalent to a pre-existing device or if the FDA were to reject a
claim of substantial equivalence, extensive preclinical and clinical testing
would be required, additional costs would be incurred and a substantial delay
would occur before the product could be brought to market.

FDA and state regulations also require adherence to applicable 'good
manufacturing practices' ('GMP'), which mandate detailed quality assurance and
record-keeping procedures. In conjunction therewith, the Company is subject to
unscheduled periodic regulatory inspections. The Company believes it is in
substantial compliance with GMP regulations.

The Company also is subject to foreign regulatory authorities governing
human clinical trials and pharmaceutical/medical device sales that vary widely
from country to country. Whether or not FDA approval has been obtained, approval
of a product by comparable regulatory authorities of foreign countries must be
obtained before products may be marketed in those countries. The approval
process varies from country to country, and the time required may be longer or
shorter than that required for FDA approval.

The procedures described above involve expenditures of considerable
resources and usually result in a substantial time lag between the development
of a new product and its introduction into the marketplace. There can be no
assurance that all necessary approvals will be obtained, or that they will be
obtained in a time frame that allows the product to be introduced for commercial
sale in a timely manner. Furthermore, product approvals may be withdrawn if
compliance with regulatory standards is not maintained or if problems occur
after marketing has begun.

Healthcare Facilities. The healthcare services industry is subject to
substantial federal, state and local regulation. Government regulation affects
the Company's business by controlling the use of its properties and controlling
reimbursement for services provided. Licensing, certification and other
applicable governmental regulations vary from jurisdiction to jurisdiction and
are revised periodically.

The Company's facilities must comply with the licensing requirements of
federal, state and local health agencies and with the requirements of municipal
building codes, health codes and local fire department codes. In granting and
renewing a facility's license, a state health agency considers, among other
things, the condition of the physical buildings and equipment, the
qualifications of the administrative personnel and professional staff, the
quality of professional and other services and the continuing compliance of such
facility with applicable laws and regulations.

Most states in which the Company operates or manages facilities have in
effect certificate of need statutes. State certificate of need statutes provide,
generally, that prior to the construction of new healthcare facilities, the
addition of new beds or the introduction of a new service, a state agency must
determine that a need exists for those facilities, beds or services. A
certificate of need is generally issued for a specific maximum amount of
expenditures or number of beds or types of services to be provided, and the
holder is generally required to implement the approved project within a specific
time period.

Certificate of need issuances for new facilities are extremely competitive,
often with several applicants for a single certificate of need.

Each Company owned or managed facility that is eligible (five of the six)
is certified or approved as a provider under one or more of the Medicaid or
Medicare programs. In order to receive Medicare reimbursement, each facility
must meet the applicable conditions promulgated by the United States Department
of Health and Human Services relating to the type of facility, its equipment,
its personnel and its standards of patient care.

The Social Security Act contains a number of provisions designed to ensure
that services rendered to Medicare and Medicaid patients are medically necessary
and meet professionally recognized standards. Those provisions include a
requirement that admissions of Medicare and Medicaid patients to healthcare
facilities must be reviewed in a timely manner to determine the medical
necessity of the admissions. In addition, the Peer Review Improvement Act of
1982 provides that a healthcare facility may be required by the federal
government to reimburse the government for the cost of Medicare-paid services
determined by a peer review organization to have been medically unnecessary.

Various state and federal laws regulate the relationships between providers
of healthcare services and physicians. Among these laws are the Medicare and
Medicaid Anti-Fraud and Abuse Amendments to the Social Security Act, which
prohibit individuals or entities participating in the Medicare or Medicaid
programs from knowingly and willfully offering, paying, soliciting or receiving
remuneration in order to induce referrals for items or services reimbursed under
those programs.

In addition, specific laws exist that regulate certain aspects of the
Company's business, such as the commitment of patients to psychiatric hospitals
and disclosure of information regarding patients being treated for chemical
dependency. Many states have adopted a 'patient's bill of rights' which sets
forth standards for dealing with issues such as use of the least restrictive
treatment, patient confidentiality, patient access to telephones, mail and legal
counsel and requiring the patient to be treated with dignity.

Healthcare Reform. On October 27, 1993, President Clinton delivered his
Administration's proposal for national health care reform to Congress. This
complex proposal contains provisions designed to control and reduce growth in
public and private spending on health care and to reform the payment methodology
for health care goods and services by both the public (Medicare and Medicaid)
and private sectors, including overall limitations on future growth in spending
for health care benefits and the provision of universal access to health care.
Currently, there are pending before Congress several competing health care
reform proposals which, through varying mechanisms and methodologies, are also
intended to control or reduce public and private spending on health care. It is
uncertain which, if any, of these proposals will be adopted by Congress or what
actions federal, state or private payors for health care goods and services may
take in response thereto. The Company cannot yet predict the effect such reforms
or the prospect of their enactment may have on the business of the Company and
its subsidiaries. Accordingly, no assurance can be given that the same will not
have a material adverse effect on the Company's revenues, earnings or cash
flows.

RAW MATERIALS

In general, raw materials required by CooperVision consist of various
polymers as well as packaging materials. Alternative sources of all of these
materials are available. Raw materials used by CooperSurgical or its suppliers
are generally available from a variety of sources. Products manufactured for
CooperSurgical are generally available from more than one source. However,
because some products require specialized manufacturing procedures,
CooperSurgical could experience inventory shortages if an alternative
manufacturer had to be secured on short notice.

MANUFACTURING

CooperVision manufactures products in the United States and Canada.
CooperSurgical manufactures products in the United States and Europe.

Pursuant to a supply agreement entered into in May 1989 and subsequently
amended between the Company and Pilkington plc, the buyer of the Company's
contact lens business outside of the United

States and Canada, CooperVision purchases certain of its product lines from
Pilkington plc (see Note 14)(1). These purchased lenses represented
approximately 28%, 31% and 40% of the total number of lenses sold by the Company
in fiscal 1993, 1992 and 1991, respectively.

MARKETING AND DISTRIBUTION

Healthcare Products. In the United States and Canada, CooperVision markets
its products through its field sales representatives, who call on
ophthalmologists, optometrists, opticians and optical chains. In the United
States, field sales representatives also call on distributors.

CVP's line of generic pharmaceuticals is sold directly to wholesalers and
distributors through an independent contract sales force and by the sales forces
of CooperVision and CoastVision.

CooperSurgical's LEEP'tm', Frigitronics'r', hysteroscopy and endoscopy
products are marketed worldwide by a network of independent sales
representatives and distributors. In the United States, CooperSurgical, as a
principal method of increasing physician awareness of its products, conducted
teaching seminars in fiscal 1993. Euro-Med instruments and systems, as well as
certain LEEP'tm' disposable products, are marketed through direct mail catalog
programs.

Healthcare Facilities. HGA's marketing concept aims to position each
psychiatric facility as the provider of the highest quality mental health
services in its marketplace. HGA employs a combination of general advertising,
toll-free 'help lines', community education programs and facility-based
continuing education programs to underscore the facility's value as a mental
health resource center. HGA's marketing emphasizes discrete programs for select
illnesses or disorders because of its belief that marketing a generic product
without program differentiation will not generate the interest of, or be of
value to, a referral source seeking treatment for specific disorders. Referral
sources include psychiatrists, other physicians, psychologists, social workers,
school guidance counselors and the police, courts, clergy, care-provider
organizations and former patients.

PATENTS, TRADEMARKS AND LICENSING AGREEMENTS

TCC owns or licenses a variety of domestic and foreign patents which, in
the aggregate, are material to its businesses. CooperVision is a party to a
licensing agreement under which it holds a perpetual, royalty free, nonexclusive
right to make, have made and sell contact lenses utilizing a polymer owned by a
third party. CooperVision's ability to utilize that polymer is material to its
business. Unexpired terms of TCC's United States patents range from less than
one year to a maximum of 17 years. CVP has the exclusive license to the U.S.
patent for the use of Class I calcium channel blockers as agents to reduce
intraocular pressure in ocular hypertensive conditions including glaucoma. In
addition, CVP has filed and/or is in the process of filing additional U.S. and
international patent applications.

As indicated in the references to such products in this Item 1, the names
of certain of TCC's products are protected by trademark registration in the
United States Patent and Trademark Office and, in some instances, in foreign
trademark offices as well. Applications are pending for additional trademark
registrations. TCC considers these trademarks to be valuable because of their
contribution to the market identification of its various products.

DEPENDENCE UPON CUSTOMERS

At this time, no material portion of TCC's businesses is dependent upon any
one customer or upon any one affiliated group of customers.

- ------------
(1) All references to Note numbers shall constitute the incorporation by
reference of the text of the specific Note contained in the Notes to
Consolidated Financial Statements of the Company located in Item 8 into the
Item number in which it appears.

GOVERNMENT CONTRACTS

No material portion of TCC's businesses is subject to renegotiation of
profits or termination of contracts or subcontracts at the election of the
United States government.

COMPETITION

No single company competes with the Company in all of its industry
segments; however, each of TCC's business segments operates within a highly
competitive environment. Competition in the healthcare industry revolves around
the search for technological and therapeutic innovations in the prevention,
diagnosis and treatment of illness or disease. TCC competes primarily on the
basis of product quality, technological benefit, service and reliability, as
perceived by medical professionals.

Healthcare Products. Numerous companies are engaged in the development and
manufacture of contact lenses and ophthalmic pharmaceuticals. CooperVision
competes primarily on the basis of product quality, service and reputation among
medical professionals and by its participation in specialty niche markets. It
has been, and continues to be, the sponsor of clinical lens studies intended to
generate information leading to the improvement of CooperVision's lenses from a
medical point of view. Major competitors have greater financial resources and
larger research and development and sales forces than CooperVision. Furthermore,
many of these competitors offer a greater range of contact lenses, plus a
variety of other eye care products, which gives them a competitive advantage in
marketing their lenses.

In the surgical segment, competitive factors are technological and
scientific advances, product quality, price and effective communication of
product information to physicians and hospitals. CooperSurgical believes that it
benefits, in part, from the technological advantages of certain of its products
and from the ongoing development of new medical procedures, which creates a
market for equipment and instruments specifically tailored for use in such new
procedures. CooperSurgical competes by focusing on distinct niche markets and
supplying medical personnel working in those markets with equipment, instruments
and disposable products that are high in quality and that, with respect to
certain procedures, enable a medical practitioner to obtain from one source all
of the equipment, instruments and disposable products required to perform such
procedure. As CooperSurgical develops products to be used in the performance of
new medical procedures, it offers training to medical professionals in the
performance of such procedures. CooperSurgical competes with a number of
manufacturers in each of its niche markets, including larger manufacturers that
have greater financial and personnel resources and sell a substantially larger
number of product lines.

Healthcare Facilities. In most areas in which HGA operates, there are other
psychiatric facilities that provide services comparable to those offered by
HGA's facilities. Some of those facilities are owned by governmental
organizations, not-for-profit organizations or investor-owned companies having
substantially greater resources than HGA and, in some cases, tax-exempt status.
Psychiatric facilities frequently draw patients from areas outside their
immediate locale, therefore, HGA's psychiatric facilities compete with both
local and distant facilities. In addition, psychiatric facilities also compete
with psychiatric units in acute care hospitals. HGA's strategy is to develop
high quality programs designed to target specific disorders and to retain a
highly qualified professional staff.

BACKLOG

TCC does not consider backlog to be a material factor in its businesses.

SEASONALITY

HGA's psychiatric facilities experience a decline in occupancy rates during
the summer months when school is not in session and during the year-end holiday
season. No other material portion of TCC's businesses is seasonal.

COMPLIANCE WITH ENVIRONMENTAL LAWS

Federal, state and local provisions regulating the discharge of materials
into the environment, or otherwise relating to the protection of the
environment, do not currently have a material effect upon TCC's capital
expenditures, earnings or competitive position.

WORKING CAPITAL

TCC's businesses have not required any material working capital
arrangements in the past five years. In light of the substantial reduction in
TCC's cash items and temporary investments and the net cash outflow still
anticipated by the Company, the Company is considering a variety of alternatives
to obtain funds through borrowings or other financings or sales of assets. See
Item 7 'Management's Discussion and Analysis of Financial Condition and Results
of Operations -- Capital Resources and Liquidity.'

FINANCIAL INFORMATION ABOUT BUSINESS SEGMENTS, GEOGRAPHIC AREAS, FOREIGN
OPERATIONS AND EXPORT SALES

Note 16 sets forth financial information with respect to TCC's business
segments and sales in different geographic areas.

EMPLOYEES

On October 31, 1993, TCC and its subsidiaries employed approximately 970
persons. In addition, HGA's psychiatric facilities are staffed by licensed
physicians who have been admitted to the medical staff of an individual
facility. Certain of those physicians are not employees of HGA. TCC believes
that its relations with its employees are good.

ITEM 2. PROPERTIES.

The following are TCC's principal facilities as of December 31, 1993:

APPROXIMATE APPROXIMATE
FLOOR AREA ANNUAL LEASE
LOCATION OPERATIONS (SQ. FT.) RENT EXPIRATION
- ------------------------------------- ----------------------- ----------- ------------ --------------

United States
Fort Lee, NJ.................... Executive Offices 11,000 $230,000 Feb. 2005
Pleasanton, CA.................. Offices 14,000 $198,000 Sept. 1995
Chicago, IL..................... Psychiatric Hospital 74,000 Owned in fee N/A(1)
New Castle, DE.................. Psychiatric Hospital 45,000 Owned in fee N/A(1)
Mt. Holly, NJ................... Learning Facility 22,000 $235,000 Aug. 1996
Rancocas, NJ.................... Psychiatric Hospital 65,000 Owned in fee N/A(1)
Wayne, PA....................... Offices 4,000 $61,000 Jan. 1996
Huntington Beach, CA............ Offices, distribution 13,000 $95,000 June 1998
Research, development 21,000 $214,000 May 1995
and manufacturing
Fairport, NY.................... Administrative offices 15,000 $237,000 March 1997
and marketing
Rochester, NY................... Distribution and 6,750 $45,000 March 1995(2)
warehouse facilities
Scottsville, NY................. Manufacturing, 20,000 Owned in fee N/A
distribution and
warehouse facilities

(table continued on next page)

(table continued from previous page)

APPROXIMATE APPROXIMATE
FLOOR AREA ANNUAL LEASE
LOCATION OPERATIONS (SQ. FT.) RENT EXPIRATION
- ------------------------------------- ----------------------- ----------- ------------ --------------

Shelton, CT..................... Manufacturing, research 25,000 $225,000 Dec. 2001
and development,
distribution and
warehouse facilities
Canada
Markham, Ont.................... Offices, manufacturing 13,000 $77,000 Feb. 1995
distribution and
warehouse facilities

- ------------
(1) Outstanding loans totaling $13,718,000 as of October 31, 1993, were secured
by these properties.
(2) Does not include optional renewal periods.

The Company believes its properties are suitable and adequate for its
businesses.

ITEM 3. LEGAL PROCEEDINGS.

The Company is a defendant in a number of legal actions relating to its
past or present businesses in which plaintiffs are seeking damages.

On November 10, 1992, the Company was charged in an indictment (the
'Indictment'), filed in the United States District Court for the Southern
District of New York, with violating federal criminal laws relating to a
'trading scheme' by Gary A. Singer, a former Co-Chairman of the Company (who
went on a leave of absence on May 28, 1992, begun at the Company's request, and
who subsequently resigned on January 20, 1994), and others, including G. Albert
Griggs, Jr., a former analyst with The Keystone Group, Inc., and John D. Collins
II, to 'frontrun' high yield bond purchases by the Keystone Custodian Funds,
Inc., a group of mutual funds. The Company was named as a defendant in 10
counts. Gary Singer was named as a defendant in 24 counts, including violations
of the Racketeer Influenced and Corrupt Organizations Act and the mail and wire
fraud statutes (including defrauding the Company by virtue of the 'trading
scheme,' by, among other things, transferring profits on trades of DR Holdings,
Inc. 15.5% bonds (the 'DR Holdings Bonds') from the Company to members of his
family during fiscal 1991), money laundering, conspiracy, and aiding and
abetting violations of the Investment Advisers Act of 1940, as amended (the
'Investment Advisers Act'), by an investment advisor.

On January 13, 1994, the Company was found guilty on six counts of mail
fraud and one count of wire fraud based upon Mr. Singer's conduct, but acquitted
of charges of conspiracy and aiding and abetting violations of the Investment
Advisers Act. Mr. Singer was found guilty on 21 counts. One count against Mr.
Singer and the Company was dismissed at trial and two counts against Mr. Singer
relating to forfeiture penalties were resolved by stipulation between the
government and Mr. Singer. Sentencing is scheduled for March 25, 1994. The
maximum penalty which could be imposed on the Company is the greater of (i)
$500,000 per count, (ii) twice the gross gain derived from the offense or (iii)
twice the gross loss suffered by the victim of the offense, and a $200 special
assessment. In addition to the penalties described in (i), (ii) or (iii), the
Court could order the Company to make restitution. The Company is considering
its options, including filing an appeal of its conviction. Mr. Singer's attorney
has advised the Company that Mr. Singer intends to appeal his conviction.
Although the Company may be obligated under its Certificate of Incorporation to
advance the costs of such appeal, the Company and Mr. Singer have agreed that
Mr. Singer will not request such advances, but that he will reserve his rights
to indemnification in the event of a successful appeal.

violated various provisions of the Securities Exchange Act of 1934, as amended
(the 'Securities Exchange Act'), including certain of its antifraud and periodic
reporting provisions, and aided and abetted violations of the Investment Company
Act, and the Investment Advisors Act, in connection with the 'trading scheme'
described in the preceding paragraphs. The SEC Complaint further alleges, among
other things, federal securities law violations (i) by the Company and Gary
Singer in connection with an alleged manipulation of the trading price of the
Company's 10 5/8% Convertible Subordinated Reset Debentures due 2005 (the
'Debentures') to avoid an interest rate reset allegedly required on June 15,
1991 under the terms of the Indenture governing the Debentures, (ii) by Gary
Singer in allegedly transferring profits on trades of high yield bonds
(including those trades in the DR Holdings Bonds which were the subject of
certain counts of the Indictment of which Mr. Singer was found guilty) from the
Company to members of his family and failing to disclose such transactions to
the Company and (iii) by the Company in failing to disclose publicly on a timely
basis such transactions by Gary Singer. The SEC Complaint asks that the Company
and Gary and Steven Singer be enjoined permanently from violating the antifraud,
periodic reporting and other provisions of the federal securities laws, that
they disgorge the amounts of the alleged profits received by them pursuant to
the alleged frauds (stated in the SEC's Litigation Release No. 13432 announcing
the filing of the SEC Complaint as being $1,296,406, $2,323,180 and $174,705,
respectively), plus interest, and that they each pay appropriate civil monetary
penalties. The SEC Complaint also seeks orders permanently prohibiting Gary and
Steven Singer from serving as officers or directors of any public company and
disgorgement from certain Singer family members and entities of amounts
representing the alleged profits received by such defendants pursuant to the
alleged frauds. In February 1993, the court granted a motion staying all
proceedings in connection with this matter pending completion of the criminal
case. On January 24, 1994, the Court lifted the stay and directed the defendants
to file answers to the SEC Complaint within 30 days. The Company is currently
involved in settlement negotiations with the SEC. At this time, there can be no
assurances these negotiations will be successfully concluded.

The imposition of monetary penalties upon the Company as a result of the
criminal convictions or in connection with the matters alleged in the SEC
Complaint, as well as the incurrence of any additional defense costs, could
exacerbate, possibly materially, the Company's liquidity problems and its need
to raise funds. See Item 7 -- 'Management's Discussion and Analysis of Financial
Condition and Results of Operations.'

Copies of the Indictment and the SEC Complaint were attached as exhibits to
the Company's Current Report on Form 8-K, dated November 16, 1992, filed with
the SEC.

The Company is named as a nominal defendant in a shareholder derivative
action entitled Harry Lewis and Gary Goldberg v. Gary A. Singer, Steven G.
Singer, Arthur C. Bass, Joseph C. Feghali, Warren J. Keegan, Robert S. Holcombe
and Robert S. Weiss, which was filed on May 27, 1992 in the Court of Chancery,
State of Delaware, New Castle County. On May 29, 1992, another plaintiff, Alfred
Schecter, separately filed a derivative complaint in Delaware Chancery Court
that was essentially identical to the Lewis and Goldberg complaint. Lewis and
Goldberg later amended their complaint, and the Delaware Chancery Court
thereafter consolidated the Lewis and Goldberg and Schecter actions as In re The
Cooper Companies, Inc. Litigation, Consolidated C.A. 12584, and designated Lewis
and Goldberg's amended complaint as the operative complaint (the 'First Amended
Derivative Complaint'). The First Amended Derivative Complaint alleges that
certain directors of the Company and Gary A. Singer, as Co-Chairman of the Board
of Directors, caused or allowed the Company to be a party to the 'trading
scheme' that was the subject of the Indictment. The First Amended Derivative
Complaint also alleges that the defendants violated their fiduciary duties to
the Company by not vigorously investigating the allegations of securities fraud.
The First Amended Derivative Complaint requests that the Court order the
defendants (other than the Company) to pay damages and expenses to the Company
and certain of the defendants to disgorge their profits to the Company. On
October 16, 1992, the defendants moved to dismiss the First Amended Derivative
Complaint on grounds that such Complaint fails to comply with Delaware Chancery
Court Rule 23.1 and that Count III of the First Amended Derivative Complaint
fails to state a claim. The Company has been advised by the individual directors
named as defendants that they believe they have meritorious defenses to this
lawsuit and intend vigorously to defend against the allegations in the First
Amended Derivative Complaint.

The Company was named as a nominal defendant in a purported shareholder
derivative action entitled Bruce D. Sturman v. Gary A. Singer, Steven G. Singer,
Brad C. Singer, Martin Singer, John D. Collins II, Back Bay Capital, Inc., G.
Albert Griggs, Jr., John and Jane Does 1-10 and The Cooper Companies, Inc.,
which was filed on May 26, 1992 in the Supreme Court of the State of New York,
County of New York. The plaintiff, Bruce D. Sturman, a former officer and
director of the Company, alleged that Gary A. Singer, as Co-Chairman of the
Board of Directors, and various members of the Singer family caused the Company
to make improper payments to alleged third-party co-conspirators, Messrs. Griggs
and Collins, as part of the 'trading scheme' that was the subject of the
Indictment. The complaint requested that the Court order the defendants (other
than the Company) to pay damages and expenses to the Company, including
reimbursement of payments made by the Company to Messrs. Collins and Griggs, and
to disgorge their profits to the Company. Pursuant to its decision and order,
filed August 17, 1993, the Court dismissed this action under New York Civil
Practice Rule 327(a). On September 22, 1993, the plaintiff filed a Notice of
Appeal.

The Company was named in an action entitled Bruce D. Sturman v. The Cooper
Companies, Inc. and Does 1-100, Inclusive, first brought on July 24, 1992 in the
Superior Court of the State of California, Los Angeles, County. Mr. Sturman
alleged that his suspension from his position as Co-Chairman of the Board of
Directors constituted, among other things, an anticipatory breach of his
employment agreement. On May 14, 1993, Mr. Sturman filed a First Amended
Complaint in the Superior Court of the State of California, County of Alameda,
Eastern Division, the jurisdiction to which the original case had been
transferred. In the Amended Complaint, Mr. Sturman alleged that by first
suspending and then terminating him from his position as Co-Chairman, the
Company breached his employment agreement, violated provisions of the California
Labor Code, wrongfully terminated him in violation of public policy, breached
its implied covenant of good faith and fair dealing, defamed him, invaded his
privacy and intentionally inflicted emotional distress, and was otherwise
fraudulent, deceitful and negligent. The Amended Complaint seeks declaratory
relief, damages in the amount of $5,000, treble and punitive damages in an
unspecified amount, and general, special and consequential damages in the amount
of at least $5,000,000. In March 1993, the Court ordered a stay of all discovery
in this action until further order of the Court and thereafter scheduled a
conference for January 14, 1994 to review the status of the stay. The Court
subsequently modified the stay to permit the taking of the deposition of one
witness who will not be available to testify at trial. On September 24, 1993,
Mr. Sturman filed a Second Amended Complaint, setting forth the same material
allegations and seeking the same relief and damages as set forth in the First
Amended Complaint. On January 7, 1994, the Company filed an Answer, generally
denying all of the allegations in the Second Amended Complaint, and also filed a
Cross-Complaint against Mr. Sturman. In the Cross-Complaint, the Company alleges
that Mr. Sturman's conduct constituted a breach of his employment agreement with
the Company as well as a breach of his fiduciary duty to the Company, that Mr.
Sturman misrepresented and failed to disclose certain material facts to the
Company and converted certain assets of the Company to his personal use and
benefit. The Cross-Complaint seeks compensatory and punitive damages in an
unspecified amount. On January 14, 1994, the Court continued in place the stay
on all discovery and scheduled a case management conference for February 10,
1994 to review the status of the stay. Based on management's current knowledge
of the facts and circumstances surrounding Mr. Sturman's termination, the
Company believes that it has meritorious defenses to this lawsuit and intends to
defend vigorously against the allegations in the Second Amended Complaint.

or delayed in disclosing, among other things: (a) that the allegedly real reason
the Company announced on May 26, 1988 that it was dropping a proposed merger
with Cooper Development Company, Inc. was because the Company's banks were
opposed to the merger; (b) that the proposed sale of Cooper Technicon, Inc., a
former subsidiary of the Company, was not pursuant to a definitive sales
agreement but merely an option; (c) that such option required the approval of
the Company's debentureholders and preferred stockholders; (d) that the approval
of such sale by the Company's debentureholders and preferred stockholders would
not have been forthcoming absent extraordinary expenditures by the Company; and
(e) that the purchase agreement between the Company and Miles, Inc. for the sale
of Cooper Technicon, Inc. included substantial penalties to be paid by the
Company if the sale was not consummated within certain time limits and that the
sale could not be consummated within those time limits. The amended complaints
further allege that the defendants are liable for having violated Section 10(b)
of the Securities Exchange Act and Rule 10(b)-5 thereunder and having engaged in
common law fraud. Based on management's current knowledge of the facts and
circumstances surrounding the events alleged by plaintiffs as giving rise to
their claims, the Company believes that it has meritorious defenses to these
lawsuits and intends vigorously to defend against the allegations in the amended
complaints. The parties have engaged in preliminary settlement negotiations;
however, there can be no assurances that these discussions will be successfully
concluded.

On September 2, 1993, a patent infringement complaint was filed against the
Company in the United States District Court for the District of Nevada captioned
Steven P. Shearing v. The Cooper Companies, Inc. On or about that same day, the
plaintiff filed twelve additional complaints, accusing at least fourteen other
defendants of infringing the same patent. The patent in these suits covers a
specific method of implanting an intraocular lens into the eye. Until February
1989, the Company manufactured intraocular lenses and ophthalmic instruments,
but did not engage in the implantation of such lenses. Subsequent to February
1989, the Company was not involved in the manufacture, marketing or sale of
intraocular lenses. The Company denies the material allegations of Shearing's
complaint and will vigorously defend itself.

The Company is a defendant in more than 2,600 breast implant lawsuits
pending in federal district courts and state courts, some of which purport to be
class actions, relating to the mammary prosthesis (breast implant) business of
its former wholly-owned subsidiaries, Aesthetech Corporation ('Aesthetech'), the
manufacturer, and Natural Y Surgical Specialities, Inc. ('Natural Y'), the
distributor, of polyurethane foam covered, silicone gel-filled breast implants,
which subsidiaries were sold to Medical Engineering Corporation ('MEC'), a
wholly-owned subsidiary of Bristol-Myers Squibb Company ('BMS') on December 14,
1988.

The plaintiffs in the breast implant lawsuits generally claim to have been
injured by breast implants allegedly manufactured and/or sold by Aesthetech,
Natural Y or MEC. The ailments typically alleged include autoimmune disorders,
scleroderma, chronic fatigue syndrome and vascular and neurological
complications, as well as, in some cases, a fear of cancer. A small percentage
of lawsuits allege that plaintiffs are suffering from cancer, allegedly caused
by the component parts of the implants, including the alleged breakdown of
polyurethane foam used to cover the implants. In most cases, other defendants
are named in addition to the Company, Aesthetech, Natural Y, MEC and BMS,
including, in many cases, implanting surgeons and the suppliers of the silicone
and polyurethane products used in the manufacture of the breast implants.

On October 29, 1992, the Delaware Chancery Court in Medical Engineering
Corporation and Bristol-Myers Squibb Company v. The Cooper Companies, Inc. ruled
that, as between BMS and MEC, on the one hand, and the Company, on the other,
the Company is responsible for product liability claims and obligations relating
to breast implants sold by Natural Y before December 14, 1988, irrespective of
when the claims are brought. On September 28, 1993, the Company entered into an
agreement with MEC (the 'MEC Agreement') settling this litigation between the
Company and BMS and MEC. Pursuant to the MEC Agreement, MEC has agreed, subject
to limited exceptions, to take responsibility for all legal fees and other
costs, and to pay all judgments and settlements, resulting from all pending and
future claims in respect of breast implants sold by Aesthetech and Natural Y
prior to their acquisition by MEC (including the above-mentioned lawsuits), and
the Company has withdrawn its appeal of the Delaware Chancery Court decision and
agreed, among other things, to make certain payments to MEC. Pursuant to the
terms of the MEC Agreement, MEC could have terminated the

agreement if the exchange offer and consent solicitation (the 'Exchange Offer
and Solicitation') relating to its Debentures (or an alternative restructuring
of the Debentures or other amendment, forebearance or waiver with respect to the
Debentures) was not completed on terms satisfactory to the Company by February
1, 1994. The Exchange Offer and Solicitation was completed on January 6, 1994.
See Item 7 -- 'Management's Discussion and Analysis of Financial Condition and
Results of Operations, Capital Resources and Liquidity' and Notes 14 and 19.

The Company was named as a defendant in a civil action entitled Site
Microsurgical Systems v. The Cooper Companies, Inc. filed in the United States
District Court of Delaware on November 13, 1990. The plaintiff alleged that the
Company infringed one of its U.S. patents through sales by the CooperVision
Surgical Division ('CVS') of certain cassettes and systems utilizing such
cassettes prior to the sale of CVS in February, 1989. The Company denied the
plaintiff's allegations and counterclaimed for a Declaratory Judgment of
non-infringement and invalidity of the plaintiff's patent-in-suit. This lawsuit
was settled in October 1993. Pursuant to the settlement, the Company made a cash
payment to the plaintiff and the parties terminated a generic ophthalmic
pharmaceutical supply agreement.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

The 1993 Annual Meeting of Stockholders was held on September 14, 1993.

Eight individuals were nominated to serve as directors of the Company.
Information with respect to votes cast for or against such nominees is set forth
below:

DIRECTOR VOTES FOR VOTES AGAINST
- ----------------------------------------------------------------- ---------- -------------

Joseph C. Feghali................................................ 27,101,216 964,518
Mark A. Filler................................................... 27,301,126 764,508
Michael H. Kalkstein............................................. 27,300,919 764,815
Donald Press..................................................... 27,329,289 736,445
Steven Rosenberg................................................. 27,312,795 752,939
Allan E. Rubenstein.............................................. 27,301,856 763,878
Mel Schnell...................................................... 27,322,653 743,081
Robert S. Weiss.................................................. 27,269,662 796,072

On June 14, 1993, the Company acquired from Cooper Life Sciences, Inc.
('CLS') 160,600 shares of its Senior Exchangeable Redeemable Restricted Voting
Preferred Stock ('SERPS'), constituting all of the Company's then outstanding
SERPS, together with all rights to any dividends thereon, in exchange for 345
shares of a newly created series of preferred stock of the Company, designated
Series B Preferred Stock (the 'Series B Preferred Stock'), having a par value of
$.10 per share and a liquidation preference of $10,000 per share. The
stockholders of the Company were asked to approve conversion rights on such
Series B Preferred Stock, whereby such shares would be convertible, at the
option of CLS, into an aggregate of 3,450,000 shares of common stock of the
Company (subject to customary antidilution adjustments). The proposal to approve
conversion rights of the Series B Preferred Stock was approved by a vote of
17,741,096 shares in favor, with 600,364 shares voted against and 409,155 shares
abstaining. 9,315,119 shares present at the meeting for the purpose of
establishing a quorum were ineligible to vote on the proposal. The shares of
Series B Preferred Stock, if any, issued in payment of dividends on the Series B
Preferred Stock will be convertible into one share of common stock for each
$1.00 of liquidation preference of such Series B Preferred Stock (subject to
customary antidilution adjustments). The Company also has the right to compel
conversion of Series B Preferred Stock at any time after (i) the average of the
closing sale prices for the common stock on its principal trading market on the
trading days during any period of 90 consecutive calendar days is at least
$1.375 and (ii) on at least 80% of the trading days during such period, the
closing sale price is at least $1.375.

Stockholders were also asked to ratify the appointment of KPMG Peat Marwick
as independent certified public accountants for the Company for the fiscal year
which ended October 31, 1993. A total of 27,694,165 shares were voted in favor
of the ratification, 291,596 shares were voted against it and 79,973 shares
abstained.

PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.

The Company's common stock is traded on The New York Stock Exchange, Inc.
and the Pacific Stock Exchange Incorporated. No cash dividends were paid with
respect to the common stock in fiscal 1993 or 1992.

The Certificate of Designations, Preferences and Relative Rights,
Qualifications, Limitations and Restrictions of the Company's SERPS, which were
retired in exchange for the Series B Preferred Stock on June 14, 1993, as
indicated in Item 4 above, prohibited the payment of cash dividends on the
Company's common stock unless certain conditions, which the Company did not
meet, were met.

The Certificate of Designations, Preferences and Relative Rights,
Qualifications, Limitations and Restrictions of the Series B Preferred Stock
prohibits the payment of cash dividends on the Company's common stock unless the
full amount of cumulative dividends on the Series B Preferred Stock have been
declared and paid in full or contemporaneously are paid through the most recent
dividend payment date. Dividends on the Series B Preferred Stock do not begin to
accrue until June 14, 1994.

The Indenture, dated as of March 1, 1985, governing the Company's
Debentures, as amended by the First Supplemental Indenture dated as of June 29,
1989 and the Second Supplemental Indenture dated as of January 6, 1994, and the
Indenture dated as of January 6, 1994 governing the Company's 10% Senior
Subordinated Secured Notes due 2003 (collectively, the 'Indentures'), permit the
payment of cash dividends on the Series B Preferred Stock but prohibit the
payment of cash dividends on the Company's common stock unless (i) no defaults
exist or would exist under the Indentures, (ii) the Company's Cash Flow Coverage
Ratio (as defined in the Indentures) for the most recently ended four full
fiscal quarters has been at least 1.5 to 1, and (iii) such cash dividend,
together with the aggregate of all other Restricted Payments (as defined in the
Indentures), is less than the sum of 50% of the Company's cumulative net income
plus the proceeds of certain sales of the Company's or its subsidiaries' capital
stock subsequent to February 1, 1994. The Company does not anticipate, in the
foreseeable future, being able to satisfy the foregoing test and, therefore,
does not anticipate being able to pay cash dividends on its common stock in the
foreseeable future.

The ability of the Company to declare and pay dividends is also subject to
restrictions set forth in the Delaware General Corporation Law (the 'Delaware
GCL'). As a general rule, a Delaware corporation may pay dividends under the
Delaware GCL either out of its 'surplus,' as defined in the Delaware GCL, or,
subject to certain exceptions, out of its net profits for the fiscal year in
which the dividend is declared and/or the preceding fiscal year. Even if the
Company were to satisfy the requirements in the Indentures for the payment of
cash dividends on the Company's common stock, the Company's ability to pay cash
dividends will depend upon whether the Company satisfies the requirements of the
Delaware GCL at the time any such proposed dividend is declared.

CLS filed Amendment No. 2 to its Schedule 13D stating that it owns and has
sole voting and dispositive power with respect to 4,850,000 shares of the
Company's common stock as of June 12, 1992. On June 14, 1993, CLS acquired 345
shares of Series B Preferred Stock which are convertible into 3,450,000 shares
of common stock. In addition, the Company had been advised that, as of December
15, 1993, Moses Marx, the beneficial owner of approximately 22% of the
outstanding stock of CLS, beneficially owned 1,126,000 shares (or approximately
3.7%) of the Company's common stock and $4,500,000 principal amount of
Debentures, or approximately 11.4% of the aggregate principal amount thereof,
and that United Equities Company ('United Equities'), a brokerage firm owned by
Mr. Marx, held approximately $3,706,000 principal amount of Debentures or
approximately 9.4% of the aggregate principal amount of Debentures outstanding,
in its trading account. Mr. Marx and United Equities tendered all of their
Debentures in the Exchange Offer and Solicitation (although not all of their
Debentures were accepted, due to proration), and the Company is not aware of
either Mr. Marx's or United Equities' current holdings of the Company's
securities. Although the Company takes no position as to whether Mr. Marx and
United Equities are 'affiliates' of the Company, the Company has not treated Mr.
Marx or United Equities as affiliates for purposes of the Company's Form 10-K.

Other information called for by this Item is set forth in Note 17.

ITEM 6. SELECTED FINANCIAL DATA

THE COOPER COMPANIES, INC. AND SUBSIDIARIES
FIVE YEAR FINANCIAL HIGHLIGHTS

YEARS ENDED OCTOBER 31,
-------------------------------------------------------
SUMMARY OF CONSOLIDATED OPERATIONS 1993 1992 1991 1990 1989
- ------------------------------------------------------- -------- -------- -------- ------- --------
(IN THOUSANDS, EXCEPT PER SHARE FIGURES)

Net service revenue.................................... $ 45,283 $ 19,406 $ -- $ -- $ --
Net sales of products.................................. 47,369 43,873 35,524 48,206 52,795
-------- -------- -------- ------- --------
Net operating revenue.................................. 92,652 63,279 35,524 48,206 52,795
-------- -------- -------- ------- --------
Cost of services provided.............................. 42,754 17,353 -- -- --
Cost of products sold.................................. 17,538 18,236 16,979 18,476 20,474
Research and development expense....................... 3,209 3,267 2,268 1,000 1,056
Selling, general and administrative expense............ 49,382 44,600 45,627 41,663 49,964
Settlement of disputes................................. 6,350 4,498 -- -- --
Debt restructuring costs............................... 2,131 -- -- -- --
Costs associated with restructuring operations......... 451 -- -- 70 (4,073)
Amortization of intangibles............................ 772 742 946 341 270
Investment income, net................................. 1,615 14,254 12,268 16,152 14,789
Gain on sales of assets and businesses, net............ 620 1,030 -- 1,076 9,333
Other income (expense), net............................ 174 772 574 1,226 (5,294)
Interest expense....................................... 6,129 6,697 7,148 8,999 22,412
-------- -------- -------- ------- --------
Loss from continuing operations before income taxes and
extraordinary items.................................. (33,655) (16,058) (24,602) (3,889) (18,480)
Provision for (benefit of) income taxes................ 417 100 201 (2,907) (2,192)
-------- -------- -------- ------- --------
Loss from continuing operations before extraordinary
items................................................ (34,072) (16,158) (24,803) (982) (16,288)
Loss on sale of discontinued operations, net of
taxes................................................ (13,657) (9,300) -- (734) (16,726)
-------- -------- -------- ------- --------
Loss before extraordinary items........................ (47,729) (25,458) (24,803) (1,716) (33,014)
Extraordinary items.................................... 924 640 5,428 10,167 (3,786)
-------- -------- -------- ------- --------
Net income (loss)...................................... (46,805) (24,818) (19,375) 8,451 (36,800)
Less, dividend requirements on Senior
Exchangeable Redeemable Restricted Voting Preferred
Stock................................................ 320 1,804 2,325 5,451 12,263
-------- -------- -------- ------- --------
Net income (loss) applicable to common stock........... ($47,125) ($26,622) ($21,700) $ 3,000 ($49,063)
-------- -------- -------- ------- --------
-------- -------- -------- ------- --------
Net income (loss) per common share:
Continuing operations............................. ($1.13) ($.64) ($1.05) ($.26) ($1.22)
Loss on sale of discontinued operations........... (.45) (.34) -- (.03) (.71)
Loss before extraordinary items................... (1.58) (.98) (1.05) (.29) (1.93)
Extraordinary items............................... .03 .02 .21 .41 (.16)
Net income (loss) per common share................ ($1.55) ($.96) ($.84) $.12 ($2.09)
Cash dividends per common share................... $ -- $ -- $ -- $ -- $ --
-------- -------- -------- ------- --------
-------- -------- -------- ------- --------
Average number of common shares outstanding....... 30,377 27,669 25,878 24,895 23,484
-------- -------- -------- ------- --------
-------- -------- -------- ------- --------

THE COOPER COMPANIES, INC. AND SUBSIDIARIES
FIVE YEAR FINANCIAL HIGHLIGHTS

OCTOBER 31,
--------------------------------------------------------
CONSOLIDATED FINANCIAL POSITION 1993 1992 1991 1990 1989
- ----------------------------------------------------- -------- -------- -------- -------- --------
(IN THOUSANDS)

Current assets....................................... $ 51,875 $119,282 $173,857 $197,061 $276,810
Property, plant and equipment, net................... 39,895 39,732 3,593 3,083 3,554
Marketable securities................................ -- -- -- 3,824 --
Intangible assets, net............................... 16,285 10,083 8,843 6,177 --
Other assets......................................... 1,469 3,910 1,340 7,283 7,621
-------- -------- -------- -------- --------
Total assets.................................... $109,524 $173,007 $187,633 $217,428 $287,985
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
Current liabilities.................................. $ 37,551 $ 52,988 $ 51,673 $ 45,202 $ 64,387
Senior and subordinated debt......................... 34,647 43,581 48,012 70,557 101,213
Other long-term debt................................. 13,430 15,010 645 306 1,670
Deferred taxes and other long-term liabilities....... 23,444 15,131 15,601 15,780 19,027
-------- -------- -------- -------- --------
Total liabilities............................... 109,072 126,710 115,931 131,845 186,297
-------- -------- -------- -------- --------
Stockholders' equity................................. 452 46,297 71,702 85,583 101,688
-------- -------- -------- -------- --------
Total liabilities and stockholders' equity...... $109,524 $173,007 $187,633 $217,428 $287,985
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.

References to Note numbers herein are references to 'Notes to Consolidated
Financial Statements' of the Company located in Item 8 herein.

CAPITAL RESOURCES & LIQUIDITY

Negative Trends and Recent Developments

The Company has experienced substantial losses from continuing operations
in each of the fiscal years ended October 31, 1989 through 1993. The aggregate
loss from continuing operations before extraordinary items over that five year
period was $92,303,000. The aggregate net loss applicable to common stock over
that same period was $141,510,000. Cash items and temporary investments of the
Company were $172,753,000 at October 31, 1990 and $16,857,000 at October 31,
1993. The losses experienced by the Company resulted in the Company's Adjusted
Net Worth, as defined in the indenture (the 'Indenture') governing the Company's
10 5/8% Convertible Subordinated Reset Debentures due 2005 (the 'Debentures')
declining to $24,580,000 at April 30, 1993, $10,965,000 at July 31, 1993 and
$452,000 at October 31, 1993. The Company experienced a material loss and had
significant reductions in cash items, temporary investments and Adjusted Net
Worth (as defined in the Indenture) during fiscal year 1993. As of October 31,
1993, the Company had cash and cash equivalents of $10,113,000, restricted cash
of $306,000, and temporary investments of $6,438,000. (Cash equivalents are
comprised of short-term income producing securities which are readily
convertible into cash. Temporary investments at October 31, 1993 include
approximately $2,000,000, based on market, of high yield, unrated or less than
investment grade corporate debt securities.) The decrease of $27,965,000 in cash
and cash equivalents since October 31, 1992, was due primarily to the payment of
legal fees and liabilities resulting from settlement of disputes and product
liability cases, including breast implant litigation (see Notes 7, 18 and 19),
the acquisition of CoastVision (see Note 2) and payments for current operating
expenses.

As a result of the above-described decline in Adjusted Net Worth, the
Company was required under a covenant contained in the Indenture to repurchase
Debentures. (See Note 11, under 'Long-Term Debt,' for a description of such
required repurchases.) The Company did not have the cash available to purchase
Debentures as required by such covenant and was not complying with such
requirement.

On September 28, 1993, the Company reached an agreement (the 'MEC
Agreement') with Medical Engineering Corporation ('MEC') and its parent,
Bristol-Myers Squibb Company ('BMS'), which limited the Company's liability for
breast implant litigation. Pursuant to the MEC Agreement, MEC agreed, subject to
limited exceptions, to take responsibility for substantially all of the breast
implant liability, and the Company agreed to pay MEC an aggregate amount of
between $12,000,000 and $30,000,000 over ten years, the actual amount to be
determined by the Company's net income before taxes in each of the years 1999
through 2003. In October 1993 the Company made an initial payment of $3,000,000
to MEC. See Note 14 for a discussion of the schedule of payments to be made to
MEC and Note 18 for a description of the breast implant litigation and the MEC
Agreement. The MEC Agreement provided that MEC could terminate the agreement if
the Company's exchange offer and consent solicitation (the 'Exchange Offer and
Solicitation') relating to its Debentures (or an alternative restructuring of
the Debentures or other amendment, forbearance, or waiver with respect to the
Debentures) was not completed on terms that were satisfactory to the Company by
February 1, 1994.

On January 6, 1994, the Company completed the Exchange Offer and
Solicitation, the terms of which are described in Note 19, pursuant to which the
Company issued approximately $22,000,000 aggregate principal amount of 10%
Senior Subordinated Secured Notes due 2003 (the 'Notes') and paid approximately
$4,350,000 in cash in exchange for approximately $30,000,000 aggregate principal
amount of Debentures.

In connection with the Exchange Offer and Solicitation, the Company amended
the Indenture to, among other things, eliminate the covenant discussed above,
with which the Company was not in compliance, requiring the Company to
repurchase Debentures. The Company also obtained a waiver (the 'Waiver') of any
and all Defaults and Events of Default (as such terms are defined in the

Indenture) that occurred or may have occurred prior to the expiration of the
Exchange Offer and Solicitation at 5:00 p.m., Eastern Standard Time, on January
6, 1994 (the 'Expiration Date'), to ensure that the Debentures could not be
accelerated based upon any actions, omissions or events (including the costs of
Company's failure to comply with the above-described covenant and matters which
are the subject of the Indictment of which the Company and/or Gary Singer were
convicted and/or the SEC Complaint described in Note 18), whether known or
unknown, that occurred or that may have occurred on or prior to the Expiration
Date and that could have been construed to be Defaults or Events of Default (as
defined in the Indenture).

As a result of the consummation of the Exchange Offer and Solicitation, the
Company has increased its operating and financial flexibility by rendering less
onerous or eliminating various restrictions and obligations previously imposed
by the Indenture. The Exchange Offer and Solicitation further benefited the
Company by reducing the Company's total indebtedness and by decreasing the
Company's future interest expense. However, the amendments to the terms of the
Debentures also reduced the conversion price at which holders may convert
Debentures into shares of the Company's common stock from $27.45 to $5.00 (which
amount is still substantially in excess of the current price of the Company's
common stock).

The Company currently anticipates that, at least during fiscal 1994, it is
likely to experience net cash outflows primarily as a result of continued legal
and other costs associated with pending litigation, research and development
costs of CVP and certain penalties that may be imposed upon the Company, as
discussed below. Depending upon a variety of factors, the Company may need to
raise funds through borrowings or other financings or sales of assets. As
described in Note 18, the Company has been convicted of six counts of mail fraud
and one count of wire fraud based upon the conduct of its former co-Chairman,
Gary Singer. The maximum penalty which could be imposed on the Company is the
greatest of $500,000 per count, twice the gross gain derived from each count or
twice the gross loss suffered by the victim of each count and, in addition, the
court could impose a fine equal to restitution. The Company is also the subject
of the SEC complaint alleging violations of the federal securities laws by the
Company, Gary Singer and Steven Singer (the Company's Executive Vice President
and Chief Operating Officer and Gary Singer's brother), as described in Note 18.
The imposition of any monetary penalties upon the Company as a result of the
criminal convictions or in connection with the matters alleged in the SEC
Complaint, as well as additional defense costs could exacerbate, possibly
materially, the Company's liquidity problems and its need to raise funds. Given
the Company's current financial condition, there can be no assurance that the
Company will be successful in raising the funds which may be required. The
Independent Auditors' report on the Company's consolidated financial statements
located in Item 8 herein contains the following statement:

'The accompanying financial statements have been prepared assuming
that the Company will continue as a going concern. During the past three
fiscal years, the Company has suffered significant losses and negative cash
flows. In addition, as discussed in Note 18 to the financial statements the
Company is exposed to contingent liabilities related to a criminal
conviction and a Securities and Exchange Commission action. Such losses,
negative cash flows, and contingent liabilities raise substantial doubt
about the Company's ability to continue as a going concern. The
consolidated financial statements and financial statement schedules do not
include any adjustments that might result from the outcome of these
uncertainties.'

In light of the foregoing, even with the successful consummation of the Exchange
Offer and Solicitation, and the limitation of the Company's liability for breast
implant litigation by reason of the MEC Agreement, there can be no assurance
that the Company will not face severe liquidity problems or that the Company
could not be forced in the future to seek protection under the Bankruptcy Code.

Clinton Administration Health Care Reforms

On October 27, 1993, President Clinton delivered his Administration's
proposal for national health care reform to Congress. This complex proposal
contains provisions designed to control and reduce growth in public and private
spending on health care, to reform the payment methodology for health care goods
and services by both the public (Medicare and Medicaid) and private sectors,
including overall limitations on future growth in spending for health care
benefits and the provision of universal

access to health care. Currently, there are pending before Congress several
competing health care reform proposals which, through varying mechanisms and
methodologies, are also intended to control or reduce public and private
spending on health care. It is uncertain which, if any, of these proposals will
be adopted by Congress or what actions federal, state or private payors for
health care goods and services may take in response thereto. The Company cannot
yet predict the effect such reforms or the prospect of their enactment may have
on the business of the Company and its subsidiaries. Accordingly, no assurance
can be given that the same will not have a material adverse effect on the
Company's revenues, earnings or cash flows.

Other

As of October 31, 1993, the Company had a receivable of $500,000 plus
accrued interest for escrow funds, all of which was collected by the Company in
December 1993. In addition, during fiscal 1993, the Company collected an
aggregate amount of $8,300,000, including interest of $418,000, on escrow funds.

RESULTS OF OPERATIONS

Comparison of Each of the Years in the Three Year Period Ended October 31,
1993:

Net Service Revenue

On May 29, 1992 the Company acquired Hospital Group of America, Inc.
('HGA'). HGA provides psychiatric and substance abuse treatment through three
facilities that contain an aggregate of 269 licensed beds. The acquisition of
HGA was accounted for as a purchase. Accordingly, the results of HGA's
operations have been included in the Company's consolidated results from May 29,
1992. Also on May 29, 1992, PSG Management, Inc. ('PSG Management'), a
subsidiary of the Company, entered into a management agreement with three
indirect subsidiaries of Nu-Med, Inc. ('Nu-Med'), under which PSG Management is
managing three additional hospitals owned by such subsidiaries which have a
total of 220 licensed beds. Under the management agreement, PSG Management is to
receive a management fee of $6,000,000 payable in equal monthly installments
over the three-year term of the agreement. The management agreement is jointly
and severally guaranteed by Nu-Med and its wholly-owned subsidiary PsychGroup,
Inc. the parent of the contracting subsidiaries which own the managed
facilities. On January 6, 1993, Nu-Med (but not any of its direct or indirect
subsidiaries) filed a voluntary petition under Chapter 11 of the United States
Bankruptcy Code. Neither the Company nor any of its affiliates filed a proof of
claim in the Nu-Med Chapter 11 proceeding, and the bar date (the time for filing
proofs of claims) has past. However, none of the Nu-Med subsidiaries have filed
under Chapter 11, and the Nu-Med subsidiaries have paid the management fee on a
timely basis, although representatives of Nu-Med and its subsidiaries have
alleged in writing that PSG Management has breached the management services
agreement (which contention PSG Management vigorously disputes). Moreover,
Nu-Med's Proposed Disclosure Statement to accompany its Second Amended Plan of
Reorganization, filed with the United States Bankruptcy Court for the Central
District of California, indicates that PsychGroup is commencing performance of
certain administrative functions performed by PSG Management on a parallel
basis.

HGA derives virtually all of its revenue from patients referred for
treatment on either an inpatient or outpatient basis for a variety of
psychological and behavioral disorders. Virtually all patients are covered by
insurance or by other third party reimbursement programs such as Medicare and
Medicaid, which make payment to HGA.

Revenue is affected by changes in the daily rates that HGA receives for
providing its services and by the number of patient days in a given period.
Patient days are a function of admissions and average length of stay.
Consequently, pressures on revenues caused by the current industry trend towards
increased managed care, with attendant decreases in daily rates and declines in
the average length of stay must be offset by increasing the number of admissions
in hospitals and by providing outpatient and other ancillary services outside of
hospitals.

Net service revenue consists of the following:

1993 1992*
------- -------
(IN THOUSANDS)

Net patient revenue............................................................... $43,283 $18,558
Management fees................................................................... 2,000 848
------- -------
$45,283 $19,406
------- -------
------- -------

Net patient revenue by major providers was as follows:

1993 1992*
------------------ ------------------
AMOUNT % TOTAL AMOUNT % TOTAL
------- ------- ------- -------
(DOLLARS IN THOUSANDS)

Commercial insurance......................................... $15,081 35% $ 7,153 38%
Medicare..................................................... 6,654 15% 3,360 18%
Medicaid..................................................... 4,353 10% 532 3%
Blue Cross................................................... 5,821 13% 3,677 20%
HMOs......................................................... 8,408 20% 2,275 12%
Other........................................................ 2,966 7% 1,561 9%
------- ------- ------- -------
$43,283 100% $18,558 100%
------- ------- ------- -------
------- ------- ------- -------

- ------------

* From May 29, 1992

In recent years, forms of prospective reimbursement legislation have been
proposed in various states but have not been enacted into law. If legislation
based on the budgeted costs of individual hospitals were to be enacted in the
future in one or more of the states in which HGA operates psychiatric
facilities, it could have an adverse effect on HGA's business and earnings. In
addition, the enactment of such legislation in states where HGA does not now
operate could have a deterrent effect on the decision to acquire or establish
facilities in such states.

Net Sales of Products

The following table summarizes the increases and decreases in net sales of
products for the Company's CVI and CooperSurgical ('CSI') business units over
the three year period. Sales generated by the Company's CooperVision
Pharmaceuticals unit ('CVP'), a start up business, were $570,000 in 1993,
$46,000 in 1992 and $12,000 in 1991.

INCREASE (DECREASE)
----------------------------------------------------------------
BUSINESS UNIT 1993 VS. 1992 1992 VS. 1991
- ----------------------------------------------------------------- ------------------------------ ------------------------------

CVI......................................................... $ 4,303 15% $ 165 1%
CSI......................................................... (1,331) (8) 8,150 104

1993 VS. 1992

Net sales of CVI increased primarily due to the April 1, 1993 acquisition
of CoastVision, Inc. ('CoastVision'), a manufacturer of custom toric contact
lenses for use by patients with astigmatic vision. In 1993, CVI's sales mix
continued to shift towards daily wear and frequent replacement products, as well
as specialty products, and away from extended wear products. The Company expects
this trend to continue and considers itself to be well positioned to compete
successfully in specialty niches of the contact lens market, particularly with
its Preference'tm' line of frequent replacement lenses and its line of custom
toric lenses.

Net sales of CSI declined primarily due to slower sales of its surgical
systems launched in 1992 for use in the Loop Electrosurgical Excision Procedure
('LEEP'), which is used diagnostically and operatively in the treatment of
cervical cancer and other indications in gynecology. This decline was partially
offset by increased sales of the Company's LEEP disposable products and the
launch of a line of instruments for various laparoscopic (minimally invasive)
procedures. The acceptance of minimally invasive procedures and the expansion of
the minimally invasive surgical market has provided continued customer demand
for CSI's products. Such products are subject to substantial government
regulation and to competition from a large number of competitors.

1992 VS. 1991

Net sales of CVI were relatively flat reflecting the successful launch of
the Preference'r' product line in the fourth quarter of 1991, continued growth
in the Vantage'r' product line and a significant decline in sales returns during
1992. The positive impact of the foregoing was offset by lower average selling
prices resulting from the Company's shift from direct sales to the use of
distributors and erosion of the extended wear contact lens market in the United
States. Net sales of CooperSurgical increased due to the expansion of the LEEP
product line and the inclusion of a full year's results in 1992 vs. nine months
in 1991 for the Euro-Med business.

The percentage increases in consolidated net sales of products in 1993 (vs.
1992) and 1992 (vs. 1991) were 8% and 24%, respectively.

Cost of Services Provided

Cost of services provided represents all of the operating costs incurred by
HGA in generating its net patient revenue and management fee revenue. The
results of subtracting cost of services provided from net service revenue is an
operating profit of $2,529,000 or 5.6% net service revenue in 1993 and
$2,053,000 or 10.6% of net service revenue in 1992. The decreased percentage of
operating profit is primarily attributable to a lower than expected number of
patient days at the hospitals operated by HGA, exacerbated by a deterioration of
payor mix. Also in 1993, HGA incurred non-recurring charges of approximately
$360,000 associated with severance and approximately $400,000 to write down
certain governmental receivables.

Cost of Products Sold

Gross profit (net sales of products less cost of products sold) as a
percentage of net sales of products ('margin') was as follows:

MARGIN %
--------------------
1993 1992 1991
---- ---- ----

CVI................................................................................ 69 61 53
CSI................................................................................ 49 54 51
CVP................................................................................ 51 33 50
Consolidated....................................................................... 63 58 52

1993 VS. 1992

Margin for CVI has increased due to the realization of efficiencies in
manufacturing as well as the impact of cost reduction measures associated with
downsizing. Also, the inclusion of higher margin CoastVision products has
resulted in a favorable product mix. The margin decrease at CSI reflects
increased sales of endoscopic products used in laparoscopic surgical procedures
and sales to international distributors, each of which generates lower margins
than CSI's other products. CSI also incurred an inventory write-down of
approximately $450,000 in 1993.

1992 VS. 1991

CVI's margin increased due to the realization of efficiencies and the
impact of cost reduction measures associated with CooperVision's downsizing,
improved product mix and the absence of inventory write-downs at levels
approaching those made in 1991, partially offset by lower average selling prices
due to CooperVision's shift towards distributors. Margin for CooperSurgical
increased reflecting product mix, primarily the inclusion of higher margin LEEP
products.

Research and Development Expense

Research and development expense was $3,209,000 or 7% of net sales of
products in 1993 compared to $3,267,000 or 7% in 1992 and $2,268,000 or 6% in
1991.

The decrease in 1993 is attributable to certain declines in research and
development project expenses in the CVI and CSI business units, net of increased
development activity primarily related to clinical and regulatory costs at CVP.
CVP accounted for 51%, 40% and 32% of consolidated research

and development expense in 1993, 1992 and 1991, respectively. The Company
anticipates that in the next two years it will concentrate its research and
development expenditures on certain clinical and regulatory projects being
administered by CVP.

Selling, General and Administrative Expense

The Company's selling, general and administrative expense ('SGA') by
business unit and corporate was as follows:

1993 1992 1991
------- ------- -------
(IN THOUSANDS)

CVI.................................................................... $13,386 $12,299 $18,519
CSI.................................................................... 10,305 9,871 5,967
CVP.................................................................... 598 333 101
Corporate/Other........................................................ 25,093 22,097 21,040
------- ------- -------
$49,382 $44,600 $45,627
------- ------- -------
------- ------- -------

The increases in Corporate/Other SGA reflect increases in legal expenses
associated with litigation, which have outweighed reductions that have been
effected in other areas:

1993 1992 1991
------- ------- -------
(IN THOUSANDS)

Legal.................................................................. $16,498 $ 9,581 $ 6,917
Other.................................................................. 8,595 12,516 14,123
------- ------- -------
$25,093 $22,097 $21,040
------- ------- -------
------- ------- -------

A significant portion of the legal expenses summarized above related to
costs associated with breast implant liabilities, which were limited pursuant to
the MEC Agreement reached on September 28, 1993 (see Note 18 and 'Capital
Resources and Liquidity'). Accordingly, the Company currently anticipates a
significant reduction in legal expenses going forward.

SGA for CVI increased by 9% in 1993 vs. 1992 due to the inclusion of SGA of
CoastVision, which the Company acquired on April 1, 1993. As a percent of sales,
however, CVI's SGA decreased in 1993 to 42% from 44% in 1992, reflecting cost
synergies effected as a result of merging CoastVisions' operations into CVI.

The increases at CSI reflect expanding CSI business, both by internal
growth and acquisition, much of which reflected the Company's expansion into
various laparoscopic procedures.

Settlement of Disputes

The charge of $6,350,000 in 1993 is comprised of $4,850,000 paid in
connection with the settlement reached between the Company and Cooper Life
Sciences, Inc. ('CLS') described below, and $1,500,000 for certain other
disputes.

The Company and CLS entered into a settlement agreement, dated June 14,
1993, pursuant to which CLS delivered a general release of claims against the
Company, subject to exceptions for specified on-going contractual obligations,
and agreed to certain restrictions on its acquisition, voting and transfer of
securities of the Company, in exchange for the Company's payment of $4,000,000
in cash and delivery of 200,000 shares of common stock of CLS owned by the
Company and a general release of claims against CLS, subject to similar
exceptions (see Note 15). The cash paid and fair value of CLS shares returned to
CLS were charged to the Company's Statement of Operations as settlement of
disputes.

In 1992 the Company recorded a charge for settlement of disputes comprised
of: 1) a $650,000 charge related to a transaction with CLS, 2) a payment to Mr.
Frederick R. Adler, a former director of the Company and 3) provisions for
several ongoing litigations and disputes, including the settlement of Guenther
v. Cooper Life Sciences, Inc., et. al. (see Note 7).

Debt Restructuring Costs

The $2,131,000 charge for debt restructuring costs reflects the Company's
estimate of transaction costs associated with the Exchange Offer and
Solicitation. These costs include amounts paid or to be

paid to the Company's attorneys, accountants and financial advisor, printer's
fees, fees of the financial advisor to the informal committee of holders of
Debentures and its attorneys, and fees of the Information Agent and the Exchange
Agent.

Costs Associated With Restructuring Operations

In the second quarter of 1993, the Company recorded $451,000 of
restructuring costs for consolidation of CSI facilities and related
reorganization and relocation costs.

Amortization of Intangibles

Amortization of intangibles was $772,000 in 1993, $742,000 in 1992 and
$946,000 in 1991. The changes in each year reflect acquisitions and divestitures
during the three year period (see Note 2).

Investment Income, Net

Investment income, net includes interest income of $2,439,000 in 1993,
$6,960,000 in 1992 and $12,057,000 in 1991. The decrease in interest income for
each year reflects the Company's use of cash for the acquisition of CoastVision
on April 1, 1993 and HGA on May 29, 1992 (see Note 2), to purchase a portion of
its Debentures, operating cash use, declining interest rates during 1992 and
1993 and a shift in investment strategy towards more conservative instruments
with lower risk and correspondingly lower returns. Also included in investment
income, net are net realized and unrealized gains (losses) in marketable
securities and investments of ($824,000) in 1993, $7,294,000 in 1992 and
$211,000 in 1991. See Note 1 under 'Temporary Investments.'

Gain on Sale of Assets and Businesses, Net

On February 12, 1993, the Company sold its EYEscrub'tm' product line for
$1,400,000 which sale resulted in a $620,000 gain. In 1992, the Company assigned
its license to manufacture, have manufactured, sell, distribute and market
certain intraocular lens products and disposed of certain other related rights
and assets. Total cash consideration received by the Company for such assignment
was approximately $5,200,000 which resulted in a gain of $1,030,000.

Other Income (Expense), Net

Other income (expense), net was $174,000 in 1993, $772,000 in 1992 and
$574,000 in 1991. Other income in 1993 primarily includes consent fees,
extension fees and collection fees related to the Company's temporary investment
activity and rental income from the Company's real estate ventures, all of which
were partially offset by a foreign exchange loss realized on the sale of an
investment denominated in other than U.S. dollars. Other income (expense), net
in 1992 primarily reflects the receipt by the Company of $1,500,000 for business
interruption insurance related to a fire at a CVI facility in 1991, offset by a
foreign exchange loss resulting from an unhedged liability. Other income
(expense), net in 1991 includes deferred income related to a standstill
agreement which expired in September 1991.

Interest Expense

Interest expense was $6,129,000 in 1993, $6,697,000 in 1992 and $7,148,000
in 1991. These declines are primarily due to the Company's purchases of its
Debentures (see Note 4). Partially offsetting the reduction of Debenture
interest expense was additional interest expense related to the assumed debt of
HGA (see Note 2).

Provision for Income Taxes

Details with regard to the Company's provision for income taxes for each of
the years in the three-year period ended October 31, 1993 are set out in Note 9.
The 1993 provision of $417,000 relates entirely to current state income and
franchise taxes. The 1992 provision of $100,000 relates to current state income
and franchise taxes, a federal assessment and an offsetting reduction of
liabilities for estimated income taxes relating to international operations
which were no longer necessary. The 1991 provision represents state franchise
taxes.

Loss on Sale of Discontinued Operations, Net of Taxes

A charge of $14,000,000 in 1993 represents an increase to the Company's
accrual for contingent liabilities associated with breast implant litigation
involving the plastic and reconstructive surgical division of the Company's
former Cooper Surgical business segment ('Surgical') which was sold in fiscal
1989 (the 'Breast Implant Accrual'). See Notes 3 and 18. In 1993 the Company
also recorded a reversal of $343,000 of accruals no longer necessary related to
another discontinued business.

In 1992 the Company recorded a charge of $9,300,000 to discontinued
operations. A charge of $7,000,000 represents an increase to the Company's
Breast Implant Accrual. The balance of the charge reflects a $2,000,000
settlement of a dispute involving the Company's former Surgical business
segment, and a $300,000 adjustment to the loss on the sale of the Company's
former Cooper Technicon business segment.

No tax benefit has been applied against the above figures, as the Company
was not profitable in either year.

Extraordinary Items

Extraordinary items represent extraordinary gains on the Company's
purchases of its Old Debentures as set forth below:

PRINCIPAL
AMOUNT EXTRAORDINARY
PURCHASED GAIN
----------- -------------

1993...................................................................... $ 4,846,000 $ 924,000
1992...................................................................... 5,031,000 640,000
1991...................................................................... 23,166,000 5,428,000

INFLATION AND CHANGING PRICES

Inflation has had little effect on the Company's operations in the last
three years.

IMPACT OF STATEMENTS OF FINANCIAL ACCOUNTING STANDARDS ISSUED BUT NOT ADOPTED

In December 1992, the Financial Accounting Standards Board (the 'FASB')
issued Statement of Financial Accounting Standards (a 'FAS') No. 112,
'Employers' Accounting for Postemployment Benefits' ('FAS 112'). FAS 112
establishes accounting standards for employers who provide benefits to former or
inactive employees after employment but before retirement ('postemployment
benefits'). Postemployment benefits are all types of benefits provided to former
or inactive employees, their beneficiaries, and covered dependents. Those
benefits include, but are not limited to, salary continuation, supplemental
unemployment benefits, severance benefits, disability-related benefits
(including workers' compensation), job training and counseling, and continuation
of benefits such as health care benefits and life insurance coverage.

FAS 112 is effective for fiscal years beginning after December 15, 1993.
Earlier application is encouraged. Previously issued financial statements shall
not be restated. The Company intends to adopt FAS 112 when required, and does
not believe that such adoption will have a material impact on its consolidated
financial statements.

In May 1993, the FASB issued FAS 115, 'Accounting for Certain Investments
in Debt and Equity Securities.' FAS 115 addresses the accounting and reporting
for investments in equity securities that have readily determinable fair value
and for all investments in debt securities. FAS 115 is effective for fiscal
years beginning after December 15, 1993. Initial adoption must be at the
beginning of the fiscal year, and retroactive adoption is not allowed. The
Company intends to adopt FAS 115 when required, and does not believe that such
adoption will have a material impact on its consolidated financial statements.

See Note 13 for a discussion of FAS 106, 'Employer's Accounting for
Postretirement Benefits Other Than Pensions,' and Note 9 for a discussion of FAS
109, 'Accounting for Income Taxes.'

INDEPENDENT AUDITORS' REPORT

The Board of Directors and Stockholders
THE COOPER COMPANIES, INC.:

We have audited the accompanying consolidated balance sheet of The Cooper
Companies, Inc. and subsidiaries as of October 31, 1993 and 1992 and the related
consolidated statements of operations, stockholders' equity and the cash flows
for each of the years in the three-year period ended October 31, 1993. In
connection with our audits of the consolidated financial statements, we also
have audited financial statement schedules II, V, VI, VIII, and X. These
consolidated financial statements and financial statement schedules are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements and financial statement
schedules based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. 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 at October 31, 1993 and 1992 and the results of
their operations and their cash flows for each of the years in the three-year
period ended October 31, 1993, in conformity with generally accepted accounting
principles. Also in our opinion, the related financial statement schedules, when
considered in relation to the basic consolidated financial statements taken as a
whole, present fairly, in all material respects, the information set forth
therein.

The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. During the past three fiscal years,
the Company has suffered significant losses and negative cash flows. In
addition, as discussed in Note 18 to the financial statements the Company is
exposed to contingent liabilities related to a criminal conviction and a
Securities and Exchange Commission action. Such losses, negative cash flows, and
contingent liabilities raise substantial doubt about the Company's ability to
continue as a going concern. The consolidated financial statements and financial
statement schedules do not include any adjustments that might result from the
outcome of these uncertainties.

KPMG PEAT MARWICK

San Francisco, California
January 24, 1994

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

THE COOPER COMPANIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET

OCTOBER 31,
------------------------
1993 1992
--------- ----------
(DOLLARS IN THOUSANDS)

ASSETS
Current assets:
Cash and cash equivalents..................... $ 10,113 $ 38,078
Restricted cash............................... 306 747
Temporary investments......................... 6,438 36,492
Receivables:
Trade and patient accounts, less allowance for
doubtful accounts of $3,240 in 1993 and
$3,031 in 1992............................... 14,298 16,066
Other............................................. 2,821 10,584
--------- ----------
17,119 26,650
--------- ----------
Inventories:
Raw materials................................. 3,958 2,647
Work-in-process............................... 865 523
Finished goods................................ 10,164 11,722
--------- ----------
14,987 14,892
--------- ----------
Other current assets.............................. 2,912 2,423
--------- ----------
Total current assets...................... 51,875 119,282
--------- ----------
Property, plant and equipment at cost............. 48,294 46,017
Less accumulated depreciation and amortization.... 8,399 6,285
--------- ----------
39,895 39,732
--------- ----------
Intangibles, net of accumulated amortization...... 16,285 10,083
Other assets...................................... 1,469 3,910
--------- ----------
$ 109,524 $ 173,007
--------- ----------
--------- ----------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current installments of long-term debt:
10 5/8% Convertible Subordinated Reset
Debentures due 2005....................... $ 4,350 $ --
Other..................................... 1,499 5,190
--------- ----------
5,849 5,190
--------- ----------
Accounts payable.............................. 4,269 14,645
Employee compensation, benefits and
severance.................................... 5,961 7,849
Other accrued liabilities..................... 21,079 25,017
Income taxes payable.......................... 393 287
--------- ----------
Total current liabilities................. 37,551 52,988
--------- ----------
Long-term debt:
10 5/8% Convertible Subordinated Reset
Debentures due 2005.......................... 34,647 43,581
Other, less current installments.............. 13,430 15,010
--------- ----------
48,077 58,591
--------- ----------
Deferred income taxes and other noncurrent
liabilities..................................... 23,444 15,131
--------- ----------
Total liabilities......................... 109,072 126,710
--------- ----------
Commitments and Contingencies (See Notes 14 and
18)
Stockholders' equity:
Senior Exchangeable Redeemable Restricted
Voting Preferred Stock, $.10 par value,
shares authorized 855,000 plus additional
shares as required for dividends; aggregate
liquidation preference value and shares
issued and outstanding of $15,147 and
151,466, respectively, at October 31, 1992... -- 15
Series B Preferred Stock, $.10 par value,
shares authorized 1,000 plus additional
shares as required for dividends; aggregate
liquidation preference value and shares
issued and outstanding of $3,450 and 345,
respectively, at October 31, 1993............ -- --
Common stock, $.10 par value, shares authorized:
100,000,000; issued and outstanding: 30,129,125
and 30,181,258 at October 31, 1993 and 1992,
respectively.................................... 3,013 3,018
Additional paid-in capital........................ 179,810 180,497
Translation adjustments........................... (223) (66)
Accumulated deficit............................... (181,743) (134,938)
Unamortized restricted stock award compensation... (405) (2,229)
--------- ----------
Total stockholders' equity................ 452 46,297
--------- ----------
$ 109,524 $ 173,007
--------- ----------
--------- ----------

See accompanying notes to financial statements.

THE COOPER COMPANIES, INC. AND SUBSIDIARIES
STATEMENT OF CONSOLIDATED OPERATIONS

YEAR ENDED OCTOBER 31,
------------------------------------
1993 1992 1991
-------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE
FIGURES)

Net service revenue.................................................. $ 45,283 $ 19,406 $ --
Net sales of products................................................ 47,369 43,873 35,524
-------- -------- --------
Net operating revenues.......................................... 92,652 63,279 35,524
-------- -------- --------
Cost of services provided............................................ 42,754 17,353 --
Cost of products sold................................................ 17,538 18,236 16,979
Research and development expense..................................... 3,209 3,267 2,268
Selling, general and administrative expense.......................... 49,382 44,600 45,627
Settlement of disputes............................................... 6,350 4,498 --
Debt restructuring costs............................................. 2,131 -- --
Costs associated with restructuring operations....................... 451 -- --
Amortization of intangibles.......................................... 772 742 946
Investment income, net............................................... 1,615 14,254 12,268
Gain on sales of assets and businesses, net.......................... 620 1,030 --
Other income, net.................................................... 174 772 574
Interest expense..................................................... 6,129 6,697 7,148
-------- -------- --------
Loss from continuing operations before income taxes.................. (33,655) (16,058) (24,602)
Provision for income taxes........................................... 417 100 201
-------- -------- --------
Loss from continuing operations before extraordinary items........... (34,072) (16,158) (24,803)
Loss on sale of discontinued operations, net of taxes................ (13,657) (9,300) --
-------- -------- --------
Loss before extraordinary items...................................... (47,729) (25,458) (24,803)
Extraordinary items.................................................. 924 640 5,428
-------- -------- --------
Net loss............................................................. (46,805) (24,818) (19,375)
Less, dividend requirements on Senior Exchangeable
Redeemable Restricted Voting Preferred Stock.................... 320 1,804 2,325
-------- -------- --------
Net loss applicable to common stock.................................. ($47,125) ($26,622) ($21,700)
-------- -------- --------
-------- -------- --------
Net loss per common share:
Continuing operations........................................... ($1.13) ($.64) ($1.05)
Discontinued operations......................................... (.45) (.34) --
Loss before extraordinary items................................. (1.58) (.98) (1.05)
Extraordinary items............................................. .03 .02 .21
Net loss per common share............................................ ($1.55) ($.96) ($.84)
Cash dividends per common share...................................... $ -- $ -- $ --
-------- -------- --------
-------- -------- --------
Average number of common shares outstanding.......................... 30,377 27,669 25,878
-------- -------- --------
-------- -------- --------

See accompanying notes to financial statements.

THE COOPER COMPANIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS

YEARS ENDED OCTOBER 31,
--------------------------------
1993 1992 1991
-------- -------- --------
(IN THOUSANDS)

Cash flows from operating activities:
Net loss................................................................. ($46,805) ($24,818) ($19,375)
Adjustments to reconcile net loss to net cash used by operating activities:
Current and deferred income taxes........................................ 417 (498) 278
Depreciation expense..................................................... 2,624 1,537 1,039
Provision for doubtful accounts.......................................... 3,202 363 237
Restructuring charge..................................................... 451 -- --
Amortization expenses:
Intangible assets................................................... 904 877 1,072
Debt discount....................................................... 201 208 207
Restricted stock.................................................... 1,084 (33) 1,734
Net (gain) loss from:
Sales of assets and businesses...................................... (620) (1,030) --
Investments......................................................... 824 (7,294) (211)
Extraordinary items................................................. (924) (640) (5,428)
Change in assets and liabilities net of effects from acquisitions and
sales of assets and businesses:
Net (increases) decreases in assets:
Restricted cash................................................ 441 8,838 365
Receivables.................................................... 5,101 (817) 3,292
Inventories.................................................... 1,150 (3,728) (2,804)
Other current assets........................................... (383) (631) (180)
Other assets................................................... 287 393 197
Net increases (decreases) in liabilities:
Accounts payable.................................................... (10,055) 6,900 (916)
Accrued liabilities................................................. (11,155) (1,084) (5,112)
Income taxes payable................................................ (581) (1,264) 91
Deferred income taxes and other long-term liabilities............... 9,000 -- --
-------- -------- --------
Total adjustments.............................................. 1,968 2,097 (6,139)
-------- -------- --------
Net cash used by operating activities.................................... (44,837) (22,721) (25,514)
Cash flows from investing activities:
Sales of assets and businesses (including releases of cash from
escrow)................................................................ 9,700 5,959 1,000
Purchases of assets and businesses, net of cash acquired................. (9,794) (14,452) (2,229)
Purchases of property, plant and equipment............................... (1,749) (3,746) (1,480)
Sales of temporary investments........................................... 32,088 265,352 206,833
Purchases of temporary investments....................................... (3,689) (263,464) (219,586)
Collection of note receivable............................................ -- 2,183 --
Purchase of Cooper Life Sciences, Inc. common stock...................... -- (1,500) --
-------- -------- --------
Net cash provided (used) by investing activities......................... 26,556 (9,668) (15,462)
-------- -------- --------

See accompanying notes to financial statements.

THE COOPER COMPANIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS -- (CONTINUED)

YEARS ENDED OCTOBER 31,
-------------------------------
1993 1992 1991
------- -------- --------
(IN THOUSANDS)

Cash flows from financing activities:
Purchase of the Company's 10 5/8% Debentures.............................. ($3,861) ($ 4,325) ($17,324)
Net payments of notes payable and current long-term debt.................. (5,818) (1,839) (1,929)
------- -------- --------
Net cash used by financing activities................................ (9,679) (6,164) (19,253)
Other, net..................................................................... (5) (21) (15)
------- -------- --------
Net decrease in cash and cash equivalents...................................... (27,965) (38,574) (60,244)
Cash and cash equivalents at beginning of year................................. 38,078 76,652 136,896
------- -------- --------
Cash and cash equivalents at end of year....................................... $10,113 $ 38,078 $ 76,652
------- -------- --------
------- -------- --------
Supplemental disclosures of cash flow information:
Cash paid (refunds) for:
Interest (net of amounts capitalized)................................ $ 6,275 $ 6,688 $ 7,150
------- -------- --------
------- -------- --------
Income taxes......................................................... $ 90 $ 511 ($ 108)
------- -------- --------
------- -------- --------
Supplemental schedule of noncash investing and financing activities:
Pay-in-kind Senior Preferred Stock dividends.............................. $ 320 $ 1,804 $ 2,325
------- -------- --------
------- -------- --------

During the three years ended October 31, 1993, the Company acquired
businesses and entered into certain licensing and distribution agreements. In
connection with these acquisitions and agreements were assumed liabilities as
follows:

YEARS ENDED OCTOBER 31,
----------------------------
1993 1992 1991
-------- -------- --------
(IN THOUSANDS)

Fair value of assets and businesses acquired
including capitalized costs................ $ 10,517 $ 56,504 $ 4,434
Investment in debt securities exchanged...... -- (12,322) --
Cash paid.................................... (9,794) (16,687) (2,229 )
-------- -------- --------
Liabilities assumed.......................... $ 723 $ 27,495 $ 2,205
-------- -------- --------
-------- -------- --------

On June 12, 1992, the Company consummated a transaction with Cooper Life
Sciences, Inc. ('CLS') which eliminated approximately 80% of the Company's $100
per share liquidation preference Senior Exchangeable Redeemable Restricted
Voting Preferred Stock ('SERPS') and resulted in the issuance of 4,850,000
shares of the Company's common stock. On June 14, 1993, the Company acquired
from CLS all of the remaining outstanding SERPS of the Company in exchange for a
newly created series of preferred stock of the Company ('Series B Preferred
Stock'). See Note 15, 'Agreements with CLS,' for a further discussion of these
transactions.

See accompanying notes to financial statements.

THE COOPER COMPANIES, INC. AND SUBSIDIARIES
STATEMENT OF CONSOLIDATED STOCKHOLDERS' EQUITY
YEARS ENDED OCTOBER 31, 1993, 1992, AND 1991
(IN THOUSANDS)

SENIOR
EXCHANGEABLE
REDEEMABLE
RESTRICTED
VOTING SERIES B
PREFERRED PREFERRED
STOCK STOCK COMMON STOCK
---------- ----------- ----------------
PAR PAR PAR
SHARES VALUE SHARES VALUE SHARES VALUE
---- --- ---- ---- ------- ------

Balance October 31, 1990................ 529 $53 0 $0 25,536 $2,554
Net Loss.............................. -- -- -- -- -- --
Aggregate translation adjustment...... -- -- -- -- -- --
Unamortized stock compensation related
to restricted stock grants.......... -- -- -- -- -- --
Restricted stock amortization and
share issuance, forfeitures and
lifting of restrictions............. -- -- -- -- 158 15
Dividend requirements on Senior
Preferred Stock..................... -- -- -- -- -- --
Issuance of Senior Preferred Stock.... 66 7 -- -- -- --
Reclassification of investment to
current marketable securities....... -- -- -- -- -- --
---- --- ---- ---- ------- ------
Balance October 31, 1991................ 595 60 0 0 25,694 2,569
---- --- ---- ---- ------- ------
Net Loss.............................. -- -- -- -- -- --
Aggregate translation adjustment...... -- -- -- -- -- --
Unamortized stock compensation related
to restricted stock grants.......... -- -- -- -- -- --
Restricted stock amortization and
share issuance, forfeitures and
lifting of restrictions............. -- -- -- -- (363) (36)
Dividend requirements on Senior
Preferred Stock..................... -- -- -- -- -- --
Issuance
of Senior Preferred Stock........... 44 4 -- -- -- --
CLS Transaction -- June 12, 1992 (see
Note 15, under 'Agreements with
CLS')............................... (488) (49) -- -- 4,850 485
---- --- ---- ---- ------- ------
Balance October 31, 1992................ 151 15 0 0 30,181 3,018
---- --- ---- ---- ------- ------
Net Loss.............................. -- -- -- -- -- --
Aggregate translation adjustment...... -- -- -- -- -- --
Unamortized stock compensation related
to restricted stock grants.......... -- -- -- -- 145 15
Restricted stock amortization and
share issuance, forfeitures and
lifting of restrictions............. -- -- -- -- (197) (20)
Dividend requirements on Senior
Preferred Stock..................... -- -- -- -- -- --
Issuance of Senior Preferred Stock.... 10 1 -- -- -- --
CLS Exchange Agreement -- June 14,
1993 (see Note 15, under 'Agreements
with CLS').......................... (161) (16) 345 -- -- --
---- --- ---- ---- ------- ------
Balance October 31, 1993................ 0 $0 345 $0 30,129 $3,013
---- --- ---- ---- ------- ------
---- --- ---- ---- ------- ------

UNREALIZED UNAMORTIZED
LOSS RESTRICTED
ON STOCK
PAID-IN TRANSLATION ACCUMULATED EQUITY AWARD
CAPITAL ADJUSTMENTS DEFICIT SECURITIES COMPENSATION TOTAL
-------- ----------- ------- ---------- ------------ ------

Balance October 31, 1990................ $181,849 $101 ($90,745) ($3,637) ($4,592) $85,583
Net Loss.............................. -- -- (19,375) -- -- (19,375)
Aggregate translation adjustment...... -- 101 -- -- -- 101
Unamortized stock compensation related
to restricted stock grants.......... 840 -- -- -- (840) --
Restricted stock amortization and
share issuance, forfeitures and
lifting of restrictions............. (115) -- -- -- 1,856 1,756
Dividend requirements on Senior
Preferred Stock..................... (2,325) -- -- -- -- (2,325)
Issuance of Senior Preferred Stock.... 2,318 -- -- -- -- 2,325
Reclassification of investment to
current marketable securities....... -- -- -- 3,637 -- 3,637
-------- ---- -------- ------ ------ -------
Balance October 31, 1991................ 182,567 202 (110,120) 0 (3,576) 71,702
-------- ---- -------- ------ ------ -------
Net Loss.............................. -- -- (24,818) -- -- (24,818)
Aggregate translation adjustment...... -- (268) -- -- -- (268)
Unamortized stock compensation related
to restricted stock grants.......... 874 -- -- -- (874) 0
Restricted stock amortization and
share issuance, forfeitures and
lifting of restrictions............. (2,254) -- -- -- 2,221 (69)
Dividend requirements on Senior
Preferred Stock..................... (1,804) -- -- -- -- (1,804)
Issuance
of Senior Preferred Stock........... 1,800 -- -- -- -- 1,804
CLS Transaction -- June 12, 1992 (see
Note 15, under 'Agreements with
CLS')............................... (686) -- -- -- -- (250)
-------- ---- -------- ------ ------ -------
Balance October 31, 1992................ 180,497 (66) (134,938) 0 (2,229) 46,297
-------- ---- -------- ------ ------ -------
Net Loss.............................. -- -- (46,805) -- -- (46,805)
Aggregate translation adjustment...... -- (157) -- -- -- (157)
Unamortized stock compensation related
to restricted stock grants.......... 75 -- -- -- (88) 2
Restricted stock amortization and
share issuance, forfeitures and
lifting of restrictions............. (778) -- -- -- 1,912 1,114
Dividend requirements on Senior
Preferred Stock..................... (320) -- -- -- -- (320)
Issuance of Senior Preferred Stock.... 320 -- -- -- -- 321
CLS Exchange Agreement -- June 14,
1993 (see Note 15, under 'Agreements
with CLS').......................... 16 -- -- -- -- 0
-------- ---- -------- ------ ------ -------
Balance October 31, 1993................ $179,810 ($223) ($181,743) $ 0 ($405) $ 452
-------- ---- -------- ------ ------ -------
-------- ---- -------- ------ ------ -------

See accompanying notes to financial statements.

THE COOPER COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

GENERAL

The Cooper Companies, Inc. and its subsidiaries (the 'Company') develop,
manufacture and market healthcare products, including a range of hard and soft
contact lenses, ophthalmic pharmaceutical products and diagnostic and surgical
instruments. On May 29, 1992, with the acquisition of Hospital Group of America,
Inc. ('HGA')(see Note 2), the Company began to provide healthcare services
through the ownership and operation of certain psychiatric facilities and
management of other such facilities.

With the acquisition of HGA, the Company has adopted certain financial
accounting and reporting practices which are specific to the healthcare service
industry.

PRINCIPLES OF CONSOLIDATION

The consolidated financial statements include the accounts of the Company.
Intercompany transactions and accounts are eliminated in consolidation. Also,
certain reclassifications have been applied to prior years' financial statements
to conform such statements to the current year's presentation. None of these
reclassifications had any impact on net loss.

FOREIGN CURRENCY TRANSLATION

Assets and liabilities of the Company's operations located outside the
United States (primarily Canada) are translated at prevailing year-end rates of
exchange. Related income and expense accounts are translated at weighted average
rates for each year. Gains and losses resulting from the translation of
financial statements in foreign currencies into U. S. dollars are recorded in
the equity section of the consolidated balance sheet. Gains and losses resulting
from the impact of changes in exchange rates on transactions denominated in
foreign currencies are included in the determination of net loss for each
period. Foreign exchange losses included in the Company's consolidated statement
of operations for each of the years ended October 31, 1993, 1992 and 1991 were
($550,000), ($769,000) and ($49,000), respectively.

NET SERVICE REVENUE

Net service revenue consists primarily of net patient service revenue,
which is based on the HGA hospitals' established billing rates less allowances
and discounts principally for patients covered by Medicare, Medicaid, Blue Cross
and other contractual programs. Payments under these programs are based on
either predetermined rates or the cost of services. Settlements for
retrospectively determined rates are estimated in the period the related
services are rendered and are adjusted in future periods as final settlements
are determined. Management believes that adequate provision has been made for
adjustments that may result from final determination of amounts earned under
these programs. Approximately 38% and 41%, respectively, of 1993 and 1992 net
service revenues are from participation of hospitals in Medicare and Medicaid
programs and Blue Cross.

With respect to net service revenue, receivables from government programs
and Blue Cross represent the only concentrated group of credit risk for the
Company, and management does not believe that there are any credit risks
associated with these governmental agencies or Blue Cross. Negotiated and
private receivables consist of receivables from various payors, including
individuals involved in diverse activities, subject to differing economic
conditions, and do not represent any concentrated credit risks to the Company.
Furthermore, management continually monitors and adjusts its reserves and
allowances associated with these receivables.

THE COOPER COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

NET SALES OF PRODUCTS

Net sales of products consists of sales from the Company's CooperVision and
CooperSurgical businesses. The Company recognizes product revenue when risk of
ownership has transferred to the buyer, with appropriate provisions for sales
returns and uncollectible accounts.

With respect to net sales of products, management believes trade
receivables do not include any concentrated groups of credit risk.

CASH AND CASH EQUIVALENTS

Cash and cash equivalents includes commercial paper and other short-term
income producing securities with a maturity date at purchase of three months or
less. These investments are readily convertible to cash, and are carried at cost
which approximates market.

RESTRICTED CASH

Restricted cash represents collateral for expiring insurance policies for a
discontinued contact lens insurance program.

TEMPORARY INVESTMENTS

Temporary investments are primarily current marketable equity and debt
securities. Current marketable debt and equity securities are carried at the
lower of aggregate cost or market at the balance sheet date with unrealized
losses included in investment income, net in the statement of consolidated
operations. Other securities and investments are carried at cost. Gains or
losses realized upon sale (based on the first-in, first-out method) and
write-downs necessitated by other than temporary declines in value for all
securities and investments are also reflected in investment income, net.

As of October 31, 1993 and October 31, 1992, aggregate cost and market
value, and gross unrealized gains and losses for current marketable securities
are as follows:

OCTOBER 31, 1993 OCTOBER 31, 1992
------------------------ ------------------------
EQUITY DEBT EQUITY DEBT
SECURITIES SECURITIES SECURITIES SECURITIES
---------- ---------- ---------- ----------
(IN THOUSANDS)

Aggregate cost............................................. $4,937 $2,651 $2,711 $ 35,296
Aggregate market value..................................... 4,428 2,010 1,999 28,325
Gross unrealized gains..................................... -- 163 93 144
Gross unrealized losses.................................... 509 804 805 7,115

In addition, the Company carried certain non-marketable equity and debt
securities at October 31, 1992, at cost in the amounts of $4,068,000 and
$2,100,000, respectively, in its temporary investments.

Unrealized gains and losses on marketable securities included in the table
above compare the market value of the Company's investment in securities as of
October 31, 1993 and 1992 versus the cost of such securities. The unrealized
gains and losses do not indicate the actual gains or losses that will be
realized by the Company upon the disposition of such marketable securities. The
net unrealized loss on the current marketable securities portfolio was increased
from approximately $1,150,000 at October 31, 1993, to approximately $1,842,000
at December 31, 1993. For the two months ended December 31, 1993, the Company
had net realized gains on investments of $191,000.

Included in the Company's marketable debt securities portfolio at October
31, 1993 and 1992 are debt securities whose issuers are currently in default of
interest payments and/or in bankruptcy reorganization. Total debt securities in
default of interest payments and in bankruptcy at October 31, 1993 have an
adjusted carrying amount of approximately $2,651,000 on which the Company has
recorded an aggregate unrealized loss of $641,000. The maximum additional
accounting loss the

THE COOPER COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Company would incur if these securities become worthless would be an additional
$2,010,000 (i.e. $2,651,000 less $641,000) because the Company does not accrue
interest income on such issues.

Included in the statement of consolidated operations in investment income,
net for each of the years ended October 31, 1993, 1992 and 1991 are unrealized
gains (losses) of $6,532,000, ($6,244,000) and $2,797,000, respectively, on
current marketable securities. Also included in investment income, net for the
years ended October 31, 1993, 1992, and 1991 are net realized gains (losses) of
($7,356,000), $13,538,000 and ($2,586,000), respectively, on marketable
equities, debt securities and option contracts. The combined impact of the
aforementioned net unrealized and realized gains (losses) for each of the years
ended October 31, 1993, 1992 and 1991 was a net gain (loss) of ($824,000),
$7,294,000 and $211,000, respectively.

Interest income for each of the years ended October 31, 1993, 1992 and 1991
was $2,439,000, $6,960,000 and $12,057,000, respectively, and is included in
investment income, net. Dividend income in any reported year was de minimis.

A former Co-Chairman of the Company and, by reason of his actions, the
Company, have been convicted of violations of federal criminal laws, and the
Securities and Exchange Commission (the 'SEC') has initiated an action with
respect to, among other things, trading in certain marketable debt securities
previously owned by the Company. For a further discussion, see Note 18.

LOANS AND ADVANCES

Loans and advances were made by the Company to certain of its officers and
employees at interest rates ranging from 9.0% to 9.5% per annum. The principal
amount of loans and advances outstanding at October 31, 1993 and 1992 was
$65,000 and $902,000, respectively.

INVENTORIES

Inventories are stated at the lower of cost, determined on a first-in,
first-out or average cost basis, or market.

UNAMORTIZED BOND DISCOUNT

The difference between the carrying amount and the principal amount of the
Company's 10 5/8% Convertible Subordinated Reset Debentures due 2005 (the
'Debentures') represents unamortized discount which is being charged to expense
over the life of the issue. As of October 31, 1993, the amount of unamortized
discount was $387,000.

DEPRECIATION AND LEASEHOLD AMORTIZATION

Depreciation is computed on the straight-line method in amounts sufficient
to write-off the cost or carrying amount of depreciable assets over their
estimated useful lives. Leasehold improvements are amortized over the shorter of
their estimated useful lives or the period of the related lease.

EXPENDITURES FOR MAINTENANCE AND REPAIRS

Expenditures for maintenance and repairs are expensed; major replacements,
renewals and betterments are capitalized. The cost and accumulated depreciation
of assets retired or otherwise disposed of are eliminated from the asset and
accumulated depreciation accounts, and any gains or losses are reflected in
operations for the period.

THE COOPER COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

AMORTIZATION OF INTANGIBLES

Amortization is currently provided for on all intangible assets (primarily
goodwill, which represents the excess of purchase price over fair value of net
assets acquired) on a straight-line basis over periods of up to thirty years.
Accumulated amortization at October 31, 1993 and 1992 was approximately
$3,059,000 and $2,155,000, respectively. The Company assesses the recoverability
of goodwill by determining whether the amortization of goodwill balance over its
remaining life can be recovered through reasonably expected future results.

RESTRICTED STOCK AND COMPENSATION EXPENSE

Under the Company's 1988 Long Term Incentive Plan, its 1990 Non-Employee
Directors' Restricted Stock Plan and its predecessor Restricted Stock Plans (see
Note 12), certain officers and key employees designated by the Board of
Directors or a committee thereof have purchased, for par value, shares of the
Company's common stock restricted as to resale ('Restricted Shares') unless or
until certain prescribed objectives are met or certain events occur. The
difference between market value and par value of the Restricted Shares on the
date of grant is recorded as unamortized restricted stock award compensation and
shown as a component of stockholders' equity. This compensation is charged to
operations as earned.

INCOME TAXES

Income taxes are provided for in the period in which the related
transactions enter into the determination of net income. No provisions have been
made for taxes which may become payable should income of subsidiaries outside
the United States be remitted to the Company (see Note 9). Investment tax
credits and other credits are applied as a reduction of the provision for United
States federal income taxes on the flow-through method.

EARNINGS PER COMMON SHARE

Net income (loss) per common share is determined by using the weighted
average number of common shares and common share equivalents (stock warrants)
outstanding during each year. Stock options have not been included in the
determination of earnings per common share for any period as they are
anti-dilutive or resulted in dilution of less than 3%.

NOTE 2. ACQUISITIONS AND DISPOSITIONS

ACQUISITIONS

On April 1, 1993, CooperVision, Inc., a subsidiary of the Company, acquired
via a purchase transaction the stock of CoastVision for approximately $9,800,000
cash. CoastVision manufactures and markets a range of contact lens products,
primarily custom soft toric contact lenses, which are designed to correct
astigmatism. The purchase of CoastVision expands CooperVision's customer base
for its existing product lines. CoastVision had net sales of $9,600,000 in its
fiscal year ended October 31, 1992. Excess cost over net assets acquired
recorded on the purchase was $7,500,000, which is being amortized over 30 years.

On May 29, 1992, the Company acquired all of the common stock of Hospital
Group of America, Inc. ('HGA') from its ultimate parent, Nu-Med Inc. ('NuMed')
for a total consideration of approximately $50,000,000 including $15,898,000 in
cash, the assumption of approximately $22,000,000 of third party debt of HGA and
the delivery of $21,685,000 principal amount of Nu-Med debentures owned by the
Company (including $3,525,000 principal amount of 'Affiliate debentures,'
defined and described below), in which the Company had a cost basis of
approximately $12,322,000. The Company

THE COOPER COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

used available cash to purchase the Nu-Med debentures and to make the
$15,898,000 payment at closing.

Except for the 'Affiliate debentures' defined and described below, the
Company acquired the Nu-Med debentures in open market transactions for a total
cost of approximately $10,374,000. On April 13, 1992, the Company acquired, for
a total cost of approximately $1,948,000, an additional $3,525,000 principal
amount of Nu-Med debentures (the 'Affiliate debentures') from an individual and
a corporation (together, the 'Affiliates') related to or affiliated with Messrs.
Gary, Steven and Brad Singer. The Affiliate debentures were tendered to Nu-Med
at the same price paid by the Company. At the time of the transaction, Gary and
Steven Singer were each officers and directors of the Company, and Brad Singer
was a director of the Company. The Affiliate debentures were purchased by the
Company at the cost paid by the Affiliates plus accrued interest thereon,
following the approval of the majority of the disinterested members of the Board
of Directors of the Company. To protect the Company against any potential loss,
it acquired the Affiliate debentures pursuant to an agreement that would have
allowed the Company to 'put' the Affiliate debentures back to the Affiliates at
the Company's cost if the acquisition of HGA had not occurred.

HGA provides psychiatric and substance abuse treatment through three
hospitals with a total of 259 beds at the time of the acquisition, which was
subsequently increased to 269.

Concurrently, PSG Management, Inc. ('PSG Management'), a subsidiary of the
Company, entered into a management agreement with three indirect subsidiaries of
Nu-Med under which PSG Management is managing three additional hospitals owned
by such subsidiaries which have a total of 220 licensed beds. Under the
management agreement, PSG Management is entitled to receive a management fee of
$6,000,000 payable in equal monthly installments over the three year term of the
agreement. The management agreement is jointly and severally guaranteed by
Nu-Med and its wholly-owned subsidiary, PsychGroup, Inc. the parent of the
contracting subsidiaries which own the managed facilities. On January 6, 1993,
Nu-Med (but not any of its direct or indirect subsidiaries) filed a voluntary
petition under Chapter 11 of the United States Bankruptcy Code. Neither the
Company nor any of its affiliates filed a proof of claim in the Nu-Med Chapter
11 proceeding, and the bar date (the time for filing proofs of claims) has past.
However, none of the Nu-Med subsidiaries has filed under Chapter 11, and the
Nu-Med subsidiaries have paid the management fee on a timely basis, although
representatives of Nu-Med and its subsidiaries have alleged in writing that PSG
Management has breached the Management Services Agreement (which contention PSG
Management vigorously disputes). Moreover, Nu-Med's Proposed Disclosure
Statement to accompany its Second Amended Plan of Reorganization, filed with the
United States Bankruptcy Court for the Central District of California, indicates
that PsychGroup, Inc. is commencing performance of certain administrative
functions performed by PSG Management on a parallel basis.

The acquisition of HGA was accounted for as a purchase. Accordingly, the
results of HGA's operations were included in the Company's consolidated results
from acquisition date. Excess of cost over net assets acquired has initially
been estimated to be $6,155,000, subject to purchase price adjustments per the
sales agreement, and is being amortized over 30 years.

Had the acquisition of HGA occurred on November 1, 1991, the Company's
unaudited pro forma combined net revenue, loss from continuing operations and
loss from continuing operations per share would have been $95,320,000,
($15,586,000) and ($.56), respectively, for the twelve months ended October 31,
1992. Had such acquisition occurred on November 1, 1990, the comparable
unaudited pro forma combined figures for the twelve months ended October 31,
1991 would have been $82,951,000, ($19,394,000) and ($.84), respectively.

During 1992, the Company acquired two parcels of land having an aggregate
cost of $3,149,000. The land is carried at cost in property, plant and
equipment. Concurrently, the Company entered into two lease agreements under
which the Company is entitled to receive rental payments amounting to

THE COOPER COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

approximately $22,000,000 over the next 48 years. The subject parcels of land
were sold in fiscal 1994 for cash and notes aggregating the approximate original
purchase price.

In December 1990 and January 1991, the Company acquired Euro-Med Endoscope
and Euro-Med, Inc., for cash and notes in the aggregate amount of $3,250,000.
The two companies offer a line of surgical instruments and diagnostic
hysteroscopy equipment for use in gynecologic and minimally invasive surgical
procedures. Excess cost over net assets acquired for these two businesses was
$2,082,000.

In November 1990, the Company entered into a license agreement under which
the Company will support the licensor's efforts to obtain FDA approvals so that
the Company may manufacture, market and sell Verapamil for ophthalmic
applications.

DISPOSITIONS

On February 12, 1993, the Company sold its EYEscrub'tm' product line for
$1,400,000 cash which resulted in a $620,000 gain. The Company retains the right
to market certain ophthalmic pharmaceutical surgical kits containing
EYEscrub'tm' once certain regulatory requirements are met.

On January 31, 1992, the Company assigned its license to manufacture, have
manufactured, sell, distribute and market certain intraocular lens products and
disposed of certain other related rights and assets. Total cash consideration
received by the Company for such assignment was approximately $5,200,000, which
resulted in a pretax gain of $1,030,000.

On June 29, 1989, the Company completed the sale of Cooper Technicon, Inc.
('CTI'), the Company's former automated medical diagnostic and industrial
analytical systems business, to Miles Inc. ('Miles'), a subsidiary of Bayer USA
Inc., a subsidiary of Bayer A G, West Germany, in a transaction involving
approximately $477,000,000, consisting of cash and the elimination of CTI's debt
of approximately $290,000,000 from the Company's consolidated financial
statements. Pursuant to the terms of the sale, the Company sold all of CTI's
capital stock for approximately $191,000,000 reduced by $4,000,000 for certain
adjustments, resulting in a net cash receipt of approximately $187,000,000, of
which $10,000,000 was placed in escrow to secure certain post-closing indemnity
obligations of the Company. During 1990, $150,000 of the escrow principal was
released to Miles. As of October 31, 1992, $9,850,000 of the escrow was included
in 'Other receivables' in the Company's consolidated balance sheet. During 1993
$7,550,000 of such funds were collected by the Company, with the balance being
released to Miles. The funds released to Miles were charged against an accrual
for such purpose.

NOTE 3. DISCONTINUED OPERATIONS

In 1993, the Company recorded a charge of $14,000,000 to increase the
Company's accrual (the 'Breast Implant Accrual') for contingent liabilities
associated with breast implant litigation involving the plastic and
reconstructive surgical division of the Company's former Cooper Surgical
business segment which was sold in fiscal 1989. See Note 18 for a discussion of
breast implant litigation. The Breast Implant Accrual will be charged for
payments made and to be made to MEC under the MEC Agreement (see Note 14 for a
discussion of the schedule of payments) as well as certain related charges. In
October 1993 the Company made the initial payment of $3,000,000 to MEC. At
October 31, 1993 the Company is carrying $9,000,000 of the Breast Implant
Accrual in 'Deferred income taxes and other non current liabilities' on the
Company's Consolidated Balance Sheet for future payments to MEC, none of which
is due for repayment in one year or less from October 31, 1993. The Company also
recorded a reversal of $343,000 of accruals no longer necessary related to
another discontinued business.

In 1992, the Company recorded a charge of $9,300,000 to discontinued
operations. A charge of $7,000,000 represents an increase to the Company's
Breast Implant Accrual. See Note 18 for a discussion of breast implant
litigation. The balance of the charge reflects a $2,000,000 settlement of a

THE COOPER COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

dispute involving the Company's former Surgical business segment, and a $300,000
adjustment to the loss on the sale of the Company's former Cooper Technicon
business segment.

No tax benefit has been applied against the above figures, as the Company
was not profitable in either year.

NOTE 4. EXTRAORDINARY ITEMS

The extraordinary gain of $924,000, or $.03 per share, in 1993 represents
gains on the Company's purchases of $4,846,000 principal amount of its
Debentures. The purchases were privately negotiated and executed at prevailing
market prices.

The extraordinary gain of $640,000, or $.02 per share, in 1992 represents
gains on the Company's purchases of $5,031,000 principal amount of its
Debentures. Substantially all of the purchases were privately negotiated and
executed at prevailing market prices.

The extraordinary gain of $5,428,000, or $.21 per share, in 1991 represents
gains on the Company's purchases of $23,166,000 principal amount of its
Debentures, including $8,518,000 owned by Brad, Gary and Steven Singer (each of
whom was an officer and/or director of the Company at the time of the
transaction) or their relatives, $7,656,000 owned by Moses Marx (a former
director of the Company) and $2,115,000 owned by Mel Schnell, currently a
director of the Company and a director and President and Chief Executive Officer
of Cooper Life Sciences, Inc. ('CLS'). See Note 7. Substantially all of the
purchases were privately negotiated and executed at or slightly below prevailing
market prices.

NOTE 5. STOCKHOLDERS RIGHTS PLAN

On October 29, 1987, the Board of Directors of the Company declared a
dividend distribution of one right for each outstanding share of the Company's
common stock, par value $.10 per share (a 'Right'). Each Right entitles the
registered holder of an outstanding share of the Company's common stock to
initially purchase from the Company a unit consisting of one one-hundredth of a
share of Series A Junior Participating Preferred Stock (a 'Unit'), par value
$.10 per share, at a purchase price of $60.00 per Unit, subject to adjustment.
The Rights are exercisable only if a person or group acquires (an 'Acquiring
Person'), or generally obtains the right to acquire beneficial ownership of 20%
or more of the Company's common stock, or commences a tender or exchange offer
which would result in such person or group beneficially owning 30% or more of
the Company's common stock.

If, following the acquisition of 20% or more of the Company's common stock,
(i) the Company is the surviving corporation in a merger with an Acquiring
Person and its common stock is not changed, (ii) a person or entity becomes the
beneficial owner of more than 30% of the Company's common stock, except in
certain circumstances such as through a tender or exchange offer for all the
Company's common stock which the Board of Directors determines to be fair and
otherwise in the best interests of the Company and its stockholders, (iii) an
Acquiring Person engages in certain self-dealing transactions or (iv) an event
occurs which results in such Acquiring Person's ownership interest being
increased by more than 1%, each holder of a Right, other than an Acquiring
Person, will thereafter have the right to receive, upon exercise, the Company's
common stock (or, in certain circumstances, cash, property or other securities
of the Company) having a value equal to two times the exercise price of the
Right. The Board of Directors amended the Rights Agreement dated as of October
29, 1987, between the Company and The First National Bank of Boston, as Rights
Agent, so that Cooper Life Sciences, Inc. ('CLS') and its affiliates and
associates would not be Acquiring Persons thereunder as a result of CLS's
beneficial ownership of more than 20% of the outstanding common stock of the
Company by reason of its ownership of Series B Preferred Stock or common stock
issued upon conversion thereof. See Note 15 under 'Agreements With CLS.'

Under certain circumstances, if (i) the Company is acquired in a merger or
other business combination transaction in which the Company is not the surviving
corporation, unless (a) the

THE COOPER COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

transaction occurs pursuant to a transaction which the Board of Directors
determines to be fair and in the best interests of the Company and its
stockholders (b) the price per share of Common Stock offered in the transaction
is not less than the price per share of common stock paid to all holders
pursuant to the tender or exchange offer, and (c) the consideration used in the
transaction is the same as that paid pursuant to the offer, or (ii) 50% or more
of the Company's assets or earning power is sold or transferred, each holder of
a Right, other than an Acquiring Person, shall thereafter have the right to
receive, upon exercise, common stock of the acquiring company having a value
equal to two times the exercise price of the Right.

At any time until the close of business on the tenth day following a public
announcement that an Acquiring Person has acquired, or generally obtained the
right to acquire beneficial ownership of 20% or more of the Company's common
stock, the Company will generally be entitled to redeem the Rights in whole, but
not in part, at a price of $.05 per Right. After the redemption period has
expired, the Company's right of redemption may be reinstated if an Acquiring
Person reduces his beneficial ownership to 10% or less of the outstanding shares
of common stock in a transaction or series of transactions not involving the
Company.

Until a Right is exercised, the holder thereof, as such, will have no
rights as a stockholder of the Company, including, without limitation, the right
to vote or to receive dividends. The Rights expire on October 29, 1997.

NOTE 6. COSTS ASSOCIATED WITH RESTRUCTURING OPERATIONS

In the second quarter of 1993, the Company recorded a restructuring charge
of $451,000 for consolidation of CooperSurgical facilities and related
reorganization and relocation costs.

NOTE 7. SETTLEMENT OF DISPUTES

The Company and CLS entered into a settlement agreement, dated July 14,
1993, pursuant to which CLS delivered a general release of claims against the
Company, subject to exceptions for specified on-going contractual obligations,
and agreed to certain restrictions on its acquisitions, voting and transfer of
securities of the Company, in exchange for the Company's payment of $4,000,000
in cash and delivery of 200,000 shares of common stock of CLS owned by the
Company and a general release of claims against CLS, subject to similar
exceptions. See Note 15 for a discussion of the settlement terms. The cash paid
and fair value of CLS shares returned to CLS were charged to the Company's
statement of operations for 1993 as settlement of disputes. In addition, the
Company charged $1,500,000 to the statement of operations for certain other
disputes.

Included in fiscal 1992 is a charge for settlement of disputes which
includes 1) a $650,000 charge related to a transaction with CLS, 2) a payment to
Mr. Frederick R. Adler and 3) provisions for several ongoing litigations and
disputes including the tentative settlement of Guenther v. Cooper Life Sciences,
Inc. et. al.

In April 1992, Frederick R. Adler, a former director of the Company at that
time, notified the Company that he would solicit proxies to elect his own slate
of nominees at the 1992 Annual Meeting of Shareholders (the 'Annual Meeting'),
in opposition to the Board's nominees to the Board of Directors (the 'Proxy
Contest'). On June 15, 1992, Mr. Adler and the Company entered into a settlement
agreement with respect to the Proxy Contest pursuant to which the Board of
Directors set the size of the Board at nine members, effective as of the Annual
Meeting, and nominated Mr. Adler and Louis A. Craco, a partner in the law firm
of Willkie, Farr & Gallagher, for election to the Board together with the
Board's seven other nominees, Arthur C. Bass, Allen H. Collins, M.D., Joseph C.
Feghali, Mark A. Filler, Michael H. Kalkstein, Allan E. Rubenstein, M.D., and
Robert S. Weiss. The settlement agreement provided for the replacement of Mr.
Adler by one of three designated persons if he was unable or unwilling to serve
as a director following his election at the Annual Meeting. In December

THE COOPER COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

1992, Mr. Adler resigned from the Company's Board of Directors and designated
Michael R. Golding, M.D., as his replacement. As part of the settlement, in
which the parties exchanged mutual releases of claims arising out of the Proxy
Contest and litigation brought in connection therewith, Mr. Adler agreed, among
other things, not to solicit proxies in opposition to the election of the
Board's nine nominees at the Annual Meeting and not to take any action to call a
special meeting of stockholders or solicit stockholder consents with respect to
the election or removal of directors prior to the 1993 annual meeting of
stockholders of the Company. The Company also reimbursed Mr. Adler for $348,000
of expenses actually incurred by him in connection with the Proxy Contest and
negotiation of the settlement agreement.

In 1992 the Company reached an agreement involving the settlement of
Guenther v. Cooper Life Sciences, et. al., a class and shareholder derivative
action filed against CLS, the Company, Cooper Development Company, a Delaware
corporation ('CDC'), Parker G. Montgomery, A. Kenneth Nilsson, Charles Crocker,
Robert W. Jamplis, Barbara Foster as executrix of the Estate of Hugh K. Foster,
Michael Mitzmacher, Joseph A. Dornig, Martin M. Koffel, Richard W. Turner, John
Vuko, Randolph Stockwell, Hambrecht & Quist, Incorporated, Peat Marwick Main &
Co., Gryphon Associates, L.P. and The Gryphon Management Group, Ltd. in June
1988 in the United States District Court for the District of Minnesota and
transferred in December 1988 to the District Court for the Northern District of
California. As amended, the action alleged various securities law violations and
shareholder derivative claims in connection with the public disclosures by, and
management of, CLS from 1985 to 1988. The Company formerly shared certain
officers and directors with CLS and is alleged to have controlled CLS. The
settlement resolved all claims asserted against the Company and its former
officers and directors. On April 30, 1993, the court approved the settlement
after notice to the plaintiff class and a court hearing. In accordance with the
settlement, the case has been dismissed as to the Company and all other
defendants. The settlement provided for a payment by Optics Cayman Islands
Insurance Ltd., a subsidiary of the Company (which provided directors' and
officers' liability insurance to some of the above-named individuals), in the
amount of $2,200,000 on behalf of the directors and officers of CLS, as well as
a payment of $1,800,000 by the Company. The settlement amount was fully reserved
in the books of the Company at July 31, 1992 and paid into escrow by October 31,
1992.

NOTE 8. PREFERRED STOCK

On June 14, 1993, the Company acquired from CLS all of the remaining
outstanding shares of the Company's SERPS, having an aggregate liquidation
preference of $16,060,000, together with all rights to any dividends or
distributions thereon, in exchange for shares of Series B Preferred Stock having
an aggregate liquidation preference of $3,450,000 and a par value of $.10 per
share. The 345 shares of Series B Preferred Stock, and any shares of Series B
Preferred Stock issued as dividends, are convertible into one share of common
stock of the Company for each $1.00 of liquidation preference, subject to
customary antidilution adjustments. The Company also has the right to compel
conversion of Series B Preferred Stock at any time after the market price of the
common stock on its principal trading market averages at least $1.375 for 90
consecutive calendar days and closes at not less than $1.375 on at least 80% of
the trading days during such period. CLS currently owns 4,850,000 shares of
common stock, or approximately 16.2% of the Company's outstanding common stock.
See Note 15.

Dividends will accrue on the Series B Preferred Stock commencing June 14,
1994, and will be payable quarterly in cash at the rate of 9% (of liquidation
preference) per annum or, if the Company is restricted by applicable law or
certain debt agreements from paying cash dividends, in additional shares of
Series B Preferred Stock at the rate of 12% (of liquidation preference) per
annum. The Series B Preferred Stock is redeemable, in whole or in part, at the
option of the Company, at any time at a redemption price equal to its then
applicable liquidation preference, plus accrued and unpaid dividends.

THE COOPER COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

NOTE 9. INCOME TAXES

The components of income (loss) from continuing operations before income
taxes and extraordinary items and the provision for income taxes are as follows:

YEAR ENDED OCTOBER 31,
------------------------------
1993 1992 1991
-------- -------- --------
(IN THOUSANDS)

Income (loss) from continuing operations before income taxes and
extraordinary items:
United States.............................................. ($34,203) ($17,164) ($26,171)
Outside the United States.................................. 548 1,106 1,569
-------- -------- --------
($33,655) ($16,058) ($24,602)
-------- -------- --------
-------- -------- --------
Provision for income taxes, all current:
Federal.................................................... $ -- $ 354 $ --
State...................................................... 417 420 201
Outside the United States.................................. -- (674) --
-------- -------- --------
$ 417 $ 100 $ 201
-------- -------- --------
-------- -------- --------

A reconciliation of the provision for (benefit of) income taxes included in
the Company's statement of consolidated operations and the amount computed by
applying the United States statutory federal income tax rate to income (loss)
from continuing operations before extraordinary items and income taxes follows:

YEAR ENDED OCTOBER 31,
------------------------------
1993 1992 1991
-------- -------- --------
(IN THOUSANDS)

Computed expected provision for (benefit of) income taxes....... ($11,443) ($ 5,460) ($ 8,365)
Increase (decrease) in taxes resulting from:
Income outside the United States operations, subject to
lower rates.............................................. (186) (376) (533)
Amortization of intangibles................................ 148 65 27
State taxes, net of federal income tax benefit............. 275 277 133
Reduction of estimated tax liability....................... -- (674) --
Dividends from subsidiaries outside the United States...... 11 1,358 967
Amortization of restricted stock compensation.............. 335 (14) (29)
Operating loss not utilized against income from continuing
operations............................................... 11,546 4,552 7,983
Prior year federal assessment.............................. -- 354 --
Other...................................................... (269) 18 18
-------- -------- --------
Actual provision for income taxes............................... $ 417 $ 100 $ 201
-------- -------- --------
-------- -------- --------

At October 31, 1993, the Company had net operating loss carryforwards of
approximately $224,000,000 for financial statement purposes and approximately
$243,000,000 for income tax purposes, and investment tax, research and
development and job tax credit carryforwards of approximately $2,455,000 all of
which will expire in varying amounts beginning in the year ending October 31,
1999.

Income taxes have not been provided for the undistributed earnings of
subsidiaries operating outside the United States. There were no such earnings of
the Company at October 31, 1993. During 1992 and 1991, the Company repatriated
$3,655,000 and $1,713,000, respectively, of earnings of the Company's selected
subsidiaries. Such repatriations did not result in a material increase in income
taxes.

Statement of Financial Accounting Standards No. 109, 'Accounting for Income
Taxes' ('FAS 109') was issued by the Financial Accounting Standards Board in
February 1992. FAS 109 requires a

THE COOPER COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

change from the deferred method under APB Opinion 11 to the asset and liability
method of accounting for income taxes. Under the asset and liability method of
FAS 109, deferred income taxes are recognized for the future tax consequences
attributable to differences between bases. Deferred tax assets and liabilities
are measured using enacted tax rates expected to apply to taxable income in the
years in which those temporary differences are expected to be recovered or
settled. Under FAS 109, the effect on deferred taxes of a change in tax rates is
recognized in income in the period that includes the enactment date.

FAS 109 must be adopted for years beginning after December 15, 1992. Upon
adoption, the provisions of FAS 109 may be applied without restating prior
years' financial statements or may be applied retroactively by restating any
number of consecutive prior years' financial statements.

Upon adoption in the 1994 fiscal year, the Company plans to apply the
provisions of FAS 109 without restating prior years' financial statements. The
Company anticipates that the adoption of FAS 109 will not have a material impact
on the financial statements. No benefit will be recognized for operating loss
and tax credit carryforwards since the deferred tax asset will be offset by a
valuation reserve.

NOTE 10. PROPERTY, PLANT AND EQUIPMENT

A summary of property, plant and equipment follows:

1993 1992
------- -------
(IN THOUSANDS)

Land and improvements*............................................................ $ 4,482 $ 4,620
Buildings and improvements........................................................ 32,560 31,932
Machinery and equipment........................................................... 9,984 7,908
Leasehold improvements............................................................ 1,088 1,346
Construction in progress.......................................................... 180 211
------- -------
$48,294 $46,017
------- -------
------- -------

- ------------

* Includes approximately $3,000,000 for two parcels of land sold in fiscal 1994.
See Note 2.

Depreciation and leasehold amortization expense amounted to $2,624,000,
$1,537,000 and $1,039,000 for the years ended October 31, 1993, 1992 and 1991,
respectively.

NOTE 11. LONG-TERM DEBT, NOTES PAYABLE AND WARRANTS

LONG-TERM DEBT

As used herein, the term 'Indenture' means the indenture governing the
Company's Debentures. The Indenture has been amended twice (and unless specified
herein or the context requires otherwise, references to the Indenture are to the
Indenture as so amended): first, pursuant to a First Supplemental Indenture
dated as of June 29, 1989, and second, pursuant to a Second Supplemental
Indenture dated as of January 6, 1994.

During the year ended October 31, 1989, in order to consummate the sale of
CTI (see Note 2), the Company was required to obtain the approval of the sale by
the holders of a majority of the Company's Debentures which were then 8 5/8%
Convertible Subordinated Debentures due 2005 (the '8 5/8% Debentures'). The
Company's Consent Solicitation and Offer to Purchase sought consents for:

the sale of CTI

the sale of the Optometrics business

the adoption of the First Supplemental Indenture.

THE COOPER COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The Company received the requisite consents and, in connection therewith,
upon consummating the CTI sale, purchased approximately $70,000,000 principal
amount of the 8 5/8% Debentures, and entered into the First Supplemental
Indenture, which amended certain terms of the Indenture. Under these amended
terms, the interest rate on the 8 5/8% Debentures was increased from 8 5/8% to
10 5/8% per annum, effective June 29, 1989. Reflecting this change, the 8 5/8%
Debentures were retitled the '10 5/8% Convertible Subordinated Reset Debentures
due 2005'. In addition, under the terms of the Indenture as then amended, the
Company was required to reset the interest rate on the Debentures on June 15,
1991, to a rate per annum, as determined by two nationally recognized investment
banking firms selected by the Company, such that the Debentures would have a
market value equal to 75% of their principal amount on such date. The market
value of the Debentures was 75% of principal value as of June 15, 1991;
therefore, no interest rate reset was necessary. The SEC has filed a complaint
for Permanent Injunction and Other Equitable Relief (the 'SEC Complaint')
alleging, among other things, federal securities laws violations by the Company
and Gary Singer, a former Co-Chairman of the Company, in connection with an
alleged manipulation of the price and demand of the Debentures to avoid an
allegedly required reset. The SEC Complaint alleges that Gary Singer and the
Company manipulated the trading price of the Debentures, and that Gary Singer
obtained allegedly false opinion letters from two firms, which letters failed to
meet the Indenture requirements to avoid such reset. See Note 18.

As a result of the losses experienced by the Company, the Company's
Adjusted Net Worth, as defined in the Indenture (as in effect after adoption of
the First Supplemental Indenture but prior to consummation of the Exchange Offer
and Solicitation more fully discussed in Note 19), was $24,580,000 at April 30,
1993, $10,965,000 at July 31, 1993 and $452,000 at October 31, 1993. As a result
of the Company's Adjusted Net Worth remaining below $41,500,000 for two
consecutive fiscal quarters, the Company was required, pursuant to Section 4.09
of the Indenture (as then in effect), to purchase $15,000,000 principal amount
of Debentures in the open market or through private transactions or to make an
offer to all holders to purchase $15,000,000 principal amount of Debentures
(less the principal amount of any Debentures purchased after July 31, 1993
through market or private purchases) at the optional redemption price then in
effect, plus accrued and unpaid interest. The maximum purchases that the Company
was required to make to comply with the covenant would have been $15,000,000
principal amount of Debentures every six months, beginning October 25, 1993.

In addition, pursuant to Section 4.14 of the Indenture (as in effect after
adoption of the First Supplemental Indenture but prior to consummation of the
Exchange Offer and Solicitation), if all of the outstanding Debentures were not
repurchased in connection with the covenant described above and if the Company
had an Adjusted Net Worth of less than $350,000,000 at January 31, 1995 or a
Cash Flow Coverage Ratio of less than 5 to 1 for the fiscal quarter then ended,
the Company would have been required to purchase, in June of 1995, all
Debentures then outstanding at 100% of principal amount plus accrued and unpaid
interest.

In its Annual Report on Form 10-K for the fiscal year ended October 31,
1991, as amended, the Company disclosed the following transactions: On July 11,
1991, the Company purchased $450,000 principal amount of Bally's Grand Inc.
11 1/2% bonds (the 'Bally's Grand Bonds') for $301,500. On July 16, 1991, Gary
Singer purchased $500,000 principal amount of Bally's Grand Bonds for his wife's
account for $340,000. On August 7, 1991, the Company purchased the Bally's Grand
Bonds held in his wife's account for $345,000. The Company has been advised by
counsel for Mr. Singer that in transactions such as this transaction and the
transactions described below, because prices for these bonds are not widely
quoted, it was Mr. Singer's practice to confirm the market price by requesting
market price information from brokers. Mr. Singer's wife received net proceeds
on such sale of $344,470.50. On September 5, 1992, the Company sold its entire
position of Bally's Grand Bonds for $656,687.50. On July 23, July 26 and August
5, 1991, the Company purchased an aggregate of $9,500,000 principal amount of
Petrolane Gas 13 1/4% bonds (the 'Petrolane Bonds') for an aggregate of
$3,361,875. On September 17, 1991, the Company sold $6,000,000 principal amount
of its Petrolane

THE COOPER COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Bonds, for an aggregate of $2,520,000. On September 19, 1991, it sold its
remaining $3,500,000 principal amount of bonds to a relative of Mr. Singer for
$1,400,000. Mr. Singer's relative purchased such bonds for $1,404,375 (including
broker mark-up) and sold a portion of them on September 30, and the balance on
October 2, 1991, receiving aggregate proceeds of $1,469,375. On September 24 and
26, 1991, the Company purchased an aggregate of $4,887,000 principal amount of
DR Holdings Bonds for an aggregate of $2,385,195. On October 1, 1991, the
Company sold its DR Holdings Bonds to the same relative of Mr. Singer for
$2,565,675. Mr. Singer's relative purchased such bonds for $2,571,783.75
(including broker mark-up) and sold them on October 2, 1991, for $2,907,765. On
or about September 27, 1991, the Company purchased $2,213,000 principal amount
of DR Holdings Bonds for $1,156,292.50. On or about October 4, 1991, the DR
Holdings Bonds were transferred to a securities brokerage account in the name of
the wife of Gary Singer, and, on or about October 7, 1991, a payment of
$1,156,292.50 was made by Mr. Singer's wife to the Company. Counsel for Mr.
Singer has advised the Company that Mr. Singer intended to purchase the DR
Holdings Bonds for his wife's account, that the transaction was executed in a
Company account as the result of a broker's error, and that the subsequent
transfer of the DR Holdings Bonds from a Company account to his wife's account
and payment by his wife to the Company, as described above, were undertaken to
correct the broker's error. Counsel for Mr. Singer has further advised the
Company that, on October 2, 1991, Mr. Singer's wife sold the $2,213,000
principal amount of DR Holdings Bonds for $1,316,735.

Gary Singer was convicted of violations of federal criminal laws in
connection with certain of the foregoing transactions, and certain of such
transactions are also the subject of allegations in the SEC Complaint that,
among other things, Gary Singer entered into such trades for the purpose of
diverting profits from the Company to such relatives. See Note 18. Section 4.12
of the Indenture (as in effect prior to consummation of the Exchange Offer and
Solicitation) contained a covenant limiting the Company's ability to, among
other things, sell any of its property or assets to, or purchase any property or
assets from, any Affiliate of the Company (as defined in the Indenture as then
in effect).

Section 4.18 of the Indenture (as in effect after adoption of the First
Supplemental Indenture but prior to consummation of the Exchange Offer and
Solicitation) contained a covenant prohibiting the Company from maintaining an
equity interest for more than eighteen months in, and making any direct or
indirect advances, loans or other extensions of credit to, any person that is
not consolidated with the Company. From time to time, the Company has maintained
an equity interest in unconsolidated persons for more than the permitted period
and may have engaged in transactions that could be construed to be a direct or
indirect advance, loan or other extension of credit in violation of the
Indenture as then in effect.

Breach of the covenants contained in Section 4.09, 4.12 or 4.18 of the
Indenture or the reset obligation contained in the Debentures (in each case, as
in effect after adoption of the First Supplemental Indenture but prior to
consummation of the Exchange Offer and Solicitation) was a Default under the
Indenture, which would have led to an Event of Default under the Indenture
(providing grounds for the Trustee or the holders ('Holders') of at least 25% in
principal amount of the Debentures then outstanding to declare the principal and
accrued interest on the outstanding Debentures immediately due and payable) if
such Default was not cured within 60 days of the Company's receipt of notice of
the Default from the Trustee or such Holders. The Company did not have the
necessary cash resources to pay the principal and accrued interest on the
outstanding Debentures (totalling approximately $40,000,000 at October 31, 1993)
in the event that the Debentures were successfully accelerated and such
acceleration were not rescinded.

Consummation of the Exchange Offer and Solicitation in January 1994 and the
execution of the Second Supplemental Indenture pursuant thereto eliminated the
requirement that the Company purchase Debentures by reason of Section 4.09 of
the Indenture and eliminated the risk that the Company would be required to
purchase Debentures by reason of Section 4.14 of the Indenture. In addition, the
Company obtained, pursuant to the Exchange Offer and Solicitation, the waiver
(the 'Waiver') of any and all Defaults and Events of Default and their
consequences under the Debentures

THE COOPER COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

and the Indenture arising out of any actions, omissions or events occurring on
or prior to 5:00 p.m. New York City time, January 6, 1994, the expiration date
of the Exchange Offer and Solicitation (the 'Expiration Date'), including any
Defaults or Events of Default arising out of the matters described above.

The Debentures mature on March 1, 2005 and, as a result of amendments
approved by the holders of the Debentures in connection with the Exchange Offer
and Solicitation and set forth in the Second Supplemental Indenture, are
convertible into common stock at a conversion price of $5.00 per share, subject
to adjustment under certain conditions to prevent dilution to the holders. On
October 31, 1993, the aggregate principal amount of Debentures then outstanding
were convertible into an aggregate of 1,434,754 shares of common stock at a
conversion price of $27.45. Interest is payable semiannually on March 1st and
September 1st of each year. As of October 31, 1993, $39,384,000 principal amount
of the Debentures remained outstanding, the market value of which was
approximately $26,584,000. The difference between the principal amount and
carrying value on the Company's consolidated balance sheet of $387,000
represents unamortized discount which is being charged to expense. Following
consummation of the Exchange Offer and Solicitation approximately $9,400,000
principal amount of the Debentures remain outstanding, convertible into shares
of common stock at a conversion price of $5.00, and approximately $22,000,000
principal amount of Notes (as defined in Note 19) were outstanding.

During 1993, 1992 and 1991, the Company purchased $4,846,000, $5,031,000
and $23,166,000, respectively, principal amount of its Debentures, all of which
have been retired. See Note 4 for a discussion of extraordinary gains which
resulted from these purchases.

Other long-term debt consists of the following:

OCTOBER 31,
------------------
1993 1992
------- -------
(IN THOUSANDS)

Bank term loan; interest at 4% above the bank's prime rate (floor of 12%), payable
monthly; principal payable in installments through August 1997 (the 'HGA Term
Loan').......................................................................... $11,222 $11,889
Bank term loan; interest at 1% to 1.5% above the bank's prime rate, payable
quarterly; principal payable in installments through 1995....................... -- 2,097
Industrial Revenue Bonds; interest at 85% of prime rate, payable monthly;
principal payable in installments through 1997 (the 'HGA IRB').................. 2,495 4,900
Mortgage note; interest at 9.5% and principal due October 2000.................... 450 450
Note payable; interest at 9% and annual principal payments through January 1993... -- 527
Capitalized leases from 11.5% to 13% maturing 1995................................ 762 337
------- -------
14,929 20,200
Less current portion.............................................................. 1,499 5,190
------- -------
$13,430 $15,010
------- -------
------- -------

The HGA Term Loan and HGA IRB contain several covenants, including the
maintenance of certain ratios and levels of net worth (as defined), restrictions
with respect to the payments of cash dividends on common stock and on the levels
of capital expenditures, interest and debt payments. In addition, the holders of
the HGA IRB have the right to accelerate all outstanding principal at December
31, 1995 upon notification one year prior to that date.

Substantially all of the property and equipment and accounts receivable of
HGA collateralize its outstanding debt.

Aggregate annual maturities of other long-term debt, including the current
installments thereof, during the five years subsequent to October 31, 1993, are
as follows:

THE COOPER COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

(IN THOUSANDS)

1994.......................................................................... $1,499
1995.......................................................................... $1,443
1996.......................................................................... $1,327
1997.......................................................................... $9,920
1998 and thereafter........................................................... $ 740

NOTES PAYABLE AND WARRANTS

In connection with agreements to extend the due date on certain of the
Company's outstanding debt in 1988, the Company issued warrants to a group of
its lenders. Warrants to purchase 658,950 shares of the Company's common stock
vested in December 1988 and currently have an expiration date of December 29,
1995. All other warrants related to the agreements expired.

The terms of the warrants provide that the exercise price is to be reset
every six months to the lower of the then current exercise price or 80% of the
market value as defined in the warrant agreement. As of January 12, 1994, the
most recent reset date, the exercise price was $.37 per share.

NOTE 12. STOCK OPTIONS, STOCK APPRECIATION RIGHTS, RESTRICTED STOCK, DEFERRED
STOCK, STOCK PURCHASE RIGHTS AND LONG TERM PERFORMANCE AWARDS

1988 Long-Term Incentive Plan

The 1988 Long Term Incentive Plan, as amended (the 'LTIP') provides the
Company with opportunities to attract, retain and motivate key employees and
consultants to the Company and its subsidiaries and affiliates, and enables the
Company to provide incentives to key employees and consultants who are directly
linked to the profitability of the Company and to increasing stockholder value.

The LTIP authorizes a committee consisting of three or more individuals not
eligible to participate in the LTIP or, if no committee is appointed, the
Company's Board of Directors, to grant to eligible individuals during a period
of ten years from September 15, 1988, stock options, stock appreciation rights,
restricted stock, deferred stock, stock purchase rights, phantom stock units and
long term performance awards for up to 6,376,710 shares of common stock, subject
to adjustment for future stock splits, stock dividends and similar events. As of
October 31, 1993, 4,008,943 shares remained available under the LTIP for future
grants. Since the approval of the LTIP by the Company's stockholders, no further
grants have been, and none will be, made under predecessor stock option and
restricted stock plans. However, grants made under the prior plans before
approval of the LTIP remain in effect.

In February 1989, Gary Singer, Steven Singer, Bruce Sturman, Howard
Sturman, Wayne Sturman, Kenneth Nilsson, Peter Riepenhausen and Martin Singer
were granted the right to purchase 25,000, 25,000, 25,000, 25,000, 25,000,
5,000, 5,000 and 25,000 shares of restricted stock, respectively, pursuant to
the LTIP. At the same time, options to purchase 313,170 shares were granted to
each of Gary Singer, Steven Singer, Bruce Sturman, Howard Sturman, Wayne Sturman
and Martin Singer, and options to purchase 25,000 shares were granted to each of
Kenneth Nilsson and Peter Riepenhausen. The exercise price of such options was
$3.75 per share. In March 1989, Arthur Bass, the former President and Chief
Executive Officer of the Company at that time, was granted the right to purchase
50,000 shares of restricted stock pursuant to the LTIP. The purchase price for
all such restricted stock awards was $.10 per share. Restrictions were removed
from 10% of all of the aforementioned restricted shares in 1989 according to the
restricted share release formula and 90% of the grants of Howard Sturman, Wayne
Sturman, Kenneth Nilsson and Peter Riepenhausen were forfeited by each of the
foregoing upon the termination of his employment. Martin Singer's restricted
shares as to which restrictions had not been removed (22,500 shares) were
relinquished as described more fully below. In April 1990 and April 1991, in
accordance with the revised vesting schedule described below, the first two
Price Levels (i.e. $4.43

THE COOPER COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

and $5.22, respectively) were achieved and, accordingly, restrictions were
removed from 40% of the restricted shares still outstanding on each of such
dates from which restrictions had not been removed previously.

In March 1989, Arthur Bass also received an option to purchase 737,690
shares of the Company's common stock at an exercise price of $3.75 per share. In
accordance with a renegotiation of his compensation, Mr. Bass waived that option
in return for 150,000 shares of restricted stock, of which 31,317 shares were
immediately free of restrictions. Restrictions were removed from another 23,736
of those shares in April 1990 upon satisfaction of the first Price Level. When
Mr. Bass resigned as President and Chief Executive Officer of the Company in
September 1990, he forfeited his remaining restricted shares.

Pursuant to employment agreements between the Company and each of Gary
Singer, Steven Singer and Bruce Sturman, which became effective as of March 9,
1990, each of the aforementioned individuals received a grant of the right to
purchase 313,170 shares of restricted stock (the 'March Restricted Shares'), of
which 31,317 shares were immediately free of restrictions. Restrictions on the
remainder of the March Restricted Shares were to be removed in 20% increments
when the average closing price of the Company's common stock on the New York
Stock Exchange (composite quotations) over any consecutive period of 30 days
(the 'Average Price') next equals or exceeds $4.43, $5.22, $6.16, $7.27 and
$8.58 (individually, a 'Price Level') or, if not previously removed, at the end
of ten years. Pursuant to other provisions in the aforementioned employment
agreements, the formula for removing restrictions from the restricted shares
granted in February and March 1989 was amended to conform to that of the March
Restricted Shares and each of Gary Singer, Steven Singer and Bruce Sturman
relinquished their 313,170 options.

The issuance of the March Restricted Shares was effected pursuant to Board
authorization given in connection with the adoption of a series of proposals
designed to reduce the cash compensation of senior management. Bruce Sturman,
Gary Singer and Steven Singer each relinquished their rights to cash severance
in exchange for the March Restricted Shares. That compensation adjustment
reflects some of the terms contained in a subsequently approved stipulation of
settlement (the 'Settlement Agreement') in a derivative suit entitled In Re The
Cooper Companies, Inc. Shareholders' Litigation in which Bruce Sturman, Gary
Singer and Steven Singer and certain former officers of the Company were named
defendants.

Also pursuant to the aforementioned Board authorization and in
contemplation of the effectiveness of the Settlement Agreement, 281,853 stock
options of Martin Singer which had not yet become exercisable and 22,500
restricted shares as to which the restrictions had not yet been removed were
relinquished in exchange for the right to purchase for par value 272,500
restricted shares as to which all restrictions were to be removed 18 months
following the date of issuance (the 'Special Restricted Shares').

On March 9, 1990, the Executive Committee of the Board of Directors
authorized additional grants totalling 457,500 restricted shares to various
other employees and consultants of the Company, with restrictions to be removed
in 20% increments or at the end of ten years as described above. All of the
aforementioned grants were also ratified and approved by the Compensation
Committee and by the full Board of Directors. When the first and second Price
Levels were achieved in April 1990 and April 1991, restrictions were removed
from 40% of the aforementioned restricted shares, other than the Special
Restricted Shares of Martin Singer.

In July 1990, the Compensation Committee of the Board of Directors
authorized several grants covering an aggregate of 383,000 restricted shares
(the 'July Restricted Shares') to be issued pursuant to the LTIP. Restrictions
on 20% of the July Restricted Shares were removed pursuant to the terms of
individual restricted share agreements upon issuance of those shares.
Restrictions on the remaining 80% of the July Restricted Shares were to be
removed in 25% increments when the Average Price of the Company's common stock
next equals or exceeds for the first time $5.22, $6.16, $7.27 and $8.58, or, if

THE COOPER COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

not previously removed, at the end of ten years. In April 1991, the $5.22 Price
Level was achieved and, accordingly, restrictions were removed from 25% of the
restricted shares.

All remaining restrictions on the aforementioned restricted shares, except
for restricted shares of Steven Singer as a result of a modification to his
employment agreement, were removed in September 1993 as a result of a 'Change in
Control' as defined by the LTIP in connection with the issuance by the Company
of Series B Preferred Stock.

In January and June 1991, the Administrative Committee of the LTIP
authorized grants to employees and consultants of the Company covering an
aggregate of 101,500 restricted shares. Those restricted shares were to have
restrictions removed in 20% increments at the various Price Levels or at the end
of ten years, as described above. As of October 31, 1992, restrictions on 13,450
of these shares were removed, and during 1993 the remainder of restrictions were
removed as a result of a 'Change in Control' as defined by the LTIP in
connection with the issuance by the Company of Series B Preferred Stock. In
October 1991, the Administrative Committee of the LTIP made a grant to Bruce
Sturman of 100,000 restricted shares. Of those 100,000 shares, 46,000 shares had
restrictions removed upon purchase and the remaining restricted shares would
have been released in 33.33% increments at Price Levels of $6.16, $7.27 and
$8.58. With the termination of Bruce Sturman's employment with the Company on
July 27, 1992, the remaining restricted shares granted in October 1991 (54,000
shares) and his remaining restricted shares granted in March 1990 (182,611
shares) were purchased by the Company for $.10 per share.

In October 1991, the Administrative Committee of the LTIP made grants of
25,000 phantom stock units ('PSUs') to each of Gary Singer, Steven Singer and
Bruce Sturman which were immediately vested to the individuals. Gary and Steven
Singer each surrendered their 25,000 PSUs to the Company in October 1991,
whereupon they received an amount of cash ($98,450 each) equal to the fair
market value of 25,000 shares of common stock as specified by the grant. Bruce
Sturman's PSUs expired with his termination of employment with the Company on
July 27, 1992.

In February and June 1992, the Administrative Committee of the LTIP
authorized grants to employees and consultants covering an aggregate of 223,250
restricted shares. These restricted shares were to have restrictions removed in
20% increments at the various Price Levels (as described above), or have
restrictions removed based on performance criteria or at the end of ten years.
Of these grants, restrictions were removed from a total of 12,300 shares in
1992, and the remainder, not otherwise forfeited, had restrictions removed
during 1993 as a result of a 'Change in Control' as defined by the LTIP in
connection with the issuance by the Company of Series B Preferred Stock. (See
Note 8.)

In June 1993, the Administrative Committee of the LTIP authorized a grant
to a consultant covering an aggregate of 125,000 restricted shares. These
restricted shares had all restrictions removed in 1993.

As of August 1, 1993, there were options to purchase an aggregate of
1,102,500 shares of common stock granted to, and not subsequently forfeited by,
optionholders at exercise prices ranging from $.69 to $4.25 per share. The
Company offered each employee who held options granted under the LTIP an
opportunity to exchange those options for a smaller number of substitute
options. Each new option is exercisable at $.56 per share. The number of shares
each employee was entitled to purchase pursuant to such option was computed by
the Company's independent nationally recognized compensation consulting firm
using an option exchange ratio derived under the Black-Scholes option pricing
model which takes into account the number of shares which could be acquired
pursuant to outstanding options, the exercise price of the options, the current
market of the Company's common stock and the option expiration date. Each person
who elected to participate received an option to purchase an individually
calculated percentage of the shares covered by his outstanding option, ranging
from 21% to 70% of the shares such person was entitled to purchase. A percentage
of the new option, equal to the percentage of the outstanding option that was
already exercisable, was immediately exercisable. The remainder of the new
option will vest and become exercisable in 25% tranches if and when the trading

THE COOPER COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

price of the Company's common stock over 30 days averages, $1.00, $1.50, $2.00
and $2.50 per share, respectively. The option exchange program provided
optionholders the opportunity to exchange options with exercise prices well in
excess of the current market price of the Company's common stock with a lesser
number of options that are exercisable at a price that, while still above
current market price, is lower than the exercise price on the surrendered
options. Under the terms of the option exchange offer, each person who elected
to participate waived the vesting of options that otherwise would have resulted
from the Change in Control (as such term is defined in the LTIP) that occurred
when stockholders approved the conversion rights of the Series B Preferred Stock
on September 14, 1993.

1990 Non-Employee Directors Restricted Stock Plan

On April 26, 1990, the Company's Board of Directors adopted the 1990
Non-Employee Directors Restricted Stock Plan (the 'NEDRSP'), subject to the
approval of such plan by the stockholders of the Company. Such approval was
received July 12, 1990, at the Annual Meeting of Stockholders. The NEDRSP, by
its terms, grants to each current and future director of the Company who is not
also an employee or a consultant to the Company or any subsidiary of the Company
('Non-Employee Director') the right to purchase for $.10 per share, shares of
the Company's common stock, subject to certain restrictions. One hundred
thousand shares of such common stock were authorized and reserved for issuance
under the NEDRSP. Shares which are forfeited become available for new awards
under such plan. On July 12, 1990, upon approval of the NEDRSP by the
stockholders of the Company, three Non-Employee Directors received grants for
10,000 restricted shares each. Each grant provided that the restrictions will be
removed from 20% of such shares upon issuance. Restrictions shall lapse in 25%
increments for the remaining 8,000 shares each time the Average Price next
equals or exceeds $5.22, $6.16, $7.27 and $8.58. Restricted shares acquired
under any award made after July 12, 1990 shall be in awards of 5,000 shares and
shall have restrictions lapse with respect to 20% of such shares, and the shares
subject thereto shall become nonforfeitable and freely transferable, each time,
after the date of grant of the award, the Average Price equals or exceeds for
the first time each of the following percentages of increase over the Average
Price on the date of grant of the award: 18%, 36%, 54%, 72% and 90%.

Transactions involving options to purchase the Company's common stock in
connection with the LTIP and NEDRSP during each of the three years ended October
31, 1993 are summarized below:

NUMBER OF SHARES
--------------------
1993 LTIP NEDRSP
- -------------------------------------------------------------------------------- --------- -------

Outstanding at beginning of year................................................ 2,805,519 35,000
Options granted................................................................. 620,000 --
Options forfeited............................................................... (962,089) --
Restricted shares granted....................................................... 125,000 20,000
Restricted shares purchased by the Company...................................... (196,633) --
Restricted shares forfeited..................................................... (24,000) --
--------- -------
Outstanding at end of year...................................................... 2,367,797 55,000
--------- -------
--------- -------
Available for future grant...................................................... 4,008,943 45,000
--------- -------
--------- -------
Included in outstanding issuances are:
Options issued but not exercisable......................................... 519,269 --
Options issued and exercisable............................................. 14,959 --
Restricted shares issued with restrictions in force........................ 182,611 5,000
Restricted shares issued with restrictions removed......................... 1,650,958 50,000
--------- -------
Outstanding at October 31, 1993............................................ 2,367,797 55,000
--------- -------
--------- -------

Options issued and outstanding have option prices ranging from $.56 to
$2.625 per share.

THE COOPER COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

NUMBER OF SHARES
-------------------
1992 LTIP NEDRSP
- -------------------------------------------------------------------------------- --------- ------

Outstanding at beginning of year................................................ 2,543,827 21,000
Options granted................................................................. 660,000 --
Options forfeited............................................................... (20,000) --
Restricted shares granted....................................................... 223,250 20,000
Restricted shares purchased by the Company...................................... (576,558) (6,000)
Restricted shares forfeited..................................................... (25,000) --
--------- ------
Outstanding at end of year...................................................... 2,805,519 35,000
--------- ------
--------- ------
Available for future grant...................................................... 3,571,191 65,000
--------- ------
--------- ------
Included in outstanding issuances are:
Options issued but not exercisable......................................... 772,500 --
Options issued and exercisable............................................. 103,817 --
Restricted shares issued with restrictions in force........................ 795,022 23,000
Restricted shares issued with restrictions removed......................... 1,134,180 12,000
--------- ------
Outstanding at October 31, 1992................................................. 2,805,519 35,000
--------- ------
--------- ------

NUMBER OF SHARES
--------------------
1991 LTIP NEDRSP
- -------------------------------------------------------------------------------- --------- -------

Outstanding at beginning of year................................................ 2,341,327 30,000
Options granted................................................................. 35,000 --
Options forfeited............................................................... (25,000) --
Restricted shares granted....................................................... 201,500 5,000
Restricted shares purchased by the Company...................................... (4,500) (14,000)
Restricted shares forfeited..................................................... (4,500) --
--------- -------
Outstanding at end of year...................................................... 2,543,827 21,000
--------- -------
--------- -------
Available for future grant...................................................... 3,832,883 79,000
--------- -------
--------- -------
Included in outstanding issuances are:
Options issued but not exercisable......................................... 124,500 --
Options issued and exercisable............................................. 111,817 --
Restricted shares issued with restrictions in force........................ 1,185,629 9,000
Restricted shares issued with restrictions removed......................... 1,121,881 12,000
--------- -------
Outstanding at October 31, 1991................................................. 2,543,827 21,000
--------- -------
--------- -------

The excess of market value over $.10 per share of LTIP and NEDRSP
restricted shares on respective dates of grant is recorded as unamortized
restricted stock award compensation and shown as a separate component of
stockholders' equity. Restricted shares and other stock compensation charged
(credited) to selling, general and administrative expense for the twelve months
ended October 31, 1993, 1992 and 1991 was approximately $1,084,000, ($33,000)
and $1,734,000, respectively.

Prior Stock Option Plans

Prior to the implementation of the LTIP, the Company had two stock option
plans, the 1982 Stock Option Plan and the 1985 Stock Option Plan (collectively
referred to as the 'Stock Option Plans'). With the adoption of the LTIP,
effective September 15, 1988, all authorized but unallocated options of the
Stock Option Plans (approximately 430,500 options) were transferred to the LTIP
and no further grants were allowed from the Stock Option Plans. Previously
existing grants, however, remained in effect.

THE COOPER COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Options granted under the Stock Option Plans could not be granted at less
than 85% of the market value on the date of grant, could not have terms
exceeding ten years and were generally exercisable in four equal annual
installments commencing on the first anniversary of the date of the grant. The
maximum number of shares authorized to be granted under the Stock Option Plans
was 2,150,000 shares.

Transactions in the Company's common stock during each of the three years
ended October 31, 1993 in connection with the Company's Stock Option Plans are
summarized below:

NUMBER OPTION PRICE
1993 OF SHARES PER SHARE
- --------------------------------------------------------------------------- --------- -------------

Outstanding at beginning of year........................................... 40,238 $16.13-$19.75
Expired or canceled........................................................ (11,088) $16.13-$19.75
Outstanding at end of year................................................. 29,150 $16.13-$19.75
Exercisable at end of year................................................. 29,150 $16.13-$19.75
1992
Outstanding at beginning of year........................................... 48,493 $ 5.33-$19.75
Expired or canceled........................................................ (8,255) $ 5.33-$16.13
Outstanding at end of year................................................. 40,238 $16.13-$19.75
Exercisable at end of year................................................. 40,238 $16.13-$19.75
1991
Outstanding at beginning of year........................................... 161,168 $ 5.33-$19.75
Expired or canceled........................................................ (112,675) $ 16.13
Outstanding at end of year................................................. 48,493 $ 5.33-$19.75
Exercisable at end of year................................................. 48,493 $ 5.33-$19.75

NOTE 13. EMPLOYEE BENEFITS

THE COMPANY'S RETIREMENT INCOME PLAN

The Company adopted The Cooper Companies, Inc. Retirement Income Plan (the
'Retirement Plan') in December 1983. The Retirement Plan is a non-contributory
pension plan covering substantially all full-time United States employees of
CVI, CVP and the Company's Corporate Headquarters. The Company's customary
contributions are designed to fund normal cost on a current basis and to fund
over thirty years the estimated prior service cost of benefit improvements
(fifteen years for annual gains and losses). The unit credit actuarial cost
method is used to determine the annual cost. The Company pays the entire cost of
the Retirement Plan and funds such costs as they accrue. Retirement costs
applicable to continuing and discontinued operations of the Company for the
years ended October 31, 1993, 1992 and 1991 were approximately $181,000,
$265,000 and $351,000, respectively. Virtually all of the assets of the
Retirement Plan are comprised of participations in equity and fixed income
funds.

Based on the latest actuarial information available, the following tables
set forth the net periodic pension costs, funded status and amounts recognized
in the Company's consolidated financial statements for the Retirement Plan:

THE COOPER COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

NET PERIODIC PENSION COST

YEAR ENDED
OCTOBER 31,
--------------------
1993 1992 1991
---- ---- ----
(IN THOUSANDS)

Service cost.................................................................... $180 $187 $194
Interest cost................................................................... 453 426 401
Actual return on assets......................................................... (628) (364) (354)
Net amortization and deferral................................................... 176 16 110
---- ---- ----
Net periodic pension cost.................................................. $181 $265 $351
---- ---- ----
---- ---- ----

SCHEDULE RECONCILING THE FUNDED STATUS OF THE PLAN
WITH PROJECTED AMOUNTS FOR THE FINANCIAL STATEMENTS

1993 1992
----------- -----------

Assumptions:
Discount rate on plan liabilities.................................... 8.0% 8.0%
Long-range rate of return on plan assets............................. 9.0% 9.0%
Salary increase rate................................................. 6.0% 6.0%
Average remaining service............................................ 15.22 years 16.11 years

ACTUARIAL PRESENT VALUE OF BENEFIT OBLIGATIONS

OCTOBER 31,
----------------
1993 1992
------ ------
(IN THOUSANDS)

Vested benefit obligation............................................................ $5,592 $5,285
Non-vested benefit obligation........................................................ 48 38
------ ------
Accumulated benefit obligation....................................................... 5,640 5,323
Effect of projected earnings levels.................................................. 532 498
------ ------
Projected benefit obligation......................................................... 6,172 5,821
Fair value of plan assets............................................................ 5,993 4,826
------ ------
Projected benefit obligation in excess of assets..................................... 179 995
Less:
Unrecognized net gain........................................................... (926) (541)
Prior service cost remaining to be amortized, including unrecognized net
asset.......................................................................... 490 516
------ ------
Pension liability recognized......................................................... $ 615 $1,020
------ ------
------ ------

THE COMPANY'S 401(K) SAVINGS PLAN

The Company adopted its Stock Purchase Savings Plan (the 'Stock Plan') on
December 1, 1983. Effective July 1, 1990, the Company froze the Stock Plan and
implemented The Cooper Companies, Inc. 401(k) Savings Plan (the '401(k) Plan'),
a revision of the Stock Plan. Both plans provide for a deferred compensation
arrangement as described in section 401(k) of the Internal Revenue Code. The
401(k) Plan is a contributory plan and is available to substantially all
full-time United States employees of the Company. United States resident
employees of the Company who participate in the 401(k) Plan may elect to have
from 2% to 10% of their pre-tax salary or wages (but not more than $8,994 for
the calendar year ended December 31, 1993) deferred and contributed to the trust
established under the 401(k) Plan. The Company's contributions to the Stock Plan
or the 401(k) Plan on account of the

THE COOPER COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Company's participating employees, net of forfeiture credits, were $90,000,
$72,000 and $54,000 for the years ended October 31, 1993, 1992 and 1991,
respectively.

THE COMPANY'S BONUS PLAN

The Company adopted its Incentive Payment Plan (the 'IPP') available to key
executives and certain other personnel on November 1, 1982 pursuant to which
such persons may in certain years receive cash bonuses based on Company and
subsidiary performance. Total payments earned under the IPP for the years ended
October 31, 1993, 1992 and 1991, were approximately $439,000, $456,000 and
$125,000, respectively. The Board of Directors of the Company also approved
discretionary bonuses outside of the IPP for the years ended October 31, 1993
and October 31, 1992 of approximately $124,000 and $343,000, respectively.

THE COMPANY'S TURN-AROUND INCENTIVE PLAN

The Company adopted its Turn-Around Incentive Plan (the 'TIP') on May 18,
1993 pursuant to which certain designated employees are eligible to receive
awards, payable over time in a combination of cash and restricted stock issued
if the Company achieves a global resolution acceptable to the Board of Directors
of all breast implant matters and if the price of the Company's common stock
reaches certain designated price levels. No payments have been made under the
TIP to date.

POSTRETIREMENT BENEFITS OTHER THAN PENSIONS

In December 1990, the Financial Accounting Standards Board issued Statement
No. 106, Employer's Accounting for Postretirement Benefits Other Than Pensions
('FAS 106'), which required adoption of a new method of accounting for
postretirement benefits. FAS 106 establishes standards for providing an
obligation for future postretirement benefits due employees over the service
period of such employees. FAS 106 is effective for fiscal years beginning after
December 15, 1992. The Company will adopt FAS 106 as required and believes the
adoption will have no material impact on its consolidated financial statements.

NOTE 14. LEASE AND OTHER COMMITMENTS

Total minimum annual rental obligations under noncancelable operating
leases (substantially all real property and equipment) in force at October 31,
1993 are payable in subsequent years as follows:

(IN THOUSANDS)

1994.................................................................................... $ 2,563
1995.................................................................................... 2,046
1996.................................................................................... 1,341
1997.................................................................................... 755
1998 and thereafter..................................................................... 4,475
--------------
$ 11,180
--------------
--------------

Aggregate rental expense for both cancelable and noncancelable contracts
amounted to $2,105,000, $2,828,000 and $2,869,000 in 1993, 1992 and 1991,
respectively.

Commitments under capitalized leases are not significant.

Under the terms of a supply agreement most recently modified in 1993, the
Company agreed to purchase by December 31, 1997, certain contact lenses from a
British manufacturer with an aggregate cost of approximately `L'4,063,000. As of
December 31, 1993, there remained a commitment of `L'3,835,116.

THE COOPER COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The $9,000,000 liability recorded for payments to be made to MEC under the
MEC Agreement described in Notes 3, 18 and 19 will become due as follows:

December 31,

1994............................................................. $1,250,000
1995............................................................. 1,500,000
1996............................................................. 1,750,000
1997............................................................. 2,000,000
1998............................................................. 2,500,000
----------
$9,000,000
----------
----------

Additional payments to be made to MEC beginning December 31, 1999 are
contingent upon the Company's earning net income before taxes in each fiscal
year, and are, therefore, not recorded in the Company's financial statements.
Such payments are limited to the smaller of 50% of the Company's net income
before taxes in each such fiscal year on a noncumulative basis or the amounts
shown below:

December 31,

1999............................................................. $3,000,000
2000............................................................. $3,500,000
2001............................................................. $4,000,000
2002............................................................. $4,500,000
2003............................................................. $3,000,000

NOTE 15. RELATIONSHIPS AND TRANSACTIONS BETWEEN THE COMPANY CLS, COOPER
DEVELOPMENT COMPANY ('CDC') AND THE COOPER LABORATORIES, INC.
STOCKHOLDERS' LIQUIDATING TRUST (THE 'TRUST')

ADMINISTRATIVE SERVICES

Pursuant to separate agreements between the Company and CDC, CLS and the
Trust, which was formed in connection with the liquidation of the Company's
former parent, Cooper Laboratories, Inc., the Company provided certain
administrative services to CDC, CLS and the Trust, including the services of the
Company's treasury, legal, tax, data processing, corporate development, investor
relations and accounting staff. Expenses are charged on the basis of specific
utilization or allocated based on personnel, space, percent of assets used or
other appropriate bases. The agreements relating to the provision of
administrative services to CDC and CLS terminated on September 17, 1988. The
Company has not performed any services for CDC and CLS since September 17, 1988,
other than historic tax services pursuant to the Trust. Combined corporate
administrative expenses charged to the Trust by the Company were $213,000 in
1992 and $560,000 in 1991. On July 9, 1992, the Trust filed a petition in
Bankruptcy under Chapter 7 of the Bankruptcy Code; and, effective July 31, 1992,
the Company ceased providing services to the Trust. The Company has asserted a
claim for approximately $740,000 in the Trust's bankruptcy proceedings,
primarily representing unpaid administrative service fees and expenses and legal
fees advanced by the Company on behalf of the Trust.

AGREEMENTS WITH CLS

On October 21, 1988, the Company and CLS entered into a settlement
agreement (the '1988 CLS Settlement Agreement') pursuant to which certain claims
between the two corporations were settled. Among other things, the 1988 CLS
Settlement Agreement provided that (a) the discovery period under the directors
and officers liability insurance policy issued by the Company covering directors
and officers of CLS would be extended pursuant to an option contained in the
insurance policy (see 'Liability Insurance', below), (b) CLS would indemnify the
Company for certain claims made by a former consultant to the Company (c) CLS
would have no further liability to the Company with respect to the termination
of the contract pursuant to which the Company had agreed to purchase ophthalmic

THE COOPER COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

laser systems from CLS, (d) CLS would pay the Company $2,750,000 and (e) CLS, in
its capacity as a holder of the SERPS, would consent to the Company's proposed
sales of its CTI business and its Cooper Surgical business and to the proposed
deletion of the mandatory redemption provision of the Senior Preferred Stock.
The 1988 CLS Settlement Agreement did not allocate the $2,750,000 settlement
amount among the various items contained therein. The $2,750,000 was paid in
full by CLS in December 1988.

On November 27, 1989, the Company and CLS entered into another separate
settlement agreement (the '1989 CLS Settlement Agreement'). Pursuant to the 1989
CLS Settlement Agreement, among other things, the Company and CLS (i) entered
into a mutual standstill arrangement precluding each party from acquiring each
other's common stock and precluding CLS from acquiring additional shares of the
SERPS, (ii) dismissed most of the outstanding litigations among the Company and
CLS, (iii) reaffirmed the Company's obligation to register the SERPS, and (iv)
obtained the consent of CLS, as a holder of outstanding SERPS, to any future
sale of all or any portion of the Company's remaining contact lens business,
subject to the receipt of a fairness opinion and following a 90-day period
(since expired) in which the Company would negotiate the sale of the business
exclusively with CLS and CDC.

On June 12, 1992, the Company consummated a transaction with CLS, which
eliminated approximately 80% of the SERPS (the '1992 CLS Transaction'). Pursuant
to an Exchange Agreement between the Company and CLS dated as of June 12, 1992
(the '1992 Exchange Agreement'), the Company acquired from CLS 488,004 shares of
SERPS owned by CLS, and all of CLS's right to receive, by way of dividends
pursuant to the terms of SERPS, an additional 11,996 shares of SERPS (such
11,996 shares together with the 488,004 shares being referred to collectively as
the 'Exchanged SERPS') in exchange for 4,850,000 newly issued shares of the
Company common stock (the 'Company Shares'). In addition, the Company purchased
200,000 unregistered shares of CLS common stock (the 'CLS Shares'), for a
purchase price of $1,500,000 in cash (carried at October 31, 1992, at cost in
'Other assets' of the Company's consolidated balance sheet) and entered into a
settlement agreement with CLS dated as of June 12, 1992 (the '1992 CLS
Settlement Agreement'), with respect to certain litigation and administrative
proceedings in which the Company and CLS were involved. Pursuant to the 1992
Settlement Agreement, CLS, among other things, released its claim against the
Company for unliquidated damages arising from the Company's failure to register
the SERPS, in return for the Company's payment of $500,000, the reimbursement of
certain legal fees and expenses in the amount of $650,000 incurred by CLS in
connection with certain litigation and administrative proceedings, and the
payment of $709,000 owed by the Company to CLS pursuant to tax sharing
agreements between them. The Company also agreed to reimburse CLS for up to
$250,000 of legal and other fees and expenses incurred by CLS in connection with
the 1992 CLS Transaction and, if requested by CLS, to use its reasonable best
efforts to cause the election to the Company's Board of Directors of one or two
designees of CLS, reasonably acceptable to the Company (the number of designees
depending, respectively, on whether CLS owns more than 1,000,000 but less than
2,400,000 shares, or more than 2,400,000 shares of the Company's common stock).

As part of the 1992 CLS Transaction, pursuant to Registration Rights
Agreements, dated as of June 12, 1992, each between the Company and CLS (the
'Registration Rights Agreements'), the Company and CLS each agreed to use its
reasonable best efforts to register, respectively, the Company Shares and the
CLS Shares. On July 27, 1992, the Company filed with the SEC a registration
statement for the Company Shares which became effective November 20, 1992. If a
registration statement covering the Company Shares had not been declared
effective within 180 days following June 12, 1992, the Company had agreed to pay
$1,250,000 in cash (an amount equal to the value of 'pay-in-kind' dividends it
would have accrued on the Exchanged SERPS but for the exchange). CLS agreed that
if CLS had not registered the CLS Shares within 17 months from the closing date,
the Company could require CLS to repurchase the CLS Shares, at the Company's
cost of $1,500,000, by either, at CLS's option, (a) payment of cash, (b)
delivery of shares of Senior Preferred Stock, valued at $39 per share, or (c)
delivery of

THE COOPER COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

shares of the Company's common stock, valued at $3 per share The CLS Shares were
delivered to CLS as part of 1993 CLS Settlement Agreement (as defined and
described below).

On June 14, 1993, the Company acquired from CLS, all of the remaining
outstanding SERPS of the Company, having an aggregate liquidation preference of
$16,060,000, together with all rights to any dividends or distributions thereon,
in exchange for shares of Series B Preferred Stock having an aggregate
liquidation preference of $3,450,000 and a par value of $.10 per share (the
'1993 CLS Exchange Agreement'). Such shares, and any shares of Series B
Preferred Stock issued as dividends, are convertible into one share of common
stock of the Company for each $1.00 of liquidation preference, subject to
customary antidilution adjustments.

The Company also has the right to compel conversion of Series B Preferred
Stock at any time after the market price of the common stock on its principal
trading market averages at least $1.375 for 90 consecutive calendar days and
closes at not less than $1.375 on at least 80% of the trading days during such
period. CLS currently owns 4,850,000 shares of Common Stock, or approximately
16.2% of the outstanding common stock.

The Company and CLS also entered into a Registration Rights Agreement,
dated June 14, 1993, providing for the registration under the Securities Act of
the shares of common stock issued upon such conversion of any of the Series B
Preferred Stock and any of the 4,850,000 shares of common stock currently owned
by CLS which have not been sold prior thereto.

The Board of Directors amended the Rights Agreement dated as of October 29,
1987, between the Company and The First National Bank of Boston, as Rights
Agent, so that CLS and its affiliates and associates would not be Acquiring
Persons thereunder as a result of CLS's beneficial ownership of more than 20% of
the outstanding Common Stock of the Company by reason of its ownership of Series
B Preferred Stock or Common Stock issued upon conversion thereof. See Note 5.

CLS obtained the 4,850,000 shares of Common Stock it currently owns
pursuant to the 1992 CLS Exchange Agreement described above. In Amendment No. 1
to its Schedule 13D, filed with the SEC on November 12, 1992, CLS disclosed that
'in light of the recent public disclosures relating to the Company and the
recent significant decline in the public trading price of the Common Stock, CLS
is presently considering various courses of action which it may determine to be
necessary or appropriate in order to maintain and restore the value of the
Common Stock. Included among the actions which CLS is considering pursuing are
the initiation of litigation against the Company and the replacement of
management and at least a majority of the members of the Board of Directors of
the Company.'

On June 14, 1993, in order to resolve all disputes with CLS, the Company
and CLS entered into a Settlement Agreement (the '1993 CLS Settlement
Agreement'), pursuant to which CLS delivered a general release of claims against
the Company, subject to exceptions for specified on-going contractual
obligations, and agreed to certain restrictions on its voting and transfer of
securities of the Company, in exchange for the Company's payment of $4,000,000
in cash and delivery of 200,000 shares of common stock of CLS owned by the
Company and a general release of claims against CLS, subject to similar
exceptions. The cash paid and fair value of CLS shares returned have been
charged to the Company's statement of operations as settlement of disputes. See
Note 7.

Pursuant to the 1993 CLS Settlement Agreement, the Company agreed to
nominate, and CLS agreed to vote all of its shares of common stock of the
Company in favor of the election of, a Board of Directors of the Company
consisting of eight members, up to three of whom will, at CLS's request, be

THE COOPER COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

designated by CLS (such designees to be officers or more than 5% stockholders of
CLS as of June 14, 1993 or otherwise be reasonably acceptable to the Company).
The number of CLS designees will decline as CLS's ownership of common stock
(including shares of common stock into which the shares of Series B Preferred
Stock owned by CLS are or may become convertible) declines. A majority of the
Board members (other than CLS designees) will be individuals who are not
officers or employees of the Company. Pursuant to the 1993 CLS Settlement
Agreement, CLS designated, and on August 10, 1993 the Board of Directors
elected, one person to serve as a director of the Company until the 1993 Annual
Meeting. CLS also designated that individual along with two other people as its
three designees to the eight-member Board of Directors that was elected at the
1993 Annual Meeting.

CLS also agreed in the 1993 Settlement Agreement not to acquire any
additional securities of the Company (except shares of Series B Preferred Stock
issued as dividends or common stock issued upon conversion, if any, of Series B
Preferred Stock) and to certain limitations on its transfer of securities of the
Company. In addition, CLS agreed, among other things, not to seek control of the
Company or the Board or otherwise take any action contrary to the 1993 CLS
Settlement Agreement. CLS is free, however, to vote all voting securities owned
by it as it deems appropriate on any matter before the Company's stockholders.

The agreements with respect to Board representation and voting, and the
restrictions on CLS's acquisition and transfer of securities of the Company,
will terminate on June 14, 1995, or earlier if CLS beneficially owns less than
1,000,000 shares of common stock (including as owned any common stock into which
shares of Series B Preferred Stock owned by CLS are convertible). The agreements
will be extended if the market price of the common stock increases to specified
levels prior to each of June 12, 1995, and June 12, 1996, or the Company agrees
to nominate one CLS designee, who is independent of CLS and reasonably
acceptable to the Company, in addition to that number of designees to which CLS
is then entitled on each such date, which could result in such agreements
continuing through October 31, 1996, and CLS having up to five designees on the
Board (which would then have a total of ten members, or eleven members if a new
chairman or chief executive officer is then serving on the Board). Following
termination of such agreements and through June 12, 2002, CLS will continue to
have the contractual right that it had pursuant to the 1992 CLS Settlement
Agreement to designate two directors of the Company, so long as CLS continues to
own at least 2,400,000 shares of common stock, or one director, so long as it
continues to own at least 1,000,000 shares of common stock.

LIABILITY INSURANCE

Prior to fiscal 1988, a subsidiary of the Company that is engaged in the
insurance underwriting business issued a directors and officers liability policy
to CLS and a former affiliate of the Company covering its directors and officers
for certain liabilities. Each policy had a maximum aggregate coverage of
$5,000,000. On September 2, 1988, the Company terminated the insurance policies.
As described above, the discovery periods for claims under such policies were
extended pursuant to the terms of such policies. The Company had pledged
$7,750,000 of cash (included in restricted cash at October 31, 1991 in the
Company's consolidated balance sheet) to collateralize the contingent
obligation.

On April 30, 1993, the civil action entitled Guenther v. Cooper Life
Sciences, Inc. et. al. filed in 1988 was settled. With such settlement, the
Company was released from any future potential director and officer liability
relating to coverage under the aforementioned policies and, therefore, the
restricted cash which collateralized contingent liabilities was released. For a
further discussion of the action see Note 7 'Settlement of Disputes.'

OTHER

CLS was formerly an 89.5% owned subsidiary of the Company's former parent,
Cooper Laboratories, Inc. ('Labs').

THE COOPER COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

CLS filed Amendment No. 2 to its Schedule 13D stating that it owns and has
sole voting and dispositive power with respect to 4,850,000 shares of the
Company's common stock as of June 12, 1992. On June 14, 1993, CLS acquired 345
shares of Series B Preferred Stock which are convertible into 3,450,000 shares
of common stock. In addition, the Company had been advised that, as of December
15, 1993, Moses Marx, the beneficial owner of approximately 22% of the
outstanding stock of CLS, beneficially owned 1,126,000 shares (or approximately
3.7%) of the Company's common stock and $4,500,000 principal amount of
Debentures, or approximately 11.4% of the aggregate principal amount thereof,
and that United Equities Company ('United Equities'), a brokerage firm owned by
Mr. Marx, held approximately $3,706,000 principal amount of Debentures or
approximately 9.4% of the aggregate principal amount of Debentures outstanding,
in its trading account. Mr. Marx and United Equities tendered all of their
Debentures in the Exchange Offer and Solicitation (although not all of their
Debentures were accepted due to proration), and the Company is not aware of Mr.
Marx's or United Equities' current holdings of the Company's securities.

NOTE 16. BUSINESS AND GEOGRAPHIC SEGMENT INFORMATION

The Company's operations are attributable to four business segments: HGA
(including PSG Management) which provides psychiatric healthcare services, and
CooperVision, CooperVision Pharmaceuticals and CooperSurgical which develop,
manufacture and market healthcare products.

Total revenues by business segment represent service and sales revenue as
reported in the Company's statement of consolidated operations. Total net sales
revenue by geographic area include intercompany sales which are priced at terms
that allow for a reasonable profit for the seller. Operating income (loss) is
total revenue less cost of products sold, research and development expenses,
selling, general and administrative expenses, costs of restructuring and
amortization of intangible assets. Corporate operating loss is principally
corporate headquarters expense. Investment income, net, settlement of disputes,
debt restructuring costs, gain on sales of assets and businesses, net, other
income (expense), net, and interest expense were not allocated to individual
businesses and geographic segments.

Identifiable assets are those assets used in continuing operations
(exclusive of cash and cash equivalents) or which are allocated thereto when
used jointly. Corporate assets are principally cash and cash equivalents,
restricted cash and temporary investments.

THE COOPER COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Information by business segment for each of the years in the three year period
ended October 31, 1993 follows:

CORPORATE
COOPER- COOPERVISION COOPER- &
1993 HGA VISION PHARMACEUTICALS SURGICAL ELIMINATIONS CONSOLIDATED
- ------------------------------------------ -------- -------- --------------- -------- ------------- ------------
(IN THOUSANDS)

Revenue from nonaffiliates................ $ 45,283 $ 32,120 $ 570 $ 14,679 $ -- $ 92,652
-------- -------- ------- -------- ------------- ------------
-------- -------- ------- -------- ------------- ------------
Operating income (loss)................... $ 2,124 $ 7,842 ($ 2,045 ) ($ 4,482) ($ 24,893 ) ($ 21,454 )
-------- -------- ------- -------- -------------
-------- -------- ------- -------- -------------
Investment income, net.................... 1,615
Settlement of disputes.................... (6,350 )
Debt restructuring costs.................. (2,131 )
Gain on sales of assets and businesses,
net..................................... 620
Other income (expense), net............... 174
Interest expense.......................... (6,129 )
------------
Loss from continuing operations before
income taxes and extraordinary items.... ($ 33,655 )
------------
------------
Identifiable assets....................... $ 48,434 $ 24,339 $ 833 $ 12,133 $ 23,785 $ 109,524
-------- -------- ------- -------- ------------- ------------
-------- -------- ------- -------- ------------- ------------
Depreciation expense...................... $ 1,324 $ 807 $ 46 $ 343 $ 104 $ 2,624
-------- -------- ------- -------- ------------- ------------
-------- -------- ------- -------- ------------- ------------
Amortization expense...................... $ 205 $ 187 $ 90 $ 290 $ -- $ 772
-------- -------- ------- -------- ------------- ------------
-------- -------- ------- -------- ------------- ------------
Capital expenditures...................... $ 774 $ 398 $ 91 $ 305 $ 181 $ 1,749
-------- -------- ------- -------- ------------- ------------
-------- -------- ------- -------- ------------- ------------

CORPORATE
HGA COOPER- COOPERVISION COOPER- &
1992 (1) VISION PHARMACEUTICALS SURGICAL ELIMINATIONS CONSOLIDATED
- ------------------------------------------ -------- -------- --------------- -------- ------------ ------------
(IN THOUSANDS)

Revenue from nonaffiliates................ $ 19,406 $ 27,817 $ 46 $ 16,010 $ -- $ 63,279
-------- -------- ------- -------- ------------ ------------
-------- -------- ------- -------- ------------ ------------
Operating income (loss)................... $ 1,967 $ 3,772 ($ 1,652 ) ($ 2,909) ($ 22,097 ) ($ 20,919 )
-------- -------- ------- -------- ------------
-------- -------- ------- -------- ------------
Investment income, net.................... 14,254
Settlement of disputes.................... (4,498 )
Gain on sales of assets and businesses,
net..................................... 1,030
Other income (expense), net............... 772
Interest expense.......................... (6,697 )
------------
Loss from continuing operations before
income taxes and extraordinary items.... ($ 16,058 )
------------
------------
Identifiable assets....................... $ 56,707 $ 21,245 $ 410 $ 10,974 $ 83,671 $ 173,007
-------- -------- ------- -------- ------------ ------------
-------- -------- ------- -------- ------------ ------------
Depreciation expense...................... $ 546 $ 540 $ 4 $ 189 $ 258 $ 1,537
-------- -------- ------- -------- ------------ ------------
-------- -------- ------- -------- ------------ ------------
Amortization expense...................... $ 86 $ 202 $ 22 $ 308 $ 124 $ 742
-------- -------- ------- -------- ------------ ------------
-------- -------- ------- -------- ------------ ------------
Capital expenditures...................... $ 101 $ 498 $ 45 $ 555 $ 3,211 (2) $ 4,410
-------- -------- ------- -------- ------------ ------------
-------- -------- ------- -------- ------------ ------------

- ------------

(1) Results from May 29, 1992.

(2) Includes $3,149,000 for two real estate investments made by Cooper Real
Estate Group.

THE COOPER COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

COOPERVISION CORPORATE &
1991 COOPERVISION PHARMACEUTICALS COOPERSURGICAL ELIMINATIONS CONSOLIDATED
- ------------------------------------------ ------------ --------------- -------------- ----------- ------------
(IN THOUSANDS)

Revenue from nonaffiliates................ $ 27,652 $ 12 $ 7,860 $ -- $ 35,524
------------ ------- -------------- ----------- ------------
------------ ------- -------------- ----------- ------------
Operating loss............................ ($ 5,351) ($ 831 ) ($ 5,386) ($ 18,728 ) ($ 30,296 )
------------ ------- -------------- -----------
------------ ------- -------------- -----------
Investment income, net.................... 12,268
Other income (expense), net............... 574
Interest expense.......................... (7,148 )
------------
Loss from continuing operations before
income taxes and extraordinary items.... ($ 24,602 )
------------
------------
Identifiable assets....................... $ 20,106 $ 384 $ 12,675 $ 154,468 $ 187,633
------------ ------- -------------- ----------- ------------
------------ ------- -------------- ----------- ------------
Depreciation expense...................... $ 801 $ 2 $ 89 $ 147 $ 1,039
------------ ------- -------------- ----------- ------------
------------ ------- -------------- ----------- ------------
Amortization expense...................... $ 196 $ 17 $ 233 $ 500 $ 946
------------ ------- -------------- ----------- ------------
------------ ------- -------------- ----------- ------------
Capital expenditures...................... $ 604 $ 19 $ 481 $ 574 $ 1,678
------------ ------- -------------- ----------- ------------
------------ ------- -------------- ----------- ------------

Information by geographic area for each of the years in the three year
period ended October 31, 1993 follows:

ELIMINATIONS
UNITED AND
STATES EUROPE CANADA OTHER CORPORATE CONSOLIDATED
------- ------- ------ ------ ------------ ------------
(IN THOUSANDS)

1993:
Revenue from nonaffiliates............. $83,189 $ 795 $7,131 $1,537 $ -- $ 92,652
Sales between geographic areas......... 4,593 -- -- -- (4,593) --
------- ------- ------ ------ ------------ ------------
Net operating revenue.................. $87,782 $ 795 $7,131 $1,537 ($ 4,593) $ 92,652
------- ------- ------ ------ ------------ ------------
------- ------- ------ ------ ------------ ------------
Operating income (loss)................ $ 3,086 ($ 72) $ 561 ($ 136) ($24,893) ($21,454)
------- ------- ------ ------ ------------ ------------
------- ------- ------ ------ ------------ ------------
Identifiable assets.................... $85,962 $ 832 $3,059 $ -- $ 19,671 $109,524
------- ------- ------ ------ ------------ ------------
------- ------- ------ ------ ------------ ------------
1992:
Revenue from nonaffiliates............. $54,036 $ 648 $7,316 $1,279 $ -- $ 63,279
Sales between geographic areas......... 2,872 -- -- -- (2,872) $ --
------- ------- ------ ------ ------------ ------------
Net operating revenue.................. $56,908 $ 648 $7,316 $1,279 ($ 2,872) $ 63,279
------- ------- ------ ------ ------------ ------------
------- ------- ------ ------ ------------ ------------
Operating income (loss)................ $ 480 ($ 45) $ 826 ($ 146) ($22,034) ($20,919)
------- ------- ------ ------ ------------ ------------
------- ------- ------ ------ ------------ ------------
Identifiable assets.................... $84,997 $ 1,613 $4,339 $1,152 $ 80,906 $173,007
------- ------- ------ ------ ------------ ------------
------- ------- ------ ------ ------------ ------------
1991:
Revenue from nonaffiliates............. $26,639 $ 811 $7,248 $ 826 $ -- $ 35,524
Sales between geographic areas......... 4,443 -- -- -- (4,443) --
------- ------- ------ ------ ------------ ------------
Net operating revenue.................. $31,082 $ 811 $7,248 $ 826 ($ 4,443) $ 35,524
------- ------- ------ ------ ------------ ------------
------- ------- ------ ------ ------------ ------------
Operating income (loss)................ ($12,082) $ 17 $ 478 $ 19 ($18,728) ($30,296)
------- ------- ------ ------ ------------ ------------
------- ------- ------ ------ ------------ ------------
Identifiable assets.................... $28,497 $ -- $2,913 $ -- $156,223 $187,633
------- ------- ------ ------ ------------ ------------
------- ------- ------ ------ ------------ ------------

THE COOPER COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

NOTE 17. QUARTERLY FINANCIAL DATA (UNAUDITED)

FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER
------- ------- ------- -------
(IN THOUSANDS, EXCEPT PER SHARE FIGURES)

1993:
Net operating revenue............................................ $22,360 $23,659 $24,495 $22,138
Loss applicable to common stock from continuing operations....... (2,844) (6,343) (13,705) (11,500)
Loss on disposition of discontinued operations................... -- (13,657) -- --
Extraordinary items.............................................. 924 -- -- --
------- ------- ------- -------
Loss applicable to common stock.................................. ($1,920) ($20,000) ($13,705) ($11,500)
------- ------- ------- -------
------- ------- ------- -------
Net income (loss) per common share*:
Continuing operations....................................... ($.09) ($.22) ($.46) ($.38)
Loss on disposition of discontinued operations.............. -- (.45) -- --
Extraordinary items......................................... .03 -- -- --
Net loss per common share................................... ($.06) ($.67) ($.46) ($.38)
Common Stock price range:
High........................................................ $ 1.375 $ 1.125 $ 0.750 $ 0.500
Low......................................................... $ 0.875 $ 0.406 $ 0.344 $ 0.344
1992:
Net operating revenue............................................ $10,743 $11,318 $19,335 $21,883
Income (loss) applicable to common stock from continuing
operations..................................................... (181) 1,494 (8,498) (10,777)
Loss on disposition of discontinued operations................... -- (1,366) (934) (7,000)
Extraordinary items.............................................. 306 12 (318) 640
------- ------- ------- -------
Net income (loss) applicable to common stock..................... $ 125 $ 140 ($9,750) ($17,137)
------- ------- ------- -------
------- ------- ------- -------
Net income (loss) per common share*:
Continuing operations....................................... ($.01) $.06 ($.30) ($.35)
Loss on disposition of discontinued operations.............. -- (.05) (.03) (.23)
Extraordinary items......................................... .01 -- (.01) .02
Net income (loss) per common share............................... $-- $.01 ($.34) ($.56)
Common Stock price range:
High........................................................ $ 4.375 $ 4.375 $ 3.250 $ 2.750
Low......................................................... $ 3.000 $ 2.875 $ 2.500 $ 1.375

- ------------

* The sum of income (loss) per common share for the four quarters is different
from the full year net income (loss) per common share as a result of
computing the quarterly and full year amounts on the weighted average number
of common shares outstanding in the respective periods.

THE COOPER COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER
------- ------- ------- -------
(IN THOUSANDS)

Included in the 1993 quarters are the following items:
Investment income (loss), net..................................... $3,677 ($ 249) ($ 199) ($1,614)
Interest expense.................................................. (1,634 ) (1,536) (1,430) (1,529)
Settlement of disputes............................................ -- -- (4,850) (1,500)
Debt restructuring costs.......................................... -- -- -- (2,131)
Cost of restructuring operations.................................. -- (451) -- --
Gain on sales of assets and businesses, net....................... -- 620 -- --
Discontinued operations........................................... -- (13,657) -- --
Extraordinary items............................................... 924 -- -- --
Dividend requirements on Senior Preferred Stock................... (160 ) (160) -- --
All other components of net loss.................................. (4,727 ) (4,567) (7,226) (4,726)
------- ------- ------- -------
Loss applicable to common stock................................... ($1,920) ($20,000) ($13,705) ($11,500)
------- ------- ------- -------
------- ------- ------- -------
Included in the 1992 quarters are the following items:
Investment income (loss), net..................................... $5,457 $ 7,129 $ 6,066 ($4,398)
Interest expense.................................................. (1,420 ) (1,425) (1,977) (1,875)
Settlement of disputes............................................ -- -- (4,495) (3)
Gain on sales of assets and businesses, net....................... 1,013 17 -- --
Discontinued operations........................................... -- (1,366) (934) (7,000)
Extraordinary items............................................... 306 12 (318) 640
Dividend requirements on Senior Preferred Stock................... (630 ) (633) (386) (155)
All other components of net income (loss)......................... (4,601 ) (3,594) (7,706) (4,346)
------- ------- ------- -------
Net income (loss) applicable to common stock...................... $ 125 $ 140 ($9,750) ($17,137)
------- ------- ------- -------
------- ------- ------- -------

- ------------

At December 31, 1993 and 1992 there were 4,550 and 4,902 common stockholders of
record, respectively.

ITEM 18. LEGAL PROCEEDINGS.

The Company is a defendant in a number of legal actions relating to its
past or present businesses in which plaintiffs are seeking damages.

On November 10, 1992, the Company was charged in an indictment (the
'Indictment'), filed in the United States District Court for the Southern
District of New York, with violating federal criminal laws relating to a
'trading scheme' by Gary A. Singer, a former Co-Chairman of the Company (who
went on a leave of absence on May 28, 1992, begun at the Company's request, and
who subsequently resigned on January 20, 1994), and others, including G. Albert
Griggs, Jr., a former analyst with The Keystone Group, Inc., and John D. Collins
II, to 'frontrun' high yield bond purchases by the Keystone Custodian Funds,
Inc., a group of mutual funds. The Company was named as a defendant in 10
counts. Gary Singer was named as a defendant in 24 counts, including violations
of the Racketeer Influenced and Corrupt Organizations Act and the mail and wire
fraud statutes (including defrauding the Company by virtue of the 'trading
scheme', by, among other things, transferring profits on trades of DR Holdings,
Inc. 15.5% bonds (the 'DR Holdings Bonds') from the Company to members of his
family during fiscal 1991), money laundering, conspiracy, and aiding and
abetting violations of the Investment Advisers Act of 1940, as amended (the
'Investment Advisers Act'), by an investment advisor.

THE COOPER COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

against Mr. Singer and the Company was dismissed at trial and two counts against
Mr. Singer relating to forfeiture penalties were resolved by stipulation between
the government and Mr. Singer. Sentencing is scheduled for March 25, 1994. The
maximum penalty which could be imposed on the Company is the greater of (i)
$500,000 per count, (ii) twice the gross gain derived from the offense or (iii)
twice the gross loss suffered by the victim of the offense, and a $200 special
assessment. In addition to the penalties described in (i), (ii) or (iii), the
Court could order the Company to make restitution. The Company is considering
its options, including filing an appeal of its conviction. Mr. Singer's attorney
has advised the Company that Mr. Singer intends to appeal his conviction.
Although the Company may be obligated under its Certificate of Incorporation to
advance the costs of such appeal, the Company and Mr. Singer have agreed that
Mr. Singer will not request such advances, but that he will reserve his rights
to indemnification in the event of a successful appeal.

Also on November 10, 1992, the SEC filed a civil Complaint for Permanent
Injunction and Other Equitable Relief (the 'SEC Complaint') in the United States
District Court for the Southern District of New York against the Company, Gary
A. Singer, Steven G. Singer (the Company's Executive Vice President and Chief
Operating Officer and Gary Singer's brother), and, as relief defendants, certain
persons related to Gary and Steven Singer and certain entities in which they
and/or those related persons have an interest. The SEC Complaint alleges that
the Company and Gary and Steven Singer violated various provisions of the
Securities Exchange Act of 1934, as amended (the 'Securities Exchange Act'),
including certain of its antifraud and periodic reporting provisions, and aided
and abetted violations of the Investment Company Act, and the Investment
Advisors Act , in connection with the 'trading scheme' described in the
preceding paragraphs. The SEC Complaint further alleges, among other things,
federal securities law violations (i) by the Company and Gary Singer in
connection with an alleged manipulation of the trading price of the Company's
10 5/8% Convertible Subordinated Reset Debentures due 2005 (the 'Debentures') to
avoid an interest rate reset allegedly required on June 15, 1991 under the terms
of the Indenture governing the Debentures, (ii) by Gary Singer in allegedly
transferring profits on trades of high yield bonds (including those trades in
the DR Holdings Bonds which were the subject of certain counts of the Indictment
of which Mr. Singer was found guilty) from the Company to members of his family
and failing to disclose such transactions to the Company and (iii) by the
Company in failing to disclose publicly on a timely basis such transactions by
Gary Singer. The SEC Complaint asks that the Company and Gary and Steven Singer
be enjoined permanently from violating the antifraud, periodic reporting and
other provisions of the federal securities laws, that they disgorge the amounts
of the alleged profits received by them pursuant to the alleged frauds (stated
in the SEC's Litigation Release No. 13432 announcing the filing of the SEC
Complaint as being $1,296,406, $2,323,180 and $174,705, respectively), plus
interest, and that they each pay appropriate civil monetary penalties. The SEC
Complaint also seeks orders permanently prohibiting Gary and Steven Singer from
serving as officers or directors of any public company and disgorgement from
certain Singer family members and entities of amounts representing the alleged
profits received by such defendants pursuant to the alleged frauds. In February
1993, the court granted a motion staying all proceedings in connection with this
matter pending completion of the criminal case. On January 24, 1994, the Court
lifted the stay and directed the defendants to file answers to the SEC Complaint
within 30 days. The Company is currently involved in settlement negotiations
with the SEC. At this time, there can be no assurance these negotiations will be
successfully concluded.

Copies of the Indictment and the SEC Complaint were attached as exhibits to
the Company's Current Report on Form 8-K, dated November 16, 1992, filed with
the SEC.

The Company is named as a nominal defendant in a shareholder derivative
action entitled Harry Lewis and Gary Goldberg v. Gary A. Singer, Steven G.
Singer, Arthur C. Bass, Joseph C. Feghali, Warren

THE COOPER COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

J. Keegan, Robert S. Holcombe and Robert S. Weiss, which was filed on May 27,
1992 in the Court of Chancery, State of Delaware, New Castle County. On May 29,
1992, another plaintiff, Alfred Schecter, separately filed a derivative
complaint in Delaware Chancery Court that was essentially identical to the Lewis
and Goldberg complaint. Lewis and Goldberg later amended their complaint, and
the Delaware Chancery Court thereafter consolidated the Lewis and Goldberg and
Schecter actions as In re The Cooper Companies, Inc. Litigation, Consolidated
C.A. 12584, and designated Lewis and Goldberg's amended complaint as the
operative complaint (the 'First Amended Derivative Complaint'). The First
Amended Derivative Complaint alleges that certain directors of the Company and
Gary A. Singer, as Co-Chairman of the Board of Directors, caused or allowed the
Company to be a party to the 'trading scheme' that was the subject of the
Indictment. The First Amended Derivative Complaint also alleges that the
defendants violated their fiduciary duties to the Company by not vigorously
investigating the allegations of securities fraud. The First Amended Derivative
Complaint requests that the Court order the defendants (other than the Company)
to pay damages and expenses to the Company and certain of the defendants to
disgorge their profits to the Company. On October 16, 1992, the defendants moved
to dismiss the First Amended Derivative Complaint on grounds that such Complaint
fails to comply with Delaware Chancery Court Rule 23.1 and that Count III of the
First Amended Derivative Complaint fails to state a claim. The Company has been
advised by the individual directors named as defendants that they believe they
have meritorious defenses to this lawsuit and intend vigorously to defend
against the allegations in the First Amended Derivative complaint.

THE COOPER COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

and damages as set forth in the First Amended Complaint. On January 7, 1994, the
Company filed an Answer, generally denying all of the allegations in the Second
Amended Complaint, and also filed a Cross-Complaint against Mr. Sturman. In the
Cross-Complaint, the Company alleges that Mr. Sturman's conduct constituted a
breach of his employment agreement with the Company as well as a breach of his
fiduciary duty to the Company, that Mr. Sturman misrepresented and failed to
disclose certain material facts to the Company and converted certain assets of
the Company to his personal use and benefit. The Cross-Complaint seeks
compensatory and punitive damages in an unspecified amount. On January 14, 1994,
the Court continued in place the stay on all discovery and scheduled a case
management conference for February 10, 1994 to review the status of the stay.
Based on management's current knowledge of the facts and circumstances
surrounding Mr. Sturman's termination, the Company believes that it has
meritorious defenses to this lawsuit and intends to defend vigorously against
the allegations in the Second Amended Complaint.

In two virtually identical actions, Frank H. Cobb, Inc. v. The Cooper
Companies, Inc., et al., and Arthur J. Korf v. The Cooper Companies, Inc., et
al., class action complaints were filed in the United States District Court for
the Southern District of New York in August 1989, against the Company and
certain individuals who served as officers and/or directors of the Company after
June 1987. In their Fourth Amended Complaint filed in September 1992, the
plaintiffs allege that they are bringing the actions on their own behalf and as
class actions on behalf of a class consisting of all persons who purchased or
otherwise acquired shares of the Company's common stock during the period May
26, 1988 through February 13, 1989. The amended complaints seek an undetermined
amount of compensatory damages jointly and severally against all defendants. The
complaints, as amended, allege that the defendants knew or recklessly
disregarded and failed to disclose to the investing public material adverse
information about the Company. Defendants are accused of having allegedly failed
to disclose, or delayed in disclosing, among other things: (a) that the
allegedly real reason the Company announced on May 26, 1988 that it was dropping
a proposed merger with Cooper Development Company, Inc. was because the
Company's banks were opposed to the merger; (b) that the proposed sale of Cooper
Technicon, Inc., a former subsidiary of the Company, was not pursuant to a
definitive sales agreement but merely an option; (c) that such option required
the approval of the Company's debentureholders and preferred stockholders; (d)
that the approval of such sale by the Company's debentureholders and preferred
stockholders would not have been forthcoming absent extraordinary expenditures
by the Company; and (e) that the purchase agreement between the Company and
Miles, Inc. for the sale of Cooper Technicon, Inc. included substantial
penalties to be paid by the Company if the sale was not consummated within
certain time limits and that the sale could not be consummated within those time
limits. The amended complaints further allege that the defendants are liable for
having violated Section 10(b) of the Securities Exchange Act and Rule 10(b)-5
thereunder and having engaged in common law fraud. Based on management's current
knowledge of the facts and circumstances surrounding the events alleged by
plaintiffs as giving rise to their claims, the Company believes that it has
meritorious defenses to these lawsuits and intends vigorously to defend against
the allegations in the amended complaints. The parties have engaged in
preliminary settlement negotiations; however, there can be no assurances that
these discussions will be successfully concluded.

THE COOPER COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

On October 29, 1992, the Delaware Chancery Court in Medical Engineering
Corporation and Bristol-Myers Squibb Company v. The Cooper Companies, Inc. ruled
that, as between BMS and MEC, on the one hand, and the Company, on the other,
the Company is responsible for product liability claims and obligations relating
to breast implants sold by Natural Y before December 14, 1988, irrespective of
when the claims are brought. On September 28, 1993, the Company announced that
it had entered into an agreement with MEC (the 'MEC Agreement') settling this
litigation between the Company and BMS and MEC. Pursuant to the MEC Agreement,
MEC has agreed, subject to limited exceptions, to take responsibility for all
legal fees and other costs, and to pay all judgments and settlements, resulting
from all pending and future claims in respect of breast implants sold by
Aesthetech and Natural Y prior to their acquisition by MEC (including the
above-mentioned lawsuits), and the Company has withdrawn its appeal of the
Delaware Chancery Court decision and agreed, among other things, to make certain
payments to MEC. Pursuant to the terms of the MEC Agreement, MEC could have
terminated the agreement if the Exchange Offer and Solicitation relating to its
Debentures (or an alternative restructuring of the Debentures or other
amendment, forebearance or waiver with respect to the Debentures) was not
completed on terms satisfactory to the Company by February 1, 1994. The Exchange
Offer and Solicitation was completed on January 6, 1994. See Notes 14 and 19.

NOTE 19. SUBSEQUENT EVENT

On January 6, 1994, the Company consummated the Exchange Offer and
Solicitation in which it issued approximately $22,000,000 of 10% Senior
Subordinated Secured Notes due 2003 (the 'Notes') and paid approximately
$4,350,000 in cash ($725 principal amount of Notes and $145 in cash for each
$1,000 principal amount of Debentures) in exchange for approximately $30,000,000
aggregate principal amount of Debentures (out of $39,384,000 aggregate principal
amount then outstanding). The Company also obtained, pursuant to the Exchange
Offer and Solicitation, consents of the holders of Debentures

THE COOPER COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

to (i) certain proposed amendments to the Indenture and (ii) the Waiver. See
Note 11. Following the exchange, approximately $9,400,000 aggregate principal
amount of Debentures remain outstanding.

On January 6, 1994, after receiving consents from holders of a majority of
the outstanding principal amount of Debentures not owned by the Company or its
affiliates, the Waiver was effected and the Company and the Trustee under the
Indenture executed the Second Supplemental Indenture effecting the proposed
amendments, which eliminated or modified various covenants in the Indenture.

The consummation of the Exchange Offer and Solicitation also satisfied a
condition of the MEC Agreement, described in Note 18, limiting the Company's
liability with respect to breast implant litigation.

The Notes bear interest from September 1, 1993 at a rate equal to 10% per
annum. (Interest accrued from September 1, 1993 will not be paid on Debentures
tendered and accepted pursuant to the Exchange Offer and Solicitation.) Interest
on the Notes is payable quarterly on each March 1, June 1, September 1 and
December 1, commencing March 1, 1994. The Notes are redeemable solely at the
option of the Company, in whole or in part, at any time, at a redemption price
equal to 100% of their principal amount, together with accrued and unpaid
interest thereon to the redemption date. The Company will not be required to
effect any mandatory redemptions or make any sinking fund payments with respect
to the Notes, except in connection with certain sales or other dispositions of,
or certain financings secured by, the collateral securing the Notes. Pursuant to
a pledge agreement dated as of January 6, 1994, between the Company and the
trustee for the holders of the Notes, the Company has pledged a first priority
security interest in all of its right, title and interest in stock of HGA and
CooperSurgical, all additional shares of stock of, or other equity interests in
HGA and CooperSurgical from time to time acquired by the Company, all
intercompany indebtedness of HGA and CooperSurgical from time to time held by
the Company and, except as set forth in the indenture governing the Notes, the
proceeds received from the sale or disposition of any or all of the foregoing. A
full description of the pledge agreement and terms of the indenture governing
the Notes is included in the Company's Amended and Restated Offer to Exchange
and Consent Solicitation filed with SEC on December 15, 1993.

The Exchange Offer and Solicitation has been accounted for in accordance
with Statement of Financial Accounting Standards No. 15 'Accounting by Debtors
and Creditors for Troubled Debt Restructurings.' Consequently, the difference
between the carrying value of the Debentures exchanged less the face value of
the Notes issued and the aggregate cash payment for the Debentures is recorded
as a deferred premium. The Company will recognize the benefit of the deferred
premium prospectively as a reduction to the effective interest rate on the Notes
over the life of the issue. In addition, the Company recorded a charge of
$2,131,000 in 1993 for the estimated debt restructuring costs related to the
Exchange Offer and Solicitation.

SCHEDULE II

THE COOPER COMPANIES, INC. AND SUBSIDIARIES
AMOUNTS RECEIVABLE FROM RELATED PARTIES
AND UNDERWRITERS, PROMOTERS, AND EMPLOYEES OTHER THAN RELATED PARTIES
THREE YEARS ENDED OCTOBER 31, 1993

DEDUCTIONS
-------------------- BALANCE AT
YEARS BALANCE AT AMOUNTS END OF YEAR
ENDED BEGINING AMOUNTS WRITTEN ----------------------
OCTOBER 31, NAME OF DEBTOR OF YEAR ADDITIONS COLLECTED OFF CURRENT NOT CURRENT
- ------------------------- -------------- ---------- --------- --------- ------- ------- -----------
(IN THOUSANDS)

1993..................... A. Bass $887 $ 83 ($905) $-- $ 65 $--
---------- --------- --------- ------- ------- -----------
---------- --------- --------- ------- ------- -----------
1992..................... A. Bass $847 $ 79 $ (39) $-- $ 887 --
R. Turner 135 -- (135) -- -- --
---------- --------- --------- ------- ------- -----------
$982 $ 79 ($174) $-- $ 887 --
---------- --------- --------- ------- ------- -----------
---------- --------- --------- ------- ------- -----------
1991..................... A. Bass(A) $943 $ 26 ($122) $-- $ 847 --
R. Turner(B) -- 200 (65) -- 135 --
---------- --------- --------- ------- ------- -----------
$943 $ 226 ($187) $-- $ 982
---------- --------- --------- ------- ------- -----------
---------- --------- --------- ------- ------- -----------

All outstanding loans are due on demand under certain conditions. The
following footnotes address original loan amounts and do not reflect interest
accrued or collected.

- ------------

(A) Represents a 9% term loan of $900,000 granted pursuant to an employment
agreement dated October 31, 1989, secured by a lien on real estate.

(B) Represents a 9.5% temporary housing loan of $200,000 secured by a lien on
real estate.

SCHEDULE V

THE COOPER COMPANIES, INC. AND SUBSIDIARIES
PROPERTY, PLANT AND EQUIPMENT
THREE YEARS ENDED OCTOBER 31, 1993

BALANCE AT
BEGINNING ADDITIONS OTHER CHANGES BALANCE AT
CLASSIFICATION OF YEAR AT COST RETIREMENTS ADD (DEDUCT) END OF YEAR
- ------------------------------------------ ---------- --------- ----------- ------------- -----------

1993:
Land................................. $ 4,620 $ -- $-- ($ 138)(A) $ 4,482
Buildings............................ 31,932 628 -- -- 32,560
Machinery and Equipment.............. 7,908 1,149 (222) 1,149(B) 9,984
Leaseholds........................... 1,346 25 (456)(C) 173(B) 1,088
Construction-in-progress............. 211 -- -- (31)(B) 180
---------- --------- ----------- ------------- -----------
$ 46,017 $ 1,802 ($ 678) $ 1,153 $48,294
---------- --------- ----------- ------------- -----------
---------- --------- ----------- ------------- -----------
1992:
Land................................. $ 55 $ 3,139 $-- $ 1,426(D) $ 4,620
Buildings............................ 906 203 (2) 30,825(D) 31,932
Machinery and Equipment.............. 7,234 840 (1,215)(E) 1,049(D) 7,908
Leaseholds........................... 1,159 206 (5) (14) 1,346
Construction-in-progress............. 143 20 -- 48(D) 211
---------- --------- ----------- ------------- -----------
$ 9,497 $ 4,408 ($1,222) $33,334 $46,017
---------- --------- ----------- ------------- -----------
---------- --------- ----------- ------------- -----------
1991:
Land................................. $ 55 $ -- $-- $-- $ 55
Buildings............................ 906 -- -- -- 906
Machinery and Equipment.............. 8,065 1,096 (2,055) 128(F) 7,234
Leaseholds........................... 734 415 -- 10 1,159
Construction-in-progress............. 62 81 -- -- 143
---------- --------- ----------- ------------- -----------
$ 9,822 $ 1,592 ($2,055) $ 138 $ 9,497
---------- --------- ----------- ------------- -----------
---------- --------- ----------- ------------- -----------

- ------------

(A) Represents reclassification of an addition in 1992.

(B) Represents acquired assets of CoastVision, Inc. and other items.

(D) Represents acquired assets of Hospital Group of America, Inc.

(E) Represents write-off of machinery and equipment resulting from a fire.

(F) Represents acquired assets of Euro-Med, Inc. and other items.

SCHEDULE VI

THE COOPER COMPANIES, INC. AND SUBSIDIARIES
ACCUMULATED DEPRECIATION, DEPLETION AND AMORTIZATION OF
PROPERTY, PLANT AND EQUIPMENT
THREE YEARS ENDED OCTOBER 31, 1993

ADDITIONS
BALANCE AT CHARGED TO
BEGINNING COST AND OTHER CHANGES BALANCE AT
CLASSIFICATION OF YEAR EXPENSES RETIREMENTS ADD (DEDUCT) END OF YEAR
- --------------------------------------------- ---------- ---------- ----------- ------------- -----------

1993:
Buildings............................... $ 663 $1,202 $-- -$- $ 1,865
Machinery and Equipment................. 4,622 1,284 (168) (3) 5,735
Leaseholds.............................. 1,000 138 (339)(A) -- 799
---------- ---------- ----------- ------ -----------
$6,285 $2,624 ($ 507) ($ 3) $ 8,399
---------- ---------- ----------- ------ -----------
---------- ---------- ----------- ------ -----------
1992:
Buildings............................... $ 249 $ 414 $-- -$- $ 663
Machinery and Equipment................. 4,885 877 (1,137)(B) (3) 4,622
Leaseholds.............................. 770 246 (5) (11) 1,000
---------- ---------- ----------- ------ -----------
$5,904 $1,537 ($1,142) ($ 14) $ 6,285
---------- ---------- ----------- ------ -----------
---------- ---------- ----------- ------ -----------
1991:
Buildings............................... $ 216 $ 33 $-- -$- $ 249
Machinery and Equipment................. 6,013 780 (2,001) 93 4,885
Leaseholds.............................. 510 226 -- 34 770
---------- ---------- ----------- ------ -----------
$6,739 $1,039 ($2,001) $ 127 $ 5,904
---------- ---------- ----------- ------ -----------
---------- ---------- ----------- ------ -----------

- ------------

(A) Represents write-off of leaseholds upon relocation of executive office.

(B) Represents write-off of machinery and equipment resulting from a fire.

SCHEDULE VIII

THE COOPER COMPANIES, INC. AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
THREE YEARS ENDED OCTOBER 31, 1993

ADDITIONS ADDITIONS ADDITIONS/
BALANCE AT CHARGED TO CHARGED TO DEDUCTIONS/ BALANCE
BEGINNING COSTS AND OTHER RECOVERIES/ AT END
OF YEAR EXPENSES ACCOUNTS OTHER OF YEAR
---------- ---------- ---------- ----------- -------
(IN THOUSANDS)

Allowance for doubtful accounts:
Year ended October 31, 1993............... $3,031 $3,202 $-- ($2,993)(A)(C) $3,240
---------- ---------- ---------- ----------- -------
---------- ---------- ---------- ----------- -------
Year ended October 31, 1992............... $ 403 $ 363 $-- $ 2,265(B)(C) $3,031
---------- ---------- ---------- ----------- -------
---------- ---------- ---------- ----------- -------
Year ended October 31, 1991............... $ 956 $ 237 $-- ($ 790)(C) $ 403
---------- ---------- ---------- ----------- -------
---------- ---------- ---------- ----------- -------
Net unrealized loss on long-term investments in
equity securities:
Year ended October 31, 1991............... $3,637 $-- $-- ($3,637)(D) $ --
---------- ---------- ---------- ----------- -------
---------- ---------- ---------- ----------- -------

- ------------

(A) Represents acquired reserve of CoastVision, Inc.

(B) Represents acquired reserve of Hospital Group of America, Inc.

(D) Recorded in Stockholders' Equity.

SCHEDULE X

THE COOPER COMPANIES, INC. AND SUBSIDIARIES
SUPPLEMENTARY INCOME STATEMENT INFORMATION
THREE YEARS ENDED OCTOBER 31, 1993

CHARGED TO COSTS AND
EXPENSES
--------------------------
1993 1992 1991
------ ------ ------
(IN THOUSANDS)

Advertising.......................................................................... $3,019 $2,887 $4,225

Royalties, maintenance and repairs and taxes other than payroll and income
taxes are omitted as each item does not exceed 1% of net operating revenue as
reported in the Statement of Consolidated Operations.

PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.

(a) Documents filed as part of this report:

1. Financial Statements of the Company.

The Consolidated Financial Statements and the Notes thereto, the Financial
Statement Schedules identified in (2) below and the Accountants' Report on the
foregoing are included in Part II, Item 8 of this report.

2. Financial Statement Schedules of the Company.

SCHEDULE
NUMBER DESCRIPTION
- -------- --------------------------------------------------------------------------

II. Amounts receivable from related parties and underwriters,
promoters and employees other than related parties
V. Property, Plant and Equipment
VI. Accumulated Depreciation and Amortization of Property,
Plant and Equipment
VIII. Valuation and qualifying accounts
X. Supplementary income statement information

All other schedules for which provision is made in the applicable
accounting regulations of the Securities and Exchange Commission are not
required under the related instructions or are not applicable and, therefore,
have been omitted.

Also included herein are separate company Financial Statements and the
Notes thereto, the Accountants' Report thereon and required Financial Statement
Schedules of:

Hospital Group of America, Inc. and Subsidiaries

CooperSurgical, Inc.

INDEPENDENT AUDITORS' REPORT

Board of Directors
HOSPITAL GROUP OF AMERICA, INC.:

We have audited the accompanying consolidated balance sheets of Hospital
Group of America, Inc. and subsidiaries as of October 31, 1993, October 31,
1992, May 29, 1992 and April 30, 1991 and the related consolidated statements of
operations, stockholder's equity and cash flows for the year ended October 31,
1993, for the period from May 30, 1992 to October 31, 1992, for the period from
June 1, 1991 to May 29, 1992, for the period from May 1, 1991 to May 31, 1991
and for the year ended April 30, 1991. In connection with our audits of the
consolidated financial statements, we also have audited financial statement
schedules V, VI, VIII and X. These consolidated financial statements and
financial statement schedules are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements and financial statement schedules based on our audits.

In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Hospital
Group of America, Inc. and subsidiaries at October 31, 1993, October 31, 1992,
May 29, 1992 and April 30, 1991 and the results of their operations and their
cash flows for the year ended October 31, 1993, for the period from May 30, 1992
to October 31, 1992, for the period from June 1, 1991 to May 29, 1992, for the
period from May 1, 1991 to May 31, 1991, and for the year ended April 30, 1991
in conformity with generally accepted accounting principles. Also in our
opinion, the related financial statement schedules, when considered in relation
to the basic consolidated financial statements taken as a whole, present fairly,
in all material respects, the information set forth therein.

The accompanying financial statements have been prepared assuming Hospital
Group of America, Inc. will continue as a going concern. As discussed in Note H
to the consolidated financial statements, the Company's losses, negative cash
flows, working capital deficiency, and dependence upon the Parent raise
substantial doubt about the Company's ability to continue as a going concern.
Additionally, the independent auditors' report dated January 24, 1994 on the
Parent's financial statements as of October 31, 1993 includes an explanatory
paragraph describing a substantial doubt about the Parent's ability to continue
as a going concern. The accompanying financial statements and financial
statement schedules do not include any adjustments that might result from the
outcome of these uncertainties.

KPMG PEAT MARWICK

Philadelphia, Pennsylvania
January 24, 1994

HOSPITAL GROUP OF AMERICA, INC. AND SUBSIDIARIES
(A WHOLLY OWNED SUBSIDIARY OF THE COOPER COMPANIES, INC.)

CONSOLIDATED BALANCE SHEETS
OCTOBER 31, 1993 AND 1992

1993 1992
------------------------ ------------------------
(IN THOUSANDS OF DOLLARS)

ASSETS
Current assets:
Cash and cash
equivalents............. $ 1,260 $ 5,335
Accounts receivable, net
of estimated
uncollectibles of $2,067
in 1993 and $2,556 in
1992.................... 8,643 9,757
Other receivables........ 466 305
Supplies................. 249 243
Prepaid expenses and
other current assets.... 872 1,099
---------- ----------
Total current
assets............ 11,490 16,739
---------- ----------
Property and equipment
Land..................... 1,426 1,426
Buildings and
improvements............ 31,400 30,890
Equipment, furniture and
fixtures................ 1,370 1,083
Construction in
progress................ 31 47
---------- ----------
34,227 33,446
Less accumulated
depreciation............ (1,868) (542)
---------- ----------
Total property and
equipment, net.... 32,359 32,904
---------- ----------
Goodwill, net of accumulated
amortization of $292 in 1993
and $86 in 1992............. 5,863 6,069
Other assets.................. 673 878
---------- ----------
$ 50,385 $ 56,590
---------- ----------
---------- ----------
LIABILITIES AND STOCKHOLDER'S
EQUITY
Current liabilities:
Accounts payable......... $ 1,856 $ 2,018
Accrued liabilities...... 1,391 2,876
Accrued salaries and
related expenses........ 1,903 1,563
Accrued interest
payable................. 147 187
Estimated third-party
payor settlements....... 431 930
Current portion of
long-term debt.......... 1,162 4,698
Current portion of due to
Parent.................. 6,082 2,103
---------- ----------
Total current
liabilities....... 12,972 14,375
Long-term debt, less current
portion..................... 12,556 14,188
Due to Parent................. 16,000 16,000
Stockholder's equity:
Common stock, $.01 par
value, 1000 shares
authorized, issued and
outstanding............. 0 0
Additional paid-in
capital................. 12,324 12,324
Accumulated deficit...... (3,467) (297)
---------- ----------
Total stockholder's
equity............ 8,857 12,027
---------- ----------
$ 50,385 $ 56,590
---------- ----------
---------- ----------

See accompanying notes to consolidated financial statements.

HOSPITAL GROUP OF AMERICA, INC. AND SUBSIDIARIES
(A WHOLLY OWNED SUBSIDIARY OF THE COOPER COMPANIES, INC.)
CONSOLIDATED STATEMENTS OF OPERATIONS
YEAR ENDED OCTOBER 31, 1993 AND PERIOD FROM MAY 30, 1992 TO OCTOBER 31, 1992

PERIOD FROM
MAY 30,
YEAR ENDED 1992 TO
OCTOBER 31, OCTOBER 31,
1993 1992
----------- -----------
(IN THOUSANDS OF DOLLARS)

Net patient service revenue............................................................ $41,330 $19,187
Other operating revenue................................................................ 2,644 881
----------- -----------
Net operating revenue.................................................................. 43,974 20,068
----------- -----------
Costs and expenses:
Salaries and benefits............................................................. 23,737 9,752
Purchased services................................................................ 2,202 834
Professional fees................................................................. 1,911 1,621
Other operating expenses.......................................................... 11,408 4,688
Bad debt expense.................................................................. 2,792 1,251
Depreciation and amortization..................................................... 1,533 635
Interest on long-term debt........................................................ 1,740 824
Interest on due to Parent note.................................................... 1,821 760
----------- -----------
Total costs and expenses..................................................... 47,144 20,365
----------- -----------
Net loss............................................................................... ($3,170) ($ 297)
----------- -----------
----------- -----------

See accompanying notes to consolidated financial statements.

HOSPITAL GROUP OF AMERICA, INC. AND SUBSIDIARIES
(A WHOLLY OWNED SUBSIDIARY OF THE COOPER COMPANIES, INC.)
CONSOLIDATED STATEMENTS OF STOCKHOLDER'S EQUITY
YEAR ENDED OCTOBER 31, 1993 AND PERIOD FROM MAY 30, 1992 TO OCTOBER 31, 1992

ADDITIONAL TOTAL
COMMON PAID-IN ACCUMULATED STOCKHOLDER'S
STOCK CAPITAL DEFICIT EQUITY
------ ---------- ----------- --------------
(IN THOUSANDS OF DOLLARS)

Balance May 30, 1992......................................... $0 $ 12,324 $ 0 $ 12,324
Net loss..................................................... (297) (297)
--
---------- ----------- --------------
Balance October 31, 1992..................................... $0 $ 12,324 ($ 297) $ 12,027
--
--
---------- ----------- --------------
---------- ----------- --------------
Balance November 1, 1992..................................... $0 $ 12,324 ($ 297) $ 12,027
Net loss..................................................... (3,170) (3,170)
--
---------- ----------- --------------
Balance October 31, 1993..................................... $0 $ 12,324 ($3,467) $ 8,857
--
--
---------- ----------- --------------
---------- ----------- --------------

See accompanying notes to consolidated financial statements.

HOSPITAL GROUP OF AMERICA, INC. AND SUBSIDIARIES
(A WHOLLY OWNED SUBSIDIARY OF THE COOPER COMPANIES, INC.)
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEAR ENDED OCTOBER 31, 1993 AND PERIOD FROM MAY 30, 1992 TO OCTOBER 31, 1992

PERIOD FROM
MAY 30,
YEAR ENDED 1992 TO
OCTOBER 31, OCTOBER 31,
1993 1992
----------- -----------
(IN THOUSANDS OF DOLLARS)

Cash flows from operating activities:
Net loss.......................................................................... $(3,170) $ (297)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization of goodwill and loan fees...................... 1,674 725
Accrued interest, management fees and net expenses due to Parent............. 1,658 785
Change in operating assets and liabilities:
(Increase) Decrease in accounts receivable.............................. 1,114 (1,477)
(Increase) Decrease in supplies and other current assets................ 60 (124)
Increase (Decrease) in accounts payable, accrued expenses and estimated
third party payor settlements......................................... (1,845) 1,188
----------- -----------
Net cash (used in) provided by operating activities................ (509) 800
Cash flows from investing activities:
Capital expenditures.............................................................. (781) (102)
Collection of note receivable..................................................... 2,149
Other............................................................................. 62 (15)
----------- -----------
Net cash from investing activities................................. (719) 2,032
Cash flows from financing activities:
Principal payments on long-term debt.............................................. (5,168) (713)
Cash advance from Parent.......................................................... 2,321
----------- -----------
Net cash used by financing activities.............................. (2,847) (713)
Net (decrease) increase in cash and cash equivalents................................... (4,075) 2,119
Cash and cash equivalents, beginning of period......................................... 5,335 3,216
----------- -----------
Cash and cash equivalents, end of period............................................... $ 1,260 $ 5,335
----------- -----------
----------- -----------
Supplemental disclosure of cash flow information -- interest paid during the period.... $ 1,520 $ 630
----------- -----------
----------- -----------

See accompanying notes to consolidated financial statements.

HOSPITAL GROUP OF AMERICA, INC. AND SUBSIDIARIES
(A WHOLLY OWNED SUBSIDIARY OF THE COOPER COMPANIES, INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEAR ENDED OCTOBER 31, 1993 AND PERIOD FROM MAY 30, 1992 TO OCTOBER 31, 1992

A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Accounting -- On May 29, 1992, The Cooper Companies, Inc.
('Cooper' or 'Parent') acquired all of the common stock of Hospital Group of
America, Inc. (HGA) from its ultimate parent, Nu-Med, Inc. (Nu-Med). The
acquisition of HGA was accounted for as a purchase and the purchase adjustments
were 'pushed-down' to the separate financial statements of HGA resulting in a
new basis of accounting as of May 30, 1992. The Parent's cost of the acquisition
was approximately $50 million, including the assumption of approximately $22
million of third-party debt of HGA. The purchase price was allocated to assets
and liabilities based on their estimated fair values as of the acquisition date.
The purchase price exceeded the estimated fair value of the identifiable net
assets acquired resulting in goodwill. The estimated goodwill amount of
$6,155,000 was recorded as of May 30, 1992 and is being amortized over 30 years
on a straight-line basis.

Business -- The accompanying consolidated financial statements include the
accounts of HGA and its wholly owned subsidiaries (the 'Company'). All
intercompany balances and transactions have been eliminated. The Company owns
and operates the following psychiatric facilities:

NAME OF FACILITY LOCATION
- ---------------------------------------------------------------- ----------------------------

Hartgrove Hospital.............................................. Chicago, Illinois
Hampton Hospital................................................ Rancocas, New Jersey
Meadow Wood Hospital............................................ New Castle, Delaware

Effective May 30, 1992, PSG Management, Inc. (PSG), a sister company to HGA
and a wholly-owned subsidiary of Cooper, entered into a three year agreement
with the following subsidiaries to manage the two psychiatric hospitals and the
substance abuse treatment center owned by the subsidiaries of Nu-Med, Inc. The
management fee earned by PSG from the subsidiaries of Nu-Med, Inc. related to
this agreement is $2,000,000 annually, payable in equal monthly installments.
The management agreement is jointly and severally guaranteed by Nu-Med and a
wholly owned subsidiary of Nu-Med, Inc. HGA is not a party to this agreement and
therefore the management fee earned by PSG from the subsidiaries of Nu-Med, Inc.
is not recognized in the accompanying financial statements. However, in
connection with this agreement, HGA performs services on behalf of PSG for which
it earns a fee of 25% of certain of its corporate headquarters' cost plus a 20%
mark-up. Such fees earned by HGA from PSG amounted to $691,000 for the year
ended October 31, 1993 and $260,000 for the period from May 30, 1992 to October
31, 1992. On January 6, 1993, Nu-Med (but not any of its direct or indirect
subsidiaries) filed a voluntary petition under Chapter 11 of the United States
Bankruptcy Code. Neither Cooper nor any of its subsidiaries filed a Proof of
Claim in the Nu-Med Chapter 11 proceeding, and the bar date (the time for filing
proofs of claim) has past. However, none of the Nu-Med subsidiaries have filed
under Chapter 11, and the Nu-Med subsidiaries have paid the management fee on a
timely basis, although representatives of Nu-Med and its subsidiaries have
alleged in writing that PSG Management has breached the management services
agreement (which contention PSG Management vigorously disputes). Moreover,
Nu-Med's Proposed Disclosure Statement to accompany its Second Amended Plan of
Reorganization, filed with the United States Bankruptcy Court for the Central
District of California, indicates that PsychGroup is commencing, performance of
certain administrative functions performed by PSG Management on a parallel
basis.

The following are subsidiaries of Nu-Med which own the facilities managed
by PSG:

NAME OF SUBSIDIARY LOCATION
- ------------------------------------------------------------------ ------------------------------------

Northwestern Institute of Psychiatry, Inc. ....................... Ft. Washington, Pennsylvania
Malvern Institute for Psychiatric and Alcoholic Studies, Inc. .... Malvern, Pennsylvania
South Central Health Services, Inc. (dba) Pinelands Hospital...... Nacogdoches, Texas

HOSPITAL GROUP OF AMERICA, INC. AND SUBSIDIARIES
(A WHOLLY OWNED SUBSIDIARY OF THE COOPER COMPANIES, INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
YEAR ENDED OCTOBER 31, 1993 AND PERIOD FROM MAY 30, 1992 TO OCTOBER 31, 1992

Net Patient Service Revenue -- Net patient service revenue is recorded at
the estimated net realizable amounts from patients, third-party payors, and
others for services rendered, including estimated retroactive adjustments under
reimbursement agreements with third-party payors. Retroactive adjustments are
accrued on an estimated basis in the period the related services are rendered
and adjusted in the period as final settlements are determined.

Charity Care -- The Company provides care to indigent patients who meet
certain criteria under its charity care policy without charge or at amounts less
than its established rates. Because the Company does not pursue collection of
amounts determined to qualify as charity care, they are not reported as revenue.
The Company maintains records to identify and monitor the level of charity care
it provides. These records include the amount of charges foregone for services
and supplies furnished under its charity care policy. Charges at the Company's
established rates forgone for charity care provided by the Company amounted to
$3,220,000 during the year ended October 31, 1993 and $1,597,000 during the
period May 30, 1992 to October 31, 1992. Hampton Hospital is required by its
Certificate of Need to incur not less than 10% of total patient days as free
care.

Health Insurance Coverage -- The Company is self-insured for the health
insurance coverage offered to its employees. The provision for estimated
self-insured health insurance costs includes management's estimates of the
ultimate costs for both reported claims and claims incurred but not reported.

Supplies -- Supplies consist principally of medical supplies and are stated
at the lower of cost (first-in, first-out method) or market.

Property and Equipment -- Property and equipment are stated at fair value
as of May 29, 1992, the date of the acquisition of HGA by Cooper. Depreciation
is computed on the straight-line method over the estimated useful lives of the
respective assets, which range from 20 to 40 years for buildings and
improvements, and 5 to 10 years for equipment, furniture and fixtures.

Other Assets -- Loan fees incurred in obtaining long-term financing are
deferred and recorded as other assets. Loan fees are amortized over the terms of
the related loans. The balance of unamortized loan fees amounted to $540,000 and
$727,000, respectively, at October 31, 1993 and 1992.

Income Taxes -- The Company is included in the consolidated tax returns of
Cooper. The Company computes a tax provision as if it were a stand alone entity.

Cash and Cash Equivalents -- Cash and cash equivalents include investments
in highly liquid debt instruments with a maturity of three months or less.

B. NET PATIENT SERVICE REVENUE

The Company has agreements with third-party payors that provide for
payments to the Company at amounts different from its established rates. A
summary of the payment arrangements with major third-party payors follows:

Commercial Insurance -- Most commercial insurance carriers reimburse the
Company on the basis of the hospitals' charges, subject to the rates and
limits specified in their policies. Patients covered by commercial
insurance generally remain responsible for any differences between
insurance proceeds and total charges.

Blue Cross -- Reimbursement under Blue Cross plans varies depending on the
areas in which the Company presently operates facilities. Benefits paid to
the Company can be charge-based, cost-based, negotiated per diem rates or
approved through a state rate setting process.

Medicare -- Services rendered to Medicare program beneficiaries are
reimbursed under a retrospectively determined reasonable cost system with
final settlement determined after

submission of annual cost reports by the Company and audits thereof by the
Medicare fiscal intermediary.

Managed Care -- Services rendered to subscribers of health maintenance
organizations, preferred provider organizations and similar organizations
are reimbursed based on prospective negotiated rates.

The Company's business activities are primarily with large insurance
companies and federal and state agencies or their intermediaries. Other than
adjustments arising from audits by certain of these agencies, the risk of loss
arising from the failure of these entities to perform according to the terms of
their respective contracts is considered remote.

During the period ended October 31, 1992, the Company received and
recognized as net patient service revenue, approximately $465,000 related to the
settlement of prior year cost reports.

C. RELATED PARTY TRANSACTIONS

The current portion of Due to Parent at October 31, 1993 consists of
amounts due under a demand note ('Demand Note') for costs incurred or paid by
the Parent in connection with the acquisition, cash advances from the Parent,
interest payable on the Subordinated Promissory Note (as defined below) in the
amount of $2,680,000, and an allocation of Cooper corporate services amounting
to $623,000, net of payments to the Parent.

All current and future borrowings under the terms of the Demand Note bear
interest, payable monthly, commencing on December 1, 1993 at the rate of 15% per
annum (17% in the event principal and interest is not paid when due), and all
principal and all accrued and unpaid interest under the Demand Note shall be
completely due and payable on demand. Prior to December 1, 1993, the Parent did
not charge the Company for amounts due to it except for amounts due under the
Subordinated Promissory Note.

The non-current portion of Due to Parent consists of a $16,000,000
subordinated promissory note (the 'Subordinated Promissory Note'). The annual
interest rate on the Subordinated Promissory Note is 12%. The principal amount
of this Subordinated Promissory Note shall be due and payable on May 29, 2002
unless payable sooner pursuant to its terms.

HGA allocates interest expense to PSG to reflect an estimate of the
interest cost on debt incurred by HGA in connection with the May 29, 1992
acquisition which relates to the PSG management agreement with Nu-Med. Such
allocations amounted to $194,000 and 106,000 for the year ended October 31, 1993
and the period from May 30, 1992 to October 31, 1992, respectively and are
recorded as reductions of interest on long-term debt and interest on due to
Parent note.

D. EMPLOYEE BENEFITS

The Company participates in Cooper's 401(k) plan (the 'Plan'), which covers
substantially all full-time employees with more than 60 days of service. The
Company matches employee contributions up to certain limits. These costs were
$40,000 for the year ended October 31, 1993 and $26,000 for the period from May
30, 1992 to October 31, 1992.

E. LONG TERM DEBT

Long-term debt at October 31, 1993 and 1992 consists of the following:

1993 1992
----------- -----------

Bank term loan, interest at 4% above the bank's prime rate (6% at October
31, 1993), subject to a minimum rate of 12%, payable monthly, principal
payable in installments from September 1992 through August 1997........ $11,223,000 $11,889,000
Bank term loan, interest at 1% to 1 1/2% above the bank's prime rate (6%
at October 31, 1992)................................................... 2,097,000
Industrial Revenue Bonds, interest at 85% of prime rate (6% at October
31, 1993), payable monthly, principal payable in installments through
1997................................................................... 2,495,000 4,900,000
----------- -----------
13,718,000 18,886,000
Less current portion..................................................... (1,162,000) (4,698,000)
----------- -----------
$12,556,000 $14,188,000
----------- -----------
----------- -----------

Annual maturities of long-term debt are as follows:

YEAR ENDING
OCTOBER 31
- -----------

1994 ........................................................................ $ 1,162,000
1995 ........................................................................ 1,187,000
1996 ........................................................................ 1,231,000
1997 ........................................................................ 9,847,000
1998 ........................................................................ 291,000
-----------
$13,718,000
-----------
-----------

The long-term debt agreements contain several covenants, including the
maintenance of certain ratios and levels of net worth (as defined), restrictions
with respect to the payments of cash dividends on common stock and on the levels
of capital expenditures, interest and debt payments. In addition, the Industrial
Revenue Bonds give the holders the right to accelerate all outstanding principal
at December 31, 1995 upon notification one year prior to that date.

Substantially all of the property and equipment and accounts receivable of
the Company collateralize the debt outstanding.

F. COMMITMENTS AND CONTINGENCIES

In the normal course of business, the Company is involved in various
litigation cases. In the opinion of management, the disposition of such
litigation will not have a material adverse effect on the Company's consolidated
financial position.

The Company leases certain space and equipment under operating lease
agreements. The following is a schedule of estimated minimum payments due under
such leases with an initial term of more than one year as of October 31, 1993:

YEAR ENDING
OCTOBER 31 BUILDINGS EQUIPMENT TOTAL
- ----------- ---------- --------- ----------

1994 .............................................. $ 417,000 $109,000 $ 526,000
1995 .............................................. 417,000 109,000 526,000
1996 .............................................. 285,000 91,000 376,000
1997 .............................................. 13,000 0 13,000
---------- --------- ----------
$1,132,000 $309,000 $1,441,000
---------- --------- ----------
---------- --------- ----------

Some of the operating leases contain provisions for renewal or increased
rental (based upon increases in the Consumer Price Index), none of which are
taken into account in the above table. Rental expense under all operating leases
amounted to $736,000 and $340,000, respectively, for the year ended October 31,
1993, and the period from May 30, 1992 to October 31, 1992.

G. INCOME TAXES

The Company is included in the consolidated tax returns of Cooper. The
Company and Cooper have incurred operating losses and accordingly the Company
has not recognized any income tax benefit in the accompanying financial
statements.

In February 1992, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards No. 109, 'Accounting for Income
Taxes.' Cooper and the Company are required to adopt the new method of
accounting for income taxes no later than the fiscal year ending October 31,
1994. Neither the Company nor Cooper has completed an analysis to estimate the
impact of the statement on the Company's consolidated financial statements.

H. DEPENDENCE UPON COOPER

The Company has incurred losses and negative cash flows since May 30, 1992,
and has a working capital deficiency at October 31, 1993 which includes a
liability to the Parent of $6,082,000. The Parent has provided the Company with
cash advances to meet its cash needs. The independent auditors' report dated
January 24, 1994 on the Parent's October 31, 1993 consolidated financial
statements includes the following explanatory paragraph:

The accompanying financial statements have been prepared assuming that
the Company will continue as a going concern. During the past three fiscal
years, the Company has suffered significant losses and negative cash flows.
In addition, as discussed in Note 18 to the financial statements the
Company is exposed to contingent liabilities related to a criminal
conviction and a Securities and Exchange Commission action. Such losses,
negative cash flows, and contingent liabilities raise substantial doubt
about the Company's ability to continue as a going concern. The
consolidated financial statements and financial statement schedules do not
include any adjustments that might result from the outcome of these
uncertainties.

The Company is unable to predict the effect, if any, of the uncertainty
concerning the Parent's ability to continue as a going concern on its financial
condition or results of operations. The aforementioned factors raise substantial
doubt about the Company's ability to continue as a going concern. The financial
statements do not include any adjustments that might be necessary if the Company
or its Parent is unable to continue as a going concern.

I. Subsequent Event

Pursuant to a pledge agreement dated as of January 6, 1994, between the
Parent and the trustee for the holders of a new class of debt issued by the
Parent (the 'Notes'), the Parent has pledged a first priority security interest
in all of its right, title and interest in stock of the Company, all additional
shares of stock of, or other equity interest in, the Company from time to time
acquired by the Parent, all intercompany indebtedness of the Company from time
to time held by the Parent and except as set forth in the indenture governing
the Notes, the proceeds received from the sale or disposition of any or all of
the foregoing. A full description of the pledge agreement and terms of the
indenture governing the Notes is included in the Parent's Amended and Restated
Offer to Exchange and Consent Solicitation filed with the Securities and
Exchange Commission on December 15, 1993.

HOSPITAL GROUP OF AMERICA, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
MAY 29, 1992
(IN THOUSANDS OF DOLLARS)

ASSETS
CURRENT ASSETS:
Cash and cash equivalents......................................................................... $ 3,216
Accounts receivable net of estimated uncollectibles of $2,347..................................... 10,759
Other receivables................................................................................. 780
Supplies.......................................................................................... 258
Prepaid expenses and other current assets......................................................... 419
-------
Total current assets............................................................................ 15,432
-------
PROPERTY AND EQUIPMENT
Land.............................................................................................. 882
Buildings and improvements........................................................................ 31,525
Equipment, furniture and fixtures................................................................. 4,159
Construction in progress.......................................................................... 50
-------
36,616
Less accumulated depreciation..................................................................... (7,050)
-------
Total property and equipment, net............................................................ 29,566
-------
OTHER ASSETS........................................................................................... 929
-------
$45,927
-------
-------
LIABILITIES AND STOCKHOLDER'S EQUITY
CURRENT LIABILITIES
Accounts payable
Accrued liabilities............................................................................... $ 1,412
Accrued salaries and related expenses............................................................. 2,601
Estimated third-party payor settlements........................................................... 2,415
Current portion of long-term debt................................................................. 1,633
$ 4,426
-------
Total current liabilities....................................................................... 12,487
LONG-TERM DEBT, less current portion................................................................... 15,173
STOCKHOLDER'S EQUITY:
Common stock, .01 par value, 1000 shares authorized, issued and outstanding....................... 7
Additional paid-in capital........................................................................ 16,654
Retained earnings................................................................................. 1,606
-------
Total stockholder's equity................................................................... 18,267
-------
$45,927
-------
-------

See accompanying notes to consolidated financial statements.

HOSPITAL GROUP OF AMERICA, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF EARNINGS
PERIODS FROM MAY 1, 1991 TO MAY 31, 1991 AND
JUNE 1, 1991 TO MAY 29, 1992
(IN THOUSANDS OF DOLLARS)

PERIOD FROM
JUNE 1, 1991
MONTH ENDED TO
MAY 31, 1991 MAY 29, 1992
------------ ------------

NET PATIENT SERVICE REVENUE......................................................... $4,282 $ 51,412
OTHER OPERATING REVENUE, (including management fees earned from related parties of
$320 and $3,557 for the month ended May 31, 1991 and the period ended May 29,
1992, respectively)............................................................... 418 5,462
------------ ------------
NET OPERATING REVENUE............................................................... 4,700 56,874
------------ ------------
COSTS AND EXPENSES:
Salaries and benefits.......................................................... 1,908 24,172
Purchased services............................................................. 142 2,378
Professional fees.............................................................. 458 5,146
Other operating expenses....................................................... 790 11,402
Bad debt expense............................................................... 100 3,304
Depreciation and amortization.................................................. 165 1,928
Interest on long-term debt..................................................... 218 2,304
------------ ------------
Total costs and expenses..................................................... 3,781 50,634
------------ ------------
EARNINGS BEFORE PROVISION FOR INCOME TAXES.......................................... 919 6,240
PROVISION FOR INCOME TAXES.......................................................... 368 2,496
------------ ------------
NET EARNINGS........................................................................ $ 551 $ 3,744
------------ ------------
------------ ------------

See accompanying notes to consolidated financial statements.

HOSPITAL GROUP OF AMERICA, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDER'S EQUITY
PERIOD FROM MAY 1, 1991 TO MAY 31 1991 AND
JUNE 1, 1991 TO MAY 29, 1992
(IN THOUSANDS OF DOLLARS)

ADDITIONAL TOTAL
COMMON PAID-IN RETAINED STOCKHOLDER'S
STOCK CAPITAL EARNINGS EQUITY
------ ---------- -------- --------------

BALANCE
May 1, 1991................................................ $7 $ 16,654 $ 17,906 $ 34,567
Net Earnings............................................... 551 551
-- ---------- -------- --------------
BALANCE
May 31, 1991............................................... 7 16,654 18,457 35,118
Net earnings............................................... 3,744 3,744
Forgiveness of due from related parties balances as of May
29, 1992 in connection with the acquisition.............. (20,595) (20,595)
-- ---------- -------- --------------
BALANCE
May 29, 1992............................................... $7 $ 16,654 $ 1,606 $ 18,267
-- ---------- -------- --------------
-- ---------- -------- --------------

See accompanying notes to consolidated financial statements.

HOSPITAL GROUP OF AMERICA, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
PERIODS FROM MAY 1, 1991 TO MAY 31, 1991 AND
JUNE 1, 1991 TO MAY 29, 1992
(IN THOUSANDS OF DOLLARS)

PERIOD FROM
MONTH ENDED JUNE 1,
MAY 31, 1991 TO MAY
1991 29, 1992
----------- -----------

CASH FLOWS FROM OPERATING ACTIVITIES
Net earnings.................................................................... $ 551 $ 3,744
Adjustments to reconcile net earnings to net cash provided by operating
activities:
Depreciation and amortization.............................................. 165 1,928
Provision for income taxes................................................. 368 2,496
Change in operating assets and liabilities.................................
(Increase) Decrease in accounts receivable................................. (57) 722
(Increase) Decrease in supplies and other current assets................... 78 (210)
(Increase) Decrease in accounts payable, accrued expenses and estimated
third party payor settlements............................................ (472) 161
----------- -----------
Net cash provided by operating activities............................. 633 8,841
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures............................................................ (36) (655)
(Increase) Decrease in Other Assets............................................. (74) 127
----------- -----------
Net cash used by investing activities................................. (110) (528)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments on long-term debt............................................ (181) (3,866)
Advances to related parties..................................................... (165) (6,581)
----------- -----------
Net cash used by financing activities................................. (346) (10,447)
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS................................. 177 (2,134)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD....................................... 5,173 5,350
----------- -----------
CASH AND CASH EQUIVALENTS, END OF PERIOD............................................. $ 5,350 $ 3,216
----------- -----------
----------- -----------
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION -- Interest paid during the
period............................................................................. $ 284 $ 2,415
----------- -----------
----------- -----------
SUPPLEMENTAL DISCLOSURE OF NON CASH ACTIVITY -- Concurrent with the acquisition,
$20,595 of due from related party balances were forgiven with a corresponding
charge to retained earnings.

See accompanying notes to consolidated financial statements.

HOSPITAL GROUP OF AMERICA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
PERIODS FROM MAY 1, 1991 TO MAY 31, 1991 AND
JUNE 1, 1991 TO MAY 29, 1992

A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

BUSINESS

The accompanying consolidated financial statements include the accounts of
Hospital Group of America (HGA) and its wholly owned subsidiaries (the
'Company') and certain other assets and operations owned by an entity affiliated
through common ownership. HGA was a wholly owned subsidiary of PsychGroup, Inc.
which in turn is wholly owned by Nu-Med, Inc. The financial position and results
of operations of Hospital Group of America and its subsidiaries may not
necessarily be indicative of conditions that may have existed or the results of
operations if the Company had been operated as an unaffiliated entity. All
intercompany balances and transactions have been eliminated. The Company owns
and operates the following psychiatric facilities:

NAME OF FACILITY LOCATION
- --------------------------------------------------- ---------------------------------------------------

Hartgrove Hospital Chicago, Illinois
Hampton Hospital Rancocas, New Jersey
Meadow Wood Hospital New Castle, Delaware

BASIS OF PRESENTATION

On May 29, 1992, PSG Acquisition, Inc., a wholly owned subsidiary of The Cooper
Companies, Inc. ('Cooper'), acquired all of the issued and outstanding
capital stock of HGA from PsychGroup, Inc. Concurrent with the acquisition, all
due from related parties balances as of May 29, 1992 were forgiven. The
accompanying financial statements represent the financial position and results
of operations of the Company as of May 29, 1992 immediately prior to the
acquisition and the periods from May 1, 1991 to May 31, 1991 and June 1, 1991 to
May 29, 1992 just prior to the acquisition and reflect the elimination of the
due from related parties balances as of May 29, 1992 with a corresponding charge
to retained earnings in the amount of $20,595,000.

NET PATIENT SERVICE REVENUE

Net patient service revenue is recorded at the estimated net realizable
amounts from patients, third-party payors, and others for services rendered,
including estimated retroactive adjustments under reimbursement agreements with
third-party payors. Retroactive adjustments are accrued on an estimated basis in
the period the related services are rendered and adjusted in the period as final
settlements are determined.

CHARITY CARE

The Company provides care to indigent patient who meet certain criteria
under its charity care policy without charge or at amounts less than its
established rates. Because the Company does not pursue collection of amount
determined to qualify as charity care, they are not reported as revenue. The

HOSPITAL GROUP OF AMERICA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
PERIODS FROM MAY 1, 1991 TO MAY 31, 1991 AND
JUNE 1, 1991 TO MAY 29, 1992

Company maintains records to identify and monitor the level of charity care it
provides. These records include the amount of charges foregone for services and
supplies furnished under its charity care policy. Charges at the Company's
established rates foregone for charity care provided by the Company amounted to
$326,000 during the month of May 1991 and $4,768,000 for the period from June 1,
1991 to May 29, 1992. Hampton Hospital is required by its Certificate of Need to
incur not less than 10% of total patient days as free care.

HEALTH INSURANCE COVERAGE

Effective October 1, 1991, the Company is self-insured for the health
insurance coverage offered to its employees. The provision for estimated
self-insured health insurance costs includes management's estimates of the
ultimate costs for both reported claims and claims incurred but not reported.

SUPPLIES

Supplies consist principally of medical supplies and are stated at the
lower of cost (first-in, first-out method) or market.

PROPERTY AND EQUIPMENT

Property and equipment are stated at cost. Depreciation is computed on the
straight-line method over the estimated useful lives of the respective assets,
which range from 20 to 40 years for buildings and improvements, and 5 to 10
years for equipment, furniture and fixtures.

OTHER ASSETS

Pre-opening costs incurred in new facilities and loan fees incurred in
obtaining long-term financing are deferred and recorded as other assets.
Pre-opening costs are amortized on a straight-line basis over five years. The
unamortized portion of pre-opening costs was $21,000 at May 29, 1992. Loan fees
are amortized over the terms of the related loans. The balance of unamortized
loan fees amounted to $802,000 at May 29, 1992.

INCOME TAXES

The Company was included in the consolidated tax returns of Nu-Med. The
Company computes a tax provision as if it were a stand-alone entity. The
corresponding liability for such taxes is included in the net amount Due from
Related Parties.

CASH AND CASH EQUIVALENTS

Cash and cash equivalents include investments in highly liquid debt
instruments with a maturity of three months or less.

HOSPITAL GROUP OF AMERICA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
PERIODS FROM MAY 1, 1991 TO MAY 31, 1991 AND
JUNE 1, 1991 TO MAY 29, 1992

B. NET PATIENT SERVICE REVENUE

Commercial Insurance -- Most commercial insurance carriers reimburse
the Company on the basis of the hospitals' charges, subject to the rates
and limits specified in their policies. Patients covered by commercial
insurance generally remain responsible for any differences between
insurance proceeds and total charges.

Blue Cross -- Reimbursement under Blue Cross plans varies depending on
the areas in which the Company presently operates facilities. Benefits paid
to the Company can be charge-based, cost-based, negotiated per diem rates
or approved through a state rate setting process.

Medicare -- Services rendered to Medicare program beneficiaries are
reimbursed under a retrospectively determined reasonable cost system with
final settlement determined after submission of annual cost reports by the
Company and audits thereof by the Medicare fiscal intermediary.

Managed Care -- Services rendered to subscribers of health maintenance
organizations, preferred provider organizations and similar organizations
are reimbursed based on prospective negotiated rates.

C. RELATED PARTY TRANSACTIONS

Due from related parties consisted primarily of cash advances to Nu-Med and
income tax obligations.

Included in the Other Operating Revenue are management fees of $320,000 for
the month of May 1991 and $3,557,000 for the period from June 1, 1991 to May 29,
1992 charged to other affiliated entities which are under common ownership.

In connection with the acquisition of HGA, all due from related parties
balances as of May 29, 1992 were forgiven and the balance of $20,595,000 as of
that date was eliminated with a corresponding charge to retained earnings.

HOSPITAL GROUP OF AMERICA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
PERIODS FROM MAY 1, 1991 TO MAY 31, 1991 AND
JUNE 1, 1991 TO MAY 29, 1992

D. EMPLOYEE BENEFITS

The Company participated in the Nu-Med Combined Savings Plan, (the 'Plan'),
which covers substantially all full-time employees with more than one year of
service. Nu-Med may make annual contributions to the Plan based upon earnings,
which the Plan may utilize to acquire Nu-Med common stock. In addition, Nu-Med
may make contributions to the Plan in the form of Nu-Med common stock. No such
contributions were made during the periods ended May 31, 1991 and May 29, 1992.
The Company does not provide post-retirement benefits to its employees.

Hartgrove had a defined benefit pension plan, which was terminated during
the period ended May 29, 1992, at which time all benefits became fully vested.
The excess of plan assets over vested benefits amounted to approximately
$94,000. Such amount has been recorded as other operating revenue in the
accompanying statement of earnings.

E. LONG TERM DEBT

Long-term debt at May 29, 1992 consists of the following:

Bank term loan, interest at 1% to 1 1/2% above the bank's prime rate (6.5% at May 29,
1992), payable quarterly, principal payable in installments through 1995............... $ 2,609,000
Bank term loan, interest at 4% above the bank's prime rate (6.5% at May 29, 1992),
subject to a minimum rate of 12%, payable monthly, principal payable in installments
from September 1992 through August 1997................................................ 12,000,000
Industrial Revenue Bonds, interest at 85% of prime rate (6.5% at May 29, 1992), payable
monthly, principal payable in installments through 1997................................ 4,990,000
-----------
19,599,000
Less current portion..................................................................... (4,426,000)
-----------
$15,173,000
-----------
-----------

HOSPITAL GROUP OF AMERICA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
PERIODS FROM MAY 1, 1991 TO MAY 31, 1991 AND
JUNE 1, 1991 TO MAY 29, 1992

Annual maturities of long-term debt are as follows:

YEAR ENDING
MAY 29
- -----------------------------------------------------------------------------------------

1993..................................................................................... 4,426,000
1994..................................................................................... 2,210,000
1995..................................................................................... 1,187,000
1996..................................................................................... 1,217,000
1997..................................................................................... 1,276,000
Thereafter............................................................................... 9,283,000
-----------
$19,599,000
-----------
-----------

Substantially all of the property and equipment and accounts receivable of
the Company collateralize the debt outstanding.

F. COMMITMENTS AND CONTINGENCIES

YEAR ENDING MAY 29 BUILDINGS EQUIPMENT TOTAL
- --------------------------------------------------------------- ---------- --------- ----------

1993........................................................... $ 406,000 $112,000 $ 518,000
1994........................................................... 378,000 112,000 490,000
1995........................................................... 299,000 96,000 395,000
1996........................................................... 209,000 90,000 299,000
1997........................................................... 0 44,000 44,000
---------- --------- ----------
$1,292,000 $454,000 $1,746,000
---------- --------- ----------
---------- --------- ----------

HOSPITAL GROUP OF AMERICA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
PERIODS FROM MAY 1, 1991 TO MAY 31, 1991 AND
JUNE 1, 1991 TO MAY 29, 1992

$619,000 for the periods from May 1, 1991 to May 31, 1991 and June 1, 1991 to
May 29, 1992.

G. INCOME TAXES

The provision for income taxes for the following periods are composed of
the following:

PERIOD FROM
JUNE 1, 1991
MONTH ENDED TO
MAY 31, 1991 MAY 29, 1992
------------ -------------

Federal................................................................... $313,000 $ 2,122,000
State..................................................................... 55,000 374,000
------------ -------------
$368,000 $ 2,496,000
------------ -------------
------------ -------------

The provision for income taxes included in the consolidated statements of
earnings differs from the amount computed by applying the statutory federal
income tax rate of 34% to earnings before taxes due to the effect of the state
franchise taxes, net of federal benefit. This amounted to 6% for the periods
presented.

H. DEPENDENCE UPON COOPER

The Company has incurred losses and negative cash flows since May 30, 1992, and
has a working capital deficiency at October 31, 1993 which includes
a liability to Cooper of $6,082,000. Cooper has provided the Company with cash
advances to meet its cash needs. The independent auditors, report dated January
24, 1994 on Cooper's October 31, 1993 consolidated financial statements includes
the following explanatory paragraph:

'The accompanying financial statements have been prepared assuming
that the Company will continue as a going concern. During the past three
fiscal years, the Company has suffered significant losses and negative cash
flows. In addition, as discussed in Note 18 to the financial statements the
Company is exposed to contingent liabilities relatated to a criminal
conviction and a Securities and Exchange Commission action. Such losses,
negative cash flows and contingent liabilities raise substantial doubt
about the Company's ability to continue as a going concern. The
consolidated financial statements and financial statement schedules do not
include any adjustments that might result from the outcome of these
uncertainties.'

HOSPITAL GROUP OF AMERICA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
PERIODS FROM MAY 1, 1991 TO MAY 31, 1991 AND
JUNE 1, 1991 TO MAY 29, 1992

The Company is unable to predict the effect, if any, of the uncertainty
concerning Cooper's ability to continue as a going concern on its financial
condition or results of operations. The aforementioned factors raise substantial
doubt about the Company's ability to continue as a going concern. The financial
statements do not include any adjustments that might be necessary if the Company
or Cooper is unable to continue as a going concern.

I. Subsequent Event

Pursuant to a pledge agreement dated as of January 6, 1994, between the Parent
and the trustee for the holders of a new class of debt issued by the Parent (the
'Notes'), the Parent has pledged a first priority security interest in all of
its right, title and interest in stock of the Company, all additional shares of
stock of, or other equity interest in, the Company from time to time acquired by
the Parent, all intercompany indebtedness of the Company from time to time held
by the Parent and except as set forth in the indenture to the Notes, the
proceeds received from the sale or disposition of any or all of the foregoing. A
full description of the pledge agreement and terms of the indenture to the Notes
is included in the Parent's Amended and Restated Offer to Exchange and Consent
Solicitation filed with the Securities and Exchange Commission on December 15,
1993.

HOSPITAL GROUP OF AMERICA, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
APRIL 30, 1991

(IN THOUSANDS
OF DOLLARS)

ASSETS
Current Assets:
Cash and cash equivalents..................................................................... $ 5,173
Accounts receivable, net of estimated uncollectibles of $963.................................. 12,204
Supplies...................................................................................... 226
Prepaid expenses and other current assets..................................................... 319
-------------
Total current assets..................................................................... 17,922
-------------
Property and Equipment
Land.......................................................................................... 882
Buildings and improvements.................................................................... 31,278
Equipment, furniture and fixtures............................................................. 3,983
Construction in progress...................................................................... 121
-------------
36,264
Less accumulated depreciation................................................................. (5,728)
-------------
Total property and equipment, net........................................................ 30,536
-------------
Due from related parties........................................................................... 16,713
Other assets....................................................................................... 1,412
-------------
$66,583
-------------
-------------
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities
Accounts payable.............................................................................. $ 2,209
Accrued liabilities........................................................................... 1,590
Accrued salaries and related expenses......................................................... 2,329
Estimated third-party payor settlements....................................................... 2,242
Current portion of long-term debt............................................................. 1,829
-------------
Total current liabilities................................................................ 10,199
Long-term debt, less current portion............................................................... 21,817
Stockholder's equity:
Common stock: 8,500 shares authorized, 1,100 shares issued and outstanding par values from
$.10 to $1.00................................................................................ 7
Additional paid-in capital.................................................................... 16,654
Retained earnings............................................................................. 17,906
-------------
Total stockholder's equity............................................................... 34,567
-------------
$66,583
-------------
-------------

See accompanying notes to consolidated financial statements.

HOSPITAL GROUP OF AMERICA, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF EARNINGS
YEAR ENDED APRIL 30, 1991

(IN THOUSANDS
OF DOLLARS)

Net patient service revenue........................................................................ $43,631
Other operating revenue, (including management fees earned from related parties of $3,172)......... 4,294
-------------
Net operating revenue.............................................................................. 47,925
-------------
Costs and expenses:
Salaries and benefits......................................................................... 21,258
Purchased services............................................................................ 2,131
Professional fees............................................................................. 1,741
Other operating expenses...................................................................... 8,580
Bad debt expense.............................................................................. 2,234
Depreciation and amortization................................................................. 1,817
Interest on long-term debt.................................................................... 2,776
-------------
Total costs and expenses................................................................. 40,537
-------------
Earnings before provision for income taxes......................................................... 7,388
Provision for income taxes......................................................................... 2,881
-------------
Net earnings....................................................................................... $ 4,507
-------------
-------------

See accompanying notes to consolidated financial statements.

HOSPITAL GROUP OF AMERICA, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDER'S EQUITY
YEAR ENDED APRIL 30, 1991

ADDITIONAL TOTAL
COMMON PAID-IN RETAINED STOCKHOLDER'S
STOCK CAPITAL EARNINGS EQUITY
------ ---------- -------- -------------
(IN THOUSANDS OF DOLLARS)

Balance
April 30, 1990............................................. $7 $ 16,654 $ 13,399 $30,060
Net Earnings............................................... 4,507 4,507
--
---------- -------- -------------
Balance
April 30, 1991............................................. $7 $ 16,654 $ 17,906 $34,567
--
--
---------- -------- -------------
---------- -------- -------------

See accompanying notes to consolidated financial statements.

100

HOSPITAL GROUP OF AMERICA, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
YEAR ENDED APRIL 30, 1991

(IN THOUSANDS
OF DOLLARS)

Cash flows from operating activities:
Net earnings.................................................................................. $ 4,507
Adjustments to reconcile net earnings to net cash provided by operating activities:
Depreciation and amortization............................................................ 1,817
Provision for income taxes............................................................... 2,881
Change in operating assets and liabilities:
Increase in accounts receivable..................................................... (868)
Increase in supplies and other current assets....................................... (46)
Increase in accounts payable, accrued expenses and estimated third party payor
settlements......................................................................... 2,394
-------------
Net cash provided by operating activities........................................... 10,685
-------------
Cash flows from investing activities:
Capital expenditures.......................................................................... (852)
Increase in Other Assets...................................................................... (115)
-------------
Net cash used by investing activities............................................... (967)
-------------
Cash flows from financing activities:
Principal payments on long-term debt.......................................................... (6,309)
Advances to related parties................................................................... (14,514)
Costs incurred in refinancing................................................................. (991)
Proceeds from issuance of long-term debt...................................................... 12,000
-------------
Net cash used by financing activities............................................... (9,814)
-------------
Net decrease in cash and cash equivalents.......................................................... (96)
Cash and cash equivalents, beginning of period..................................................... 5,269
-------------
Cash and cash equivalents, end of period........................................................... $ 5,173
-------------
-------------
Supplemental disclosure of cash flow information -- Interest paid during the period................ $ 2,474
-------------
-------------

See accompanying notes to consolidated financial statements.

101

HOSPITAL GROUP OF AMERICA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEAR ENDED APRIL 30, 1991

A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Business -- The accompanying consolidated financial statements include the
accounts of Hospital Group of America, Inc., (HGA) and its wholly owned
subsidiaries (the 'Company') and certain other assets and operations owned by an
entity affiliated through common ownership. HGA was a wholly owned subsidiary of
PsychGroup, Inc. which in turn is wholly-owned by Nu-Med, Inc. ('Nu-Med'). The
financial position and results of operations of HGA and its subsidiaries may not
necessarily be indicative of conditions that may have existed or the results of
operations if the Company had been operated as an unaffiliated entity. All
intercompany balances and transactions have been eliminated. The Company owns
and operates the following psychiatric facilities:

NAME OF FACILITY LOCATION
- ---------------------- ---------------------

Hartgrove Hospital.... Chicago, Illinois
Hampton Hospital...... Rancocas, New Jersey
Meadow Wood
Hospital............ New Castle, Delaware

Basis of Presentation -- On May 29, 1992, PSG Acquisition, Inc., a wholly
owned subsidiary of The Cooper Companies, Inc. ('Cooper'), acquired all of the
issued and outstanding capital stock of HGA from PsychGroup, Inc. Concurrent
with the acquisition, all due from related parties balances as of May 29, 1992
were forgiven. The accompanying financial statements represent the historical
position and results of operations of the Company as of April 30, 1991 and for
the year then ended. The accompanying financial statements do not reflect the
elimination of the due from related parties balances with a corresponding charge
to retained earnings which as of May 29, 1992 amounted to $20,595,000.

Charity Care -- The Company provides care to indigent patients who meet
certain criteria under its charity care policy without charge or at amounts less
than its established rates. Because the Company does not pursue collection of
amounts determined to qualify as charity care, they are not reported as revenue.
The Company maintains records to identify and monitor the level of charity care
it provides. These records include the amount of charges foregone for services
and supplies furnished under its charity care policy. Charges at the Company's
established rates foregone for charity care provided by the Company amounted to
$3,457,000 for the year ended April 30, 1991. Hampton Hospital is required by
its Certificate of Need to incur not less than 10% of total patient days as free
care.

Supplies -- Supplies consist principally of medical supplies and are stated
at the lower of cost (first-in, first-out method) or market.

Property and Equipment -- Property and equipment are stated at cost.
Depreciation is computed on the straight-line method over the estimated useful
lives of the respective assets, which range from 20 to 40 years for buildings
and improvements, and 5 to 10 years for equipment, furniture and fixtures.

Other Assets -- Pre-opening costs incurred in new facilities and loan fees
incurred in obtaining long-term financing are deferred and recorded as other
assets. Pre-opening costs are amortized on a straight-line basis over five
years. Loan fees are amortized over the terms of the related loans. The balance
of unamortized loan fees was $896,000 as of April 30, 1991.

Income Taxes -- The Company was included in the consolidated tax returns of
Nu-Med. The Company computes a tax provision as if it were a stand alone entity.
The corresponding liability for such taxes is included in the net amount Due
from Related Parties.

102

HOSPITAL GROUP OF AMERICA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
YEAR ENDED APRIL 30, 1991

Malpractice Insurance Coverage -- Medical malpractice claims were covered
by an occurrence-basis medical malpractice insurance policy. In the opinion of
management, sufficient reserves have been established for any potential
deductible to be paid by the Company. These reserves are maintained upon
Nu-Med's financial statements and are not allocated to individual subsidiaries.
The costs and deductibles associated with the policy are allocated to the
Company and are included in operating expenses. Subsequent to October 1, 1991,
the Company became directly responsible for its own malpractice insurance, with
Nu-Med being responsible for any tail coverage through May 29, 1992.

B. NET PATIENT SERVICE REVENUE

Managed Care -- Services rendered to subscribers of health maintenance
organizations, preferred provider organizations and similar organizations
are reimbursed based on prospective negotiated rates.

C. RELATED PARTY TRANSACTIONS

Amounts due from (to) related parties at April 30, 1991 were composed of
the following (in thousands of dollars):

APRIL 30, 1991
--------------

Due from Nu-Med, Inc. ......................................................... $ 37,682
Due to other related affiliates................................................ (20,969)
--------------
$ 16,713
--------------
--------------

Due from Nu-Med, Inc. consists primarily of cash advances, transfers of
certain assets and income tax obligations. The repayment of this obligation was
not expected to commence within 12 months and was to be repaid over a period of
years. Therefore, this amount was classified as a long-term receivable at April
30, 1991. In connection with the acquisition of HGA, all due from related
parties balances as of May 29, 1992 were forgiven and the balance of $20,595,000
as of that date was eliminated with a corresponding charge to retained earnings.

103

HOSPITAL GROUP OF AMERICA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
YEAR ENDED APRIL 30, 1991

Included in Other Operating Revenue are management fees charged to other
affiliated entities which are under common ownership. Such fees amounted to
$3,172,000 for 1991.

D. LONG TERM DEBT

Long-term debt consists of the following:

Bank term loan, interest at 1% to 1 1/2% above the bank's prime rate (8.5% at April 30,
1991), payable quarterly, principal payable in installments through 1995................... $ 6,251
Bank term loan, interest at 4% above the bank's prime rate (8.5% at April 30, 1991), subject
to a minimum rate of 12%, payable monthly, principal payable in installments from September
1992 through August 1997................................................................... 12,000
Industrial Revenue Bonds, interest at 85% of prime rate payable monthly, principal payable in
installments through 1997.................................................................. 5,395
-------
23,646
Less current portion......................................................................... 1,829
-------
$21,817
-------
-------

Scheduled annual maturities of long-term debt as of April 30, 1991 are as
follows:

YEAR ENDING
APRIL 30
- -----------------------------------------------------------------------------------

1992............................................................................ $ 1,829
1993............................................................................ 2,015
1994............................................................................ 2,156
1995............................................................................ 2,257
1996............................................................................ 894
Thereafter...................................................................... 14,495
-------
$23,646
-------
-------

Substantially all of the property and equipment and accounts receivable of
the Company collateralize the debt outstanding.

E. EMPLOYEE BENEFITS

The Company participated in the Nu-Med Combined Savings Plan, (the 'Plan'),
which covers substantially all full-time employees with more than one year of
service. Nu-Med may make annual contributions to the Plan based upon earnings,
which the Plan may utilize to acquire Nu-Med common stock. In addition, Nu-Med
may make contributions to the Plan in the form of Nu-Med common stock. No such
contributions were made during the year ended April 30, 1991. The Company does
not provide postretirement benefits to its employees.

F. COMMITMENTS AND CONTINGENCIES

In the normal course of business, the Company is involved in various
litigation. In the opinion of management, the disposition of such litigation
will not have a material adverse effect on the Company's consolidated financial
position.

104

HOSPITAL GROUP OF AMERICA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
YEAR ENDED APRIL 30, 1991

YEAR ENDING
APRIL 30 BUILDINGS EQUIPMENT TOTAL
- ------------------------------------------------------------- --------- --------- ------

1992...................................................... $ 74 $ 47 $ 121
1993...................................................... 203 59 262
1994...................................................... 213 59 272
1995...................................................... 222 59 281
1996...................................................... 232 47 279
--------- --------- ------
$ 944 $ 271 $1,215
--------- --------- ------
--------- --------- ------

G. INCOME TAXES

The provision for income taxes is composed of the following (in thousands
of dollars):

YEAR ENDED
APRIL 30, 1991
--------------

Federal........................................................................ $2,512
State.......................................................................... 369
-------
$2,881
-------
-------

In February 1992, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards No. 109. 'Accounting for Income
Taxes'. Cooper and the Company are required to adopt the new method of
accounting for income taxes no later than the fiscal year ending October 31,
1994. Neither the Company nor Cooper has completed an analysis to estimate the
impact of the statement on the Company's consolidated financial statements.

H. DEPENDENCE UPON COOPER

The Company has incurred losses and negative cash flows since May 30, 1992,
and has a working capital deficiency at October 31, 1993 which includes a
liability to Cooper of $6,082,000. Cooper has provided the Company with cash
advances to meet its cash needs. The independent auditors' report dated January
24, 1994 on Cooper's October 31, 1993 consolidated financial statements includes
the following explanatory paragraph:

'The accompanying financial statements have been prepared assuming
that the Company will continue as a going concern. During the past three
fiscal years, the Company has suffered significant losses and negative cash
flows. In addition, as discussed in Note 18 to the financial statements the
Company is exposed to contingent liabilities related to a criminal
conviction and a Securities and Exchange Commission motion. Such losses,
negative cash flows, and contingent liabilities raise substantial doubt
about the Company's ability to continue as a going concern. The
consolidated financial statements and financial statement schedules do not
include any adjustments that might result from the outcome of these
uncertainties.'

105

HOSPITAL GROUP OF AMERICA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
YEAR ENDED APRIL 30, 1991

I. SUBSEQUENT EVENT

Pursuant to a pledge agreement dated as of January 6, 1994, between the
Parent and the trustee for the holders of a new class of debt issued by the
Parent (the 'Notes'), the Parent has pledged a first priority security interest
in all of its right, title and interest in stock of the Company, all additional
shares of stock of, or other equity interest in, the Company from time to time
acquired by the Parent, all intercompany indebtedness of the Company from time
to time held by the Parent and except as set forth in the indenture to the
Notes, the proceeds received from the sale or disposition of any or all of the
foregoing. A full description of the pledge agreement and terms of the indenture
governing the Notes is included in the Parent's Amended and Restated Offer to
Exchange and Consent Solicitation filed with the Securities and Exchange
Commission on December 15, 1993.

106

SCHEDULE V

HOSPITAL GROUP OF AMERICA, INC. AND SUBSIDIARIES
PROPERTY AND EQUIPMENT
YEAR ENDED OCTOBER 31, 1993
PERIOD FROM MAY 30, 1992 TO OCTOBER 31, 1992
PERIOD FROM JUNE 1, 1991 TO MAY 29, 1992
PERIOD FROM MAY 1, 1991 TO MAY 31, 1991
YEAR ENDED APRIL 30, 1991

BALANCE AT BALANCE
BEGINNING ADDITIONS OTHER AT END OF
CLASSIFICATION OF PERIOD AT COST RETIREMENTS CHANGES PERIOD
- -------------------------------------------------- ----------- --------- ----------- ------- ---------
(IN THOUSANDS)

October 31, 1993:
Land......................................... $ 1,426 $ 0 $ 0 $ 0 $ 1,426
Buildings and improvements................... 30,890 319 0 191 31,400
Equipment, furniture and fixtures............ 1,083 211 0 76 1,370
Construction in progress..................... 47 251 0 (267) 31
----------- --------- --- ------- ---------
$33,446 $ 781 $ 0 $ 0 $34,227
----------- --------- --- ------- ---------
----------- --------- --- ------- ---------
October 31, 1992:
Land......................................... $ 1,426(A) $ 0 $ 0 $ 0 $ 1,426
Buildings and improvements................... 30,825(A) 64 (2) 3 30,890
Equipment, furniture and fixtures............ 1,053(A) 33 (5) 2 1,083
Construction in progress..................... 47(A) 5 0 (5) 47
----------- --------- --- ------- ---------
$33,351 $ 102 $(7) $ 0 $33,446
----------- --------- --- ------- ---------
----------- --------- --- ------- ---------
May 29, 1992:
Land......................................... $ 882 $ 0 $ 0 $ 0 $ 882
Buildings and improvements................... 31,287 238 0 0 31,525
Equipment, furniture and fixtures............ 4,010 325 0 (176) 4,159
Construction in progress..................... 121 92 0 (163) 50
----------- --------- --- ------- ---------
$36,300 $ 655 $ 0 $(339) $36,616
----------- --------- --- ------- ---------
----------- --------- --- ------- ---------
May 31, 1991:
Land......................................... $ 882 $ 0 $ 0 $ 0 $ 882
Buildings and improvements................... 31,278 9 0 0 31,287
Equipment, furniture and fixtures............ 3,983 27 0 0 4,010
Construction in progress..................... 121 0 0 0 121
----------- --------- --- ------- ---------
$36,264 $ 36 $ 0 $ 0 $36,300
----------- --------- --- ------- ---------
----------- --------- --- ------- ---------
April 30, 1991:
Land......................................... $ 882 $ 0 $ 0 $ 0 $ 882
Buildings and improvements................... 30,856 422 0 0 31,278
Equipment, furniture and fixtures............ 3,571 412 0 0 3,983
Construction in progress..................... 103 18 0 0 121
----------- --------- --- ------- ---------
$35,412 $ 852 $ 0 $ 0 $36,264
----------- --------- --- ------- ---------
----------- --------- --- ------- ---------

- ------------

(A) Includes adjustment of accounts to fair value pursuant to the
implementation of purchase accounting.

107

SCHEDULE VI

HOSPITAL GROUP OF AMERICA, INC. AND SUBSIDIARIES
ACCUMULATED DEPRECIATION OF PROPERTY AND EQUIPMENT
YEAR ENDED OCTOBER 31, 1993
PERIOD FROM MAY 30, 1992 TO OCTOBER 31, 1992
PERIOD FROM JUNE 1, 1991 TO MAY 29, 1992
PERIOD FROM MAY 1, 1991 TO MAY 31, 1991
YEAR ENDED APRIL 30, 1991

ADDITIONS
BALANCE AT CHARGED TO BALANCE
BEGINNING COSTS AND OTHER AT END OF
DESCRIPTION OF PERIOD EXPENSES RETIREMENTS CHANGES PERIOD
- ------------------------------------------------ ----------- ---------- ----------- ------- ---------
(IN THOUSANDS)

October 31, 1993:
Buildings and improvements................. $ 407 $1,128 $ 0 $ 0 $ 1,535
Equipment, furniture and fixtures.......... 135 198 0 0 333
--
----------- ---------- --- ---------
$ 542 $1,326 $ 0 $ 0 $ 1,868
--
--
----------- ---------- --- ---------
----------- ---------- --- ---------
October 31, 1992:
Buildings and improvements................. $ 0(A) $ 409 $(2) $ 0 $ 407
Equipment, furniture and fixtures.......... 0(A) 140 (5) 0 135
--
----------- ---------- --- ---------
$ 0(A) $ 549 $(7) $ 0 $ 542
--
--
----------- ---------- --- ---------
----------- ---------- --- ---------
May 29, 1992:
Buildings and improvements................. $ 4,216 $ 858 $ 0 $ 0 $ 5,074
Equipment, furniture and fixtures.......... 1,621 355 0 0 1,976
--
----------- ---------- --- ---------
$ 5,837 $1,213 $ 0 $ 0 $ 7,050
--
--
----------- ---------- --- ---------
----------- ---------- --- ---------
May 31, 1991:
Buildings and improvements................. $ 4,143 $ 73 $ 0 $ 0 $ 4,216
Equipment, furniture and fixtures.......... 1,585 36 0 0 1,621
--
----------- ---------- --- ---------
$ 5,728 $ 109 $ 0 $ 0 $ 5,837
--
--
----------- ---------- --- ---------
----------- ---------- --- ---------
April 30, 1991:
Buildings and improvements................. $ 3,361 $ 782 $ 0 $ 0 $ 4,143
Equipment, furniture and fixtures.......... 1,212 373 0 0 1,585
--
----------- ---------- --- ---------
$ 4,573 $1,155 $ 0 $ 0 $ 5,728
--
--
----------- ---------- --- ---------
----------- ---------- --- ---------

- ------------

(A) Write-off of accumulated depreciation pursuant to the implementation of
purchase accounting.

108

SCHEDULE VIII

HOSPITAL GROUP OF AMERICA, INC. AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
YEAR ENDED OCTOBER 31, 1993
PERIOD FROM MAY 30, 1992 TO OCTOBER 31, 1992
PERIOD FROM JUNE 1, 1991 TO MAY 29, 1992
PERIOD FROM MAY 1, 1991 TO MAY 31, 1991
YEAR ENDED APRIL 30, 1991

ADDITIONS ADDITIONS DEDUCTIONS/
BALANCE AT CHARGED TO CHARGED TO WRITE OFFS/ BALANCE AT
BEGINNING COSTS AND OTHER RECOVERIES/ END
OF PERIOD EXPENSES ACCOUNTS OTHER OF PERIOD
---------- ---------- ---------- ----------- ----------
(IN THOUSANDS)

Allowance for doubtful accounts:
Year ended October 31, 1993............... $2,556 $2,792 $0 $(3,281) $2,067
--
--
---------- ---------- ----------- ----------
---------- ---------- ----------- ----------
Period ended October 31, 1992............. $2,347 $1,251 $0 $(1,042) $2,556
--
--
---------- ---------- ----------- ----------
---------- ---------- ----------- ----------
Period ended May 29, 1992................. $ 884 $3,304 $0 $(1,841) $2,347
--
--
---------- ---------- ----------- ----------
---------- ---------- ----------- ----------
Month ended May 31, 1991.................. $ 963 $ 100 $0 $ (179) $ 884
--
--
---------- ---------- ----------- ----------
---------- ---------- ----------- ----------
Year ended April 30, 1991................. $ 841 $2,234 $0 $(2,112) $ 963
--
--
---------- ---------- ----------- ----------
---------- ---------- ----------- ----------

109

SCHEDULE X

HOSPITAL GROUP OF AMERICA, INC. AND SUBSIDIARIES
SUPPLEMENTARY INCOME STATEMENT INFORMATION
YEAR ENDED OCTOBER 31, 1993
PERIOD FROM MAY 30, 1992 TO OCTOBER 31, 1992
PERIOD FROM JUNE 1, 1991 TO MAY 29, 1992
PERIOD FROM MAY 1, 1991 TO MAY 31, 1991
YEAR ENDED APRIL 30, 1991

CHARGED TO COSTS AND EXPENSES
-------------------------------------------------------------
PERIOD ENDED
-------------------------------------------------------------
OCTOBER 31, OCTOBER 31, MAY 29, MAY 31, APRIL 30,
1993 1992 1992 1991 1991
----------- ----------- ------- ------- ---------
(IN THOUSANDS)

Advertising............................................. $ 851 $ 605 $1,643 $ 140 $ 1,139
Illinois Medicaid Provider Tax.......................... $ 495 $ 152 $ 0 $ 0 $ 0

- ------------

Royalties, maintenance and repairs and taxes other than payroll and income taxes
are omitted as each item does not exceed 1% of net operating revenue as reported
in the statement of consolidated operations.

110

INDEPENDENT AUDITORS' REPORT

The Board of Directors and Stockholders
COOPERSURGICAL, INC.

We have audited the accompanying balance sheets of CooperSurgical, Inc. as
of October 31, 1993 and 1992, and the related statements of operations,
stockholders' deficit, and cash flows for each of the years in the three-year
period ended October 31, 1993. In connection with our audits of the financial
statements, we also have audited financial statement schedules IV, VIII and X.
These financial statements and financial statement schedules are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements and financial statement schedules based on
our audits.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of CooperSurgical, Inc. as of
October 31, 1993 and 1992, and the results of its operations and its cash flows
for each of the years in the three-year period ended October 31,1993 in
conformity with generally accepted accounting principles. Also in our opinion,
the related financial statement schedules, when considered in relation to the
basic financial statements taken as a whole, present fairly, in all material
respects, the information set forth therein.

The accompanying financial statements have been prepared assuming
CooperSurgical, Inc. will continue as a going concern. As discussed in Note 1 to
the financial statements, the Company's recurring losses and negative cash flows
from operations raise substantial doubt about the Company's ability to continue
as a going concern. Additionally, the independent auditors' report dated January
24, 1994 on the parent's financial statements as of October 31, 1993 included an
explanatory paragraph describing a substantial doubt about the parent's ability
to continue as a going concern. The accompanying financial statements and
financial statement schedules do not include any adjustments that might result
from the outcome of these uncertainties.

KPMG PEAT MARWICK

Stamford, Connecticut
January 24, 1994

111

COOPERSURGICAL, INC.
BALANCE SHEET

OCTOBER 31
----------------------------
1993 1992
---------------------- ----------------------
(DOLLARS IN THOUSANDS)

ASSETS
Current Assets:
Cash..................... $ 297 $ 207
Receivables:
Trade, less
allowance for
doubtful accounts
of $294 in 1993
and $281 in
1992.............. 2,387 2,115
Other receivables... 50 325
---------- ----------
2,437 2,440
---------- ----------
Inventories:
Raw materials....... 3,100 2,648
Work-in-process..... 344 387
Finished goods...... 2,497 1,620
---------- ----------
5,941 4,655
---------- ----------
Prepaid expenses......... 366 379
---------- ----------
Total current
assets............ 9,041 7,681
---------- ----------
Furniture and equipment....... 1,469 1,039
Less accumulated
depreciation............ (663) (341)
---------- ----------
806 698
---------- ----------
Intangibles, net of
accumulated amortization:
Goodwill................. 1,681 1,899
Non-compete Agreements... 405 583
Distribution Rights...... 182 208
---------- ----------
2,268 2,690
---------- ----------
Other assets.................. 493 130
---------- ----------
$ 12,608 $ 11,199
---------- ----------
---------- ----------
LIABILITIES AND STOCKHOLDERS'
DEFICIT
Current liabilities:
Current installments of
long-term debt.......... $ 17 $ 400
Accounts payable......... 1,050 1,774
Other Accrued
liabilities............. 1,821 1,436
---------- ----------
Total current
liabilities....... 2,888 3,610
---------- ----------
Long-term debt................ 106 127
Due to Parent................. 22,325 13,163
---------- ----------
Total liabilities... 25,319 16,900
---------- ----------
Commitments and contingencies
(Note 6)
Stockholders' equity:
Series A Convertible
Preferred stock:
4,000,000 shares
authorized, 640,000
issued and outstanding,
par value per share
$.0001, aggregate
liquidation preference
of $1,242 plus
cumulative dividend of
$248 at October 31, 1993
(Note 8)................ -- --
Common stock: 6,000,000
shares authorized,
23,212 issued and
outstanding, par value
per share $.002 at
October 31, 1993........ -- --
Additional
paid-in-capital......... 1,242 1,242
Translation
adjustments............. 33
Accumulated deficit...... (13,986) (6,943)
---------- ----------
Total stockholders'
deficit........... (12,711) (5,701)
---------- ----------
$ 12,608 $ 11,199
---------- ----------
---------- ----------

See accompanying notes to financial statements.

112

COOPERSURGICAL, INC.
STATEMENTS OF OPERATIONS

YEARS ENDED OCTOBER 31,
----------------------------
1993 1992 1991
------- ------- ------
(DOLLARS IN THOUSANDS)

Net sales......................................................................... $14,679 $16,010 $7,860
Cost of goods sold................................................................ 7,429 7,368 3,887
------- ------- ------
Gross profit...................................................................... 7,250 8,642 3,973
------- ------- ------
Costs and expenses:
Research and development expense............................................. 778 1,248 448
Selling, general and administrative expense (Note 4)......................... 10,507 9,034 6,239
Other expense................................................................ 460 568 --
Amortization of intangibles.................................................. 290 308 233
Interest:
Parent promissory notes................................................. 2,240 1,134 328
Other................................................................... 18 55 81
------- ------- ------
14,293 12,347 7,329
------- ------- ------
Net loss.......................................................................... ($7,043) ($3,705) ($3,356)
------- ------- ------
------- ------- ------

See accompanying notes to financial statements.

113

COOPERSURGICAL, INC.
STATEMENT OF STOCKHOLDERS' DEFICIT
YEARS ENDED OCTOBER 31, 1993, 1992, 1991 AND 1990

RETAINED
SERIES A ADDITIONAL EARNINGS TOTAL
PREFERRED COMMON PAID-IN TRANSLATION (ACCUMULATED STOCKHOLDERS'
STOCK STOCK CAPITAL ADJUSTMENTS DEFICIT) DEFICIT
--------- ------ ---------- ----------- ------------ ------------
(DOLLARS IN THOUSANDS)

Balance at October 31, 1990............. $ -- $-- $ 450 $ -- $ 118 $ 568
Equity transfer to Parent............... -- -- (450) -- -- (450)
Net loss................................ -- -- -- -- (3,356) (3,356)
--------- ------ ---------- --- ------------ ------------
Balance at October 31, 1991............. -- -- -- -- (3,238) (3,238)
Issuance of 640,000 shares of Series A
preferred stock....................... -- -- 1,242 -- -- 1,242
Issuance of 23,212 shares of common
stock and retirement of 1,000 shares
of common stock....................... -- -- -- -- -- --
Net loss................................ -- -- -- -- (3,705) (3,705)
--------- ------ ---------- --- ------------ ------------
Balance at October 31, 1992............. -- -- 1,242 -- (6,943) (5,701)
Net loss................................ -- -- -- -- (7,043) (7,043)
Aggregate translation adjustment........ -- -- -- 33 -- 33
--------- ------ ---------- --- ------------ ------------
Balance at October 31, 1993............. $ -- $-- $1,242 $ 33 ($13,986) ($12,711)
--------- ------ ---------- --- ------------ ------------
--------- ------ ---------- --- ------------ ------------

See accompanying notes to financial statements.

114

COOPERSURGICAL, INC.
STATEMENTS OF CASH FLOWS

YEARS ENDED OCTOBER 31,
-----------------------------
1993 1992 1991
------- ------- -------
(DOLLARS IN THOUSANDS)

Cash flows used by operating activities:
Net loss.................................................................... ($7,043) ($3,705) ($3,356)
Adjustments to reconcile net loss to cash used by operating activities:
Depreciation and amortization.......................................... 540 478 303
Bad debt expense....................................................... 13 9 51
Interest on Parent advances............................................ 2,240 1,134 328
Change in assets and liabilities net of the effects from purchase of
Euro-Med:
(Increase) in accounts receivable................................. (285) (210) (756)
(Increase) in inventories......................................... (1,286) (2,413) (998)
(Increase)/Decrease in other current assets....................... 288 (103) (380)
(Increase) in other assets........................................ (330) (123) (2)
Increase/(Decrease) in accounts payable........................... (724) 940 28
Increase in accrued expenses...................................... 517 186 588
------- ------- -------
Net cash (used) by operating activities...................... ($6,070) ($3,807) ($4,194)
------- ------- -------
Cash flows used in investing activities:
Acquisition of Euro-Med Endoscope and Euro-Med, Inc. (Note 2)............... -- -- (1,725)
Purchase of distribution rights (Note 2).................................... -- -- (256)
Capital expenditures........................................................ (302) (555) (225)
------- ------- -------
Net cash (used) by investing activities...................... (302) (555) (2,206)
------- ------- -------
Cash flows provided from/used for financing activities:
Proceeds from issuance of preferred stock................................... -- 1,242 0
Proceeds from Parent advances............................................... 6,866 4,336 4,964
Repayment of long-term debt................................................. (404) (1,077) 0
------- ------- -------
Proceeds from long-term debt................................................ -- -- 1,504
------- ------- -------
Net cash provided by financing activities.................... 6,462 4,501 6,468
------- ------- -------
Net increase in cash and cash equivalents........................................ 90 139 68
Cash and cash equivalents, beginning of period................................... 207 68 0
------- ------- -------
Cash and cash equivalents, end of period......................................... $ 297 $ 207 68
------- ------- -------
------- ------- -------
Cash paid for:
Interest.................................................................... $ -- $ 40 $ 95
Income taxes................................................................ $ -- $ -- $ --
------- ------- -------

During Fiscal 1993, furniture and equipment with a net book value of $56
were transferred to CooperSurgical from the Parent. This non-cash transaction
was recorded as an increase to Parent advances.

During Fiscal 1991, CooperSurgical assumed notes payable of $1,525 with the
acquisition of Euro-Med Endoscope and Euro-Med, Inc., see Note 2. Also during
fiscal 1991, CooperSurgical assumed promissory notes, due to its Parent, as a
result of a $450 non-cash equity transfer to its Parent.

See accompanying notes to financial statements.

115

COOPERSURGICAL, INC.
NOTES TO FINANCIAL STATEMENTS

NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

GENERAL

CooperSurgical, Inc. ('CooperSurgical' or the 'Company'), a Delaware
corporation, develops, manufactures and distributes electrosurgical,
cryosurgical and general application diagnostic surgical instruments and
equipment. The Cooper Companies, Inc. ('Parent'), a Delaware corporation, owns
100% of CooperSurgical's Series A preferred stock. CooperSurgical's outstanding
common stock is 100% owned by individuals on the CooperSurgical Advisory Board
which provides counsel and management of clinical trials in the area of
minimally invasive surgery. The accompanying financial statements have been
prepared from the separate records of CooperSurgical and may not be indicative
of conditions which would have existed or the results of its operations if
CooperSurgical operated autonomously (see Note 4). Foreign exchange translation
and transactions are immaterial.

DEPENDENCE UPON PARENT

CooperSurgical has incurred substantial losses and has not generated
positive cash flows from operations. The Company is, therefore, dependent upon
its Parent for financing to meet its cash obligations. The Company's Parent
issued its October 31, 1993 consolidated financial statements on or about
January 24, 1994. The independent accountants' report thereon included the
following explanatory paragraph:

The accompanying financial statements have been prepared assuming that
the Company will continue as a going concern. During the past three fiscal
years, the Company has suffered significant losses and negative cash flows.
In addition, as discussed in Note 18 to the financial statements the
Company is exposed to contingent liabilities related to a criminal
conviction and a Securities and Exchange Commission action. Such losses,
negative cash flows, and contingent liabilities raise substantial doubt
about the Company's ability to continue as a going concern. The
consolidated financial statements and financial statement schedules do not
include any adjustments that might result from the outcome of these
uncertainties.

The Company is unable to predict the effect, if any, of this uncertainty on
its financial condition or results of operations. These factors raise
substantial doubt about CooperSurgical's ability to continue as a going concern.
The financial statements do not include any adjustments that might be necessary
if CooperSurgical or its Parent is unable to continue as a going concern.

REVENUE RECOGNITION

CooperSurgical recognizes product revenue when risk of ownership has
transferred to the buyer, net of appropriate provisions for sales returns and
bad debts.

PROVISION FOR INCOME TAXES

CooperSurgical is included in the consolidated federal income tax return of
the Parent pursuant to a tax-sharing agreement. CooperSurgical state and
franchise taxes are de minimis.

In February 1992, the Financial Accounting Standards Board ('FASB') issued
Statement of Financial Accounting Standards No. 109, 'Accounting for Income
Taxes.' The Parent and CooperSurgical are required to adopt this method of
accounting for income taxes no later than the fiscal year ending October 31,
1994. The Parent anticipates that the adoption of the statement will not have a
material impact on CooperSurgical's balance sheet.

116

COOPERSURGICAL, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

INVENTORIES

Inventories are carried at the lower of cost, determined on an average cost
basis, or market.

FURNITURE AND EQUIPMENT

Furniture and equipment are carried at cost. Depreciation is computed on
the straight line method over the estimated useful lives of depreciable assets.

AMORTIZATION OF INTANGIBLES

Amortization is currently provided on all intangible assets on a straight
line basis over periods up to 20 years. Accumulated amortization at October 31,
1993 and 1992 was $831,000 and $541,000, respectively.

NOTE 2. ACQUISITIONS

In December 1990 and January 1991, CooperSurgical acquired Euro-Med
Endoscope and Euro-Med, Inc. for cash and notes in the amount of $3,250,000. The
acquisitions were recorded using the purchase method of accounting. The two
companies offer a line of surgical instruments and diagnostic hysteroscopy
equipment for use in gynecologic and minimally invasive surgical procedures.
Goodwill for these two businesses was $2,082,000 and is being amortized over 20
years.

On a pro forma basis, if Euro-Med, Inc. results had been included in
CooperSurgical's results beginning November 1, 1990, the pro forma net sales
would have been approximately $8,460,000 and loss before provision of income
taxes would have been approximately $3,406,000.

In a separate transaction, CooperSurgical purchased distribution rights
associated with the aforementioned surgical instruments and diagnostic
hysteroscopy equipment from the previous owners of Euro-Med Endoscope and
Euro-Med, Inc. for $256,000.

NOTE 3. ACCOUNTS PAYABLE

CooperSurgical utilized a cash concentration account with the Parent
whereby approximately $131,000 and $293,000 of checks issued and outstanding at
October 31, 1993 and 1992, respectively, in excess of related bank cash balances
were reclassified to accounts payable. Sufficient funds were available from the
Parent to cover these checks.

NOTE 4. RELATED PARTY TRANSACTIONS

Included in CooperSurgical's selling, general and administrative expense
are Parent allocations for technical service fees of $1,312,000, $341,000 and
$279,000 for the three years ended October 31, 1993, 1992 and 1991 respectively.
1993 technical service fees include $134,000 relating to redetermination of
appropriate amount for the year ended October 31, 1992. These costs are charges
from the Parent for accounting, legal, tax and other services provided to
CooperSurgical.

117

COOPERSURGICAL, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

Amounts due to the parent at October 31, 1993 and 1992 were composed of the
following:

OCTOBER 31,
----------------------------
1993 1992
---------------------- ----------------------
(DOLLARS IN THOUSANDS)

Advances with interest at 10% per annum............................. $ 6,000 $ 6,000
Advances with interest at 15% per annum............................. 12,552 5,401
Interest due on Parent advances..................................... 3,702 1,462
Other............................................................... 71 300
---------- ----------
$ 22,325 $ 13,163
---------- ----------
---------- ----------

NOTE 5. LONG TERM DEBT

Long term debt consists of the following:

OCTOBER 31,
------------
1993 1992
---- ----
(DOLLARS IN
THOUSANDS)

Note payable; interest at 9%.................................................. $123 $527
Less current portion.......................................................... (17) (400)
---- ----
$106 $127
---- ----
---- ----

Annual maturities of long-term debt, including current installments
thereof, are as follows:

YEAR ENDING OCTOBER 31, (000'S)
- ----------------------- ---------------------------------------------------

1994 ................................................... $17
1995 ................................................... 16
1996 ................................................... 17
1997 ................................................... 73

NOTE 6. COMMITMENTS AND CONTINGENCIES

In the normal course of its business, CooperSurgical is involved in various
litigation cases. In the opinion of management, the disposition of such
litigation will not have a materially adverse effect on CooperSurgical's
financial condition.

CooperSurgical leases certain property and equipment under operating lease
agreements. The following is a schedule of the estimated minimum payment due
under such leases with an initial term of more than one year as of October 31,
1993:

YEAR ENDED OCTOBER 31, (000'S)
- ---------------------- ----------------------------------------------------

1994 .................................................... $ 270
1995 .................................................... 255
1996 .................................................... 255
1997 .................................................... 265
1998 .................................................... 265
1999 and thereafter................................................. 835

Rental expense for all leases amounted to approximately $340,000 and
$322,000 for the years ended October 31, 1993 and 1992, respectively.

NOTE 7. EMPLOYEE BENEFITS

CooperSurgical employees are eligible to participate in the Parent's 401(k)
Savings Plan, a defined contribution plan and the Parent's Retirement Income
Plan, a defined benefit plan. As of October 31,

118

COOPERSURGICAL, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

1993, CooperSurgical has not elected to participate in the Parent's Retirement
Income Plan. Costs and expenses of administration of the Parent's 401(k) Savings
Plan are allocated to CooperSurgical as appropriate. These costs were not
significant for the years ended October 31, 1993, 1992 and 1991.

NOTE 8. SERIES A CONVERTIBLE PREFERRED STOCK

The Series A Convertible Preferred Stock is convertible into Common Stock
on a one-to-one basis, subject to adjustment for stock splits, dividends and
certain other distributions of Common Stock and has voting rights equal to the
number of shares of Common Stock into which it is convertible. The Preferred
Stock has a liquidation preference of $1.940625 per share and accrues cumulative
dividends of $0.1940625 per share per annum. The aggregate liquidation
preference of the Preferred Stock at October 31, 1993 is $1,242,000, plus
cumulative dividends of $248,000. The Preferred Stock participates ratably with
the Common Stock in any additional dividends declared beyond the cumulative
dividends and in any remaining assets beyond the liquidation preference. The
Series A Convertible Preferred Stock represents 96.5% of the total voting rights
of all outstanding CooperSurgical stock.

NOTE 9. INCOME TAXES

As of October 31, 1993, CooperSurgical, Inc. had federal tax net operating
loss carryforwards of $12,611,000 expiring as follows: 2006 -- $3,260,000,
2007 -- $3,083,000, and 2008 -- $6,268,000.

The tax benefits attributable to the net operating loss carryforwards have
not been recognized in the statements of operations for each of the years in the
three year period ended October 31, 1993 due to the uncertainty of future
taxable income.

NOTE 10. SUBSEQUENT EVENT

Pursuant to a pledge agreement dated as of January 6, 1994, between the
Parent and the trustee for the holders of a new class of debt issued by the
Parent (the 'Notes'), the Parent has pledged a first priority security interest
in all of its right, title and interest in stock of CooperSurgical, all
additional shares of stock of, or other equity interests in, CooperSurgical from
time to time acquired by the Parent, all intercompany indebtedness of
CooperSurgical from time to time held by the Parent and, except as set forth in
the indenture governing the Notes, the proceeds received from the sale or
disposition of any or all of the foregoing. A full description of the pledge
agreement and terms of the indenture governing the Notes is included in the
Parent's Amended and Restated Offer to Exchange and Consent Solicitation filed
with The Securities and Exchange Commission on December 15, 1993.

On January 24, 1994, the Company's Parent converted $19,012,000 of
outstanding Parent advances into 9,796,660 shares of the Company's Series A
preferred stock and converted the remaining $3,313,000 balance of
CooperSurgical's liability to its Parent into a promissory note due January 24,
1996. As a result of this transaction, advances due to Parent have been
classified as long-term.

119

SCHEDULE IV

COOPERSURGICAL, INC.
INDEBTEDNESS OF AND TO RELATED PARTIES -- NOT CURRENT
THREE YEARS ENDED OCTOBER 31, 1993

INDEBTEDNESS OF INDEBTEDNESS TO
YEARS --------------------------------------------- -----------------------------------
ENDED BALANCE AT BALANCE BALANCE AT
OCTOBER BEGINNING AT END BEGINNING
31, NAME OF PARTY OF YEAR ADDITIONS DEDUCTIONS OF YEAR OF YEAR ADDITIONS DEDUCTIONS
- --------- ------------------------------- ---------- --------- ---------- ------- ---------- --------- ----------
(DOLLARS IN THOUSANDS)

1993 The Cooper Companies........... $ 0 $ 0 $ 0 $ 0 $ 13,163 $ 9,162 $ 0
--- --- --- ------- ---------- --------- ---
--- --- --- ------- ---------- --------- ---
1992 The Cooper Companies........... $ 0 $ 0 $ 0 $ 0 $ 7,693 $ 5,470 $ 0
--- --- --- ------- ---------- --------- ---
--- --- --- ------- ---------- --------- ---
1991 The Cooper Companies........... $ 0 $ 0 $ 0 $ 0 $ 849 $ 6,844 $ 0
--- --- --- ------- ---------- --------- ---
--- --- --- ------- ---------- --------- ---

YEARS
ENDED BALANCE
OCTOBER AT END
31, OF YEAR
- --------- -------

1993 $22,325
-------
-------
1992 $13,163
-------
-------
1991 $ 7,693
-------
-------

120

SCHEDULE VIII

COOPERSURGICAL, INC.
VALUATION AND QUALIFYING ACCOUNTS
THREE YEARS ENDED OCTOBER 31, 1993

ADDITIONS
------------------------
BALANCE AT CHARGED TO CHARGED TO BALANCE
BEGINNING COSTS AND OTHER END OF
CLASSIFICATION OF YEAR EXPENSES ACCOUNTS DEDUCTIONS YEAR
- ----------------------------------------------------- ---------- ---------- ---------- ---------- -------
(DOLLARS IN THOUSANDS)

Allowance for doubtful accounts:
Year ended October 31, 1993..................... $ 281 $ 19 $ 0 $ 6 $ 294
---------- ---------- --- --- -------
Year ended October 31, 1992..................... $ 272 $ 12 $ 0 $ 3 $ 281
---------- ---------- --- --- -------
Year ended October 31, 1991..................... $ 221 $ 51 $ 0 $ 0 $ 272
---------- ---------- --- --- -------
---------- ---------- --- --- -------

121

SCHEDULE X

COOPERSURGICAL, INC.
SUPPLEMENTARY INCOME STATEMENT INFORMATION
THREE YEARS ENDED OCTOBER 31, 1993

CHARGED TO COSTS AND
EXPENSES
--------------------------
ITEM 1993 1992 1991
- ------------------------------------------------------------------------------------- ------ ------ ------
(DOLLARS IN THOUSANDS)

Maintenance and repairs.............................................................. $ * $ * $ *
Depreciation and amortization of intangible assets................................... 290 308 233
Taxes, other than payroll income taxes............................................... * * *
Royalties............................................................................ * * *
Advertising costs.................................................................... $1,959 $2,167 $1,463

- ------------

* Royalties, maintenance and repairs, and taxes other than payroll are omitted
as each item does not exceed 1% of net operating revenue as reported in the
statement of operations.

122

3. Exhibits.

EXHIBIT
NUMBER
- -------

3.1 -- Restated Certificate of Incorporation, as 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 -- Amended and Restated By-Laws, incorporated by reference to Exhibit 3.2 to the Company's Report on Form
8-A dated January 18, 1994.
4.1 -- Indenture, dated as of March 1, 1985, between the Company and Security Pacific National Bank, with
respect to the 8 5/8% Convertible Subordinated Debentures due 2005 incorporated by reference to Exhibit
28(a) to the Company's Registration Statement on Form S-3 (No. 33-11298).
4.2 -- First Supplemental Indenture, dated as of June 29, 1989, between the Company and Bankers Trust Company,
as successor trustee, with respect to the 10 5/8% Convertible Subordinated Reset Debentures due 2005,
incorporated by reference to Exhibit 4.1 to the Company's Current Report on Form 8-K dated July 13, 1989.
4.3 -- Second Supplemental Indenture, dated as of January 6, 1994, between the Company and Bankers Trust
Company, as successor trustee, with respect to the 10 5/8% Convertible Subordinated Reset Debentures due
2005, incorporated by reference to Exhibit 4.3 to the Company's Report on Form 8-A dated January 18,
1994.
4.4 -- Indenture, dated as of January 6, 1994, between the Company and IBJ Schroder Bank & Trust Company, as
trustee, with respect to the 10% Senior Subordinated Secured Notes due 2003, incorporated by reference to
Exhibit 4.8 to the Company's Report on Form 8-A dated January 18, 1994.
4.5 -- Pledge Agreement, dated January 6, 1994, by the Company in favor of IBJ Schroder Bank & Trust Company, as
Trustee, incorporated by reference to Exhibit 4.9 to the Company's Report on Form 8-A dated January 18,
1994.
4.6 -- Rights Agreement, dated as of October 29, 1987, between the Company and The First National Bank of
Boston, incorporated by reference to Exhibit 4.1 to the Company's Current Report on Form 8-K dated
October 29, 1987.
4.7 -- Amendment No. 1 to Rights Agreement, dated as of June 14, 1993, between the Company and The First
National Bank of Boston, incorporated by reference to Exhibit 10.4 to the Company's Quarterly Report on
Form 10-Q for the Fiscal Quarter ended April 30, 1993.
4.8 -- Warrant Agreement, dated as of August 15, 1988, between the Company and certain holders of its promissory
notes, incorporated by reference to Exhibit 28.5 to the Company's Current Report on Form 8-K dated August
26, 1988.
4.9 -- Certificate of Designations, Preferences, and Relative Rights, Qualifications, Limitations and
Restrictions of the Series B Preferred Stock and Series C Preferred Stock of The Cooper Companies, Inc.,
incorporated by reference to Exhibit 10.2 to the Quarterly Report on Form 10-Q for the Fiscal Quarter
ended April 30, 1993.
4.10 -- Certificate of Designation, Preferences and Rights of Series A Junior Participating Preferred Stock of
The Cooper Companies, Inc., incorporated by reference to Exhibit 4.10 of the Company's Annual Report on
Form 10-K for the fiscal year ended October 31, 1989.
10.1 -- 1988 Long Term Incentive Plan, incorporated by reference to Exhibit 10.62 to the Company's Annual Report
on Form 10-K for the fiscal year ended October 31, 1988.
10.2 -- Amendment No. 1 to 1988 Long Term Incentive Plan, incorporated by reference to the Company's Proxy
Statement dated June 15, 1990.
10.3 -- Amendment No. 2 to the 1988 Long Term Incentive Plan, incorporated by reference to the Company's Proxy
Statement dated February 27, 1991.
10.4 -- 1990 Restricted Stock Plan for Non-Employee Directors of The Cooper Companies, Inc., incorporated by
reference to the Company's Proxy Statement dated June 15, 1990.
10.5 -- Employment Agreement entered into the 28th day of August, 1991, but effective as of March 9, 1990,
between the Company and Gary A. Singer, incorporated by reference to Exhibit 10.16 to the Company's
Annual Report on Form 10-K for the Fiscal Year ended October 31, 1992.
10.6 -- Letter Agreement, dated as of July 27, 1992, between Gary A. Singer and the Company, incorporated by
reference to Exhibit 10 to the Company's Quarterly Report on Form 10-Q for the Fiscal Quarter ended July
31, 1992.

123

EXHIBIT
NUMBER
- -------

10.7 -- Employment Agreement entered into the 28th day of August, 1991, but effective as of March 9, 1990,
between the Company and Steven G. Singer, incorporated by reference to Exhibit 10.18 to the Company's
Annual Report on Form 10-K for the Fiscal Year ended October 31, 1992.
10.8 -- Letter Agreement dated June 2, 1993, between Steven G. Singer and the Company.
10.9 -- Settlement Agreement, dated as of October 21, 1988, between the Company and Cooper Development Company,
incorporated by reference to Exhibit 10.51 to the Company's Annual Report on Form 10-K for the fiscal
year ended October 31, 1988.
10.10 -- Settlement Agreement, dated as of October 21, 1988, between the Company and Cooper Life Sciences, Inc.,
incorporated by reference to Exhibit 10.52 to the Company's Annual Report on Form 10-K for the fiscal
year ended October 31, 1988.
10.11 -- Settlement Agreement, dated as of November 27, 1989, between the Company and Cooper Development Company
(including Exhibits), incorporated by reference to Exhibit 1 to the Company's Current Report on Form 8-K
dated December 7, 1989.
10.12 -- Settlement Agreement, dated as of November 27, 1989, between the Company and Cooper Life Sciences, Inc.
(including Exhibits), incorporated by reference to Exhibit 2 to the Company's Current Report on Form 8-K
dated December 7, 1989.
10.13 -- Exchange Agreement, dated June 12, 1992 by and between the Company and Cooper Life Sciences, Inc.,
incorporated by reference to Exhibit 28(d) to the Company's Current Report on Form 8-K dated June 12,
1992.
10.14 -- Settlement Agreement, dated June 12, 1992, by and between the Company and Cooper Life Sciences, Inc.,
incorporated by reference to Exhibit 28(e) to the Company's Current Report on Form 8-K dated June 12,
1992.
10.15 -- Registration Rights Agreement, dated June 12, 1992, by and between the Company and Cooper Life Sciences,
Inc., incorporated by reference to Exhibit 28(f) to the Company's Current Report on Form 8-K dated June
12, 1992.
10.16 -- Registration Rights Agreement, dated June 12, 1992, by and between the Company and Cooper Life Sciences,
Inc., incorporated by reference to Exhibit 28(g) to the Company's Current Report on Form 8-K dated June
12, 1992.
10.17 -- Exchange Agreement, dated June 14, 1993, between the Company and Cooper Life Sciences, Inc., incorporated
by reference to Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q for the Fiscal Quarter ended
April 30, 1993.
10.18 -- Registration Rights Agreement, dated June 14, 1993, between the Company and Cooper Life Sciences, Inc.,
incorporated by reference to Exhibit 10.3 to the Company's Quarterly Report on Form 10-Q for the Fiscal
Quarter ended April 30, 1993.
10.19 -- Settlement Agreement, dated June 14, 1993, between the Company and Cooper Life Sciences, Inc.,
incorporated by reference to Exhibit 10.5 to the Company's Quarterly Report on Form 10-Q for the Fiscal
Quarter ended April 30, 1993.
10.20 -- Omnibus Agreement, dated as of November 23, 1988, between the Company and Alcon Surgical, Inc.,
incorporated by reference to Exhibit 10.50 to the Company's Annual Report on Form 10-K for the fiscal
year ended October 31, 1988.
10.21 -- Escrow Agreement dated as of November 1988, among the Company, Alcon Surgical, Inc. and Morgan Guaranty
Trust Company of New York, incorporated by reference to Exhibit 10.43 to the Company's Annual Report on
Form 10-K for the fiscal year ended October 31, 1989.
10.22 -- Stock Purchase Agreement, dated as of April 6, 1992, by and among PSG and Nu-Med and PsychGroup (the
'Agreement'), and for the limited purposes set forth therein, Malvern, Northwestern, South Central,
Alliance, HGA and PSG Management are parties to the Agreement, incorporated by reference to Exhibit 10(a)
to the Company's Current Report on Form 8-K dated May 29, 1992.
10.23 -- Management Services Agreement, dated as of May 29, 1992, by and among PSG Management and South Central,
Malvern and Northwestern (the 'Management Agreement'), together with the Guarantee of PsychGroup and
Nu-Med attached thereto, incorporated by reference to Exhibit 10(b) on Form 8-K dated May 29, 1992. The
Schedules to the Management Agreement are not included and will be furnished upon request.
10.24 -- Indemnification Agreement, dated as of April 6, 1992, by and among PSG and Nu-Med and PsychGroup (the
'Indemnification Agreement'), and for the limited purposes set forth therein HGA and certain wholly owned
subsidiaries of PsychGroup are parties to the Indemnification Agreement, incorporated by reference to
Exhibit 10(c) to the Company's Current Report on Form 8-K dated May 29, 1992.

124

EXHIBIT
NUMBER
- -------

10.25 -- Letter Agreement, dated May 29, 1992, by and among PSG and Nu-Med and PsychGroup (the 'Letter
Agreement'), and for the limit purposes set forth therein, Malvern, Northwestern, South Central and
Alliance are parties to the Letter Agreement, incorporated by reference to Exhibit 10(d) to the Company's
Current Report on Form 10-K dated May 29, 1992.
10.26 -- Letter Agreement, dated April 6, 1992, among PSG, Romulus Holdings, Inc. and Karen Singer, incorporated
by reference to Exhibit 10(f) to the Company's Current Report on Form 10-K dated May 29, 1992.
10.27 -- Agreement dated as of September 28, 1993, among Medical Engineering Corporation, Bristol-Myers Squibb
Company and the Company, incorporated by reference to Exhibit 10.1 to the Company's Current Report on
Form 8-K dated October 1, 1993.
11.1 -- Calculation of Net Income per Common Share.
21.1 -- Subsidiaries.
23.1 -- Consent of KPMG Peat Marwick.

(b) Reports on Form 8-K.

DATE OF REPORT ITEM REPORTED
- -------------------------------------------------------- --------------------------------------------------------

October 1, 1993......................................... Item 5. Other Events
Item 7. Financial Statements and Exhibits
October 8, 1993......................................... Item 5. Other Events
Item 7. Financial Statements and Exhibits
January 7, 1994......................................... Item 5. Other Events
January 14, 1994........................................ Item 5. Other Events

125

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 26, 1994.

THE COOPER COMPANIES, INC.

By: /s/ ALLAN E. RUBENSTEIN
...
ALLAN E. RUBENSTEIN
ACTING CHAIRMAN OF THE BOARD OF
DIRECTORS

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 January 26, 1994.

SIGNATURE CAPACITY DATE
- ------------------------------------------ --------------------------------------------- ------------------

/s/ ALLAN E. RUBENSTEIN Acting Chairman of the Board and Director January 26, 1994
.........................................
ALLAN E. RUBENSTEIN
/s/ ROBERT S. WEISS Senior Vice-President, Treasurer, Chief January 26, 1994
......................................... Financial Officer and Director
ROBERT S. WEISS
/s/ STEPHEN C. WHITEFORD Vice President and Corporate Controller January 26, 1994
.........................................
STEPHEN C. WHITEFORD
/s/ JOSEPH C. FEGHALI Director January 26, 1994
.........................................
JOSEPH C. FEGHALI
/s/ MARK A. FILLER Director January 26, 1994
.........................................
MARK A. FILLER
/s/ MICHAEL H. KALKSTEIN Director January 26, 1994
.........................................
MICHAEL H. KALKSTEIN
/s/ DONALD PRESS Director January 26, 1994
.........................................
DONALD PRESS
/s/ STEVEN ROSENBERG Director January 26, 1994
.........................................
STEVEN ROSENBERG
/s/ MEL SCHNELL Director January 26, 1994
.........................................
MEL SCHNELL

126

STATEMENT OF DIFFERENCES

The registered trademark symbol shall be expressed as............... 'r'
The trademark symbol shall be expressed as.......................... 'tm'
The British Pound Sterling Symbol shall be expressed as............. 'L'


                            [Letterhead of the Cooper Companies]

                                          June 2, 1993
 
Mr. Steven G. Singer
10 Loman Court
Cresskill, NJ 07626
 
Dear Steven:
 
     This  letter will  confirm the  modifications to  your Employment Agreement
with The  Cooper  Companies, Inc.  (the  'Company')  dated March  9,  1990  (the
'Agreement') which have been agreed to in recent discussions between you and the
Compensation Committee of the Company's Board of Directors.
 
     1.  The reference to your job title in  Section 2 of the Agreement shall be
changed to 'Executive  Vice President  and Chief Operating  Officer' to  reflect
your current position, which is not being changed.
 
     2.  The reference to  your Annual Salary  in the first  sentence of Section
3(a) of the Agreement shall be changed  to 'THREE HUNDRED AND TWO THOUSAND  FIVE
HUNDRED  DOLLARS ($302,500)' to reflect your  current salary, which is not being
changed.
 
     3. Subclause (iv)  of Section  3(c) of the  Agreement shall  be amended  to
delete  therefrom the last two sentences of such sub-clause and to substitute in
lieu thereof the following sentence:
 
             'Executive hereby agrees that, notwithstanding any other provisions
        of this Employment Agreement, the  LTIP, the Restricted Stock  Agreement
        or  the restricted stock agreement entered  into between the Company and
        Executive with  respect  to  the November  Restricted  Shares,  none  of
        Executive's  Restricted Shares shall vest as a result of any termination
        of Executive's employment or any  Change in Control or Potential  Change
        in  Control, and such Restricted  Shares shall vest only  as a result of
        the Company's common stock achieving the above-indicated average closing
        price levels.'
 
     4. Subclause (A) of  the definition of 'Good  Reason' appearing in  Section
4(b)  of the  Agreement shall  be deleted and  the remaining  subclauses of such
definition shall be redesignated (A) through (D), so that 'Good Reason' shall no
longer be  defined to  include any  Change  in Control  or Potential  Change  in
Control.
 
     5. The first paragraph of Section 5(c) of the Agreement shall be amended to
read as follows:
 
             '(c)  If  the Company  shall  terminate the  Executive's employment
        other than  pursuant  to  Section  4(a)  hereof,  or  if  the  Executive
        terminates his employment pursuant to Section 4(b) hereof:'
 
     6.  Clause (i) of Section 5(c) of the Agreement shall be amended to read as
follows:
 
             '(i) The Company shall pay Executive his Annual Salary through  the
        Date  of Termination  at the rate  in effect  at the time  the Notice of
        Termination is given, together with a lump sum severance payment payable
        on the Date  of Termination in  an amount (less  all applicable tax  and
        other  withholdings) equal  to the sum  of twelve (12)  months of Annual
        Salary plus an additional  one (1) month of  Annual Salary (or  prorated
        portion  thereof) for each  month (or prorated  portion thereof) between
        March 9, 1993  and the  Date of Termination,  up to  a maximum  possible
        total  severance payment equal to eighteen (18) months of Annual Salary,
        provided, however, that the amount of severance payable pursuant to  the
        foregoing  provisions of  this Section 5(c)(i)  shall be  increased by a
        factor of fifty percent (50%) in the event that the Date of  Termination
        occurs  within  the one-year  period immediately  following a  Change in
        Control or Potential  Change in Control  of the Company,  as defined  in
        Section  12  of the  LTIP (unless  such Change  in Control  or Potential
        Change in Control results from  the acquisition of beneficial  ownership
        by  Cooper Life Sciences, Inc. ('CLS') of securities representing twenty
        percent (20%) or more of the combined voting power of the Company's then
        outstanding securities with respect to the election of Directors of  the
        Company  as  a result  of its  exchange and  surrender of  the Company's
        Senior Exchangeable Redeemable Restricted Voting Preferred Stock in  one
        or  more transac-tions  or the  conversion or  exchange of  any security
        received by CLS in any  such exchange, in which  case there shall be  no
        such  increase  in  the  amount of  severance  payable  pursuant  to the
        foregoing provisions of this Section 5(c)(i)).'
 

     In connection with  the foregoing  amendments, the Board  of Directors  has
approved,  at its  meeting on May  18, 1993, that  for the 1993  fiscal year you
shall be eligible to participate, pursuant to Section 3 of the Agreement, in the
Company's Incentive Payment Plan for such fiscal year at the 50% level.
 
     Also, in connection with the  foregoing, the Compensation Committee of  the
Board  has discussed with you the interpretation  of clause (iv) of Section 5(c)
of the Agreement. You acknowledge that you  are aware of the claims asserted  by
Bruce  D. Sturman in respect of a  similar provision contained in his Employment
Agreement with the Company dated March 9,  1990, and that you have reviewed  the
memorandum  of Jed  W. Brickner  of Latham  & Watkins  dated July  17, 1992. You
hereby disavow  and  waive any  right  to  assert that  the  retirement  benefit
described  in said  clause (iv)  should be  valued in  any manner  other than as
described in said memorandum.
 
     In consideration  of  your  services  to the  Company  and  the  agreements
contained  herein, simultaneous with  the execution and  delivery of this letter
agreement, the Company will pay  you a one-time special  bonus in the amount  of
ONE  HUNDRED  THOUSAND DOLLARS  ($100,000), less  all  applicable tax  and other
withholdings.
 
     This will  also confirm  that, in  consideration of  your services  to  the
Company  and the agreements  contained herein, the  Company's Board of Directors
approved on May 18, 1993 the following two additional benefits:
 
             1. All compensation, benefits and  other perquisites which you  are
        entitled  to  receive from  the Company  pursuant  to the  Agreement, as
        amended and supplemented by  this letter agreement,  or pursuant to  the
        applicable  provisions of the Company's  charter documents, Delaware law
        or the Company's benefit plans, shall be guaranteed by the principal sub
        sidiaries of the Company  in consideration of  the services provided  by
        you  to those subsidiaries, pursuant to the resolutions and the separate
        Guaranties in the form of  the Subsidiary Guaranty adopted and  approved
        on  May 18, 1993 by  the Board of Directors,  copies of which Guaranties
        are attached hereto as Schedules A-K. You hereby agree that the Guaranty
        of any one  (but not more  than one)  of such subsidiaries  may, at  the
        election  of the  Company, be released,  withdrawn, cancelled  and of no
        further effect in the event that such subsidiary is sold by the Company,
        provided, however, that  (i) even if  more than one  such subsidiary  is
        sold,  only one subsidiary may be released from its Guaranty as provided
        above, and (ii) in no event shall the Guaranty of CooperVision, Inc.,  a
        New  York corporation, ever be released, withdrawn or cancelled, whether
        or not such subsidiary is ever sold by the Company.
 
             2. You  will participate  in the  Turn-Around Incentive  Plan  (the
        'TIP')  as  adopted  and  approved  on May  18,  1993  by  the  Board of
        Directors, with a total maximum  possible award of SIX HUNDRED  THOUSAND
        DOLLARS  ($600,000) in  cash and  shares of  restricted stock; provided,
        however, that, notwithstanding any provision to the contrary in the  TIP
        or  the LTIP, if your employment is terminated by the Company other than
        for Cause or by you  for Good Reason (as such  terms are defined in  the
        Agreement  as  amended by  this  letter agreement),  after  a resolution
        approved by the Board of Directors has been reached with respect to  the
        Company's breast implant liabilities but before the average price of the
        Company's  common stock  reaches both of  the $1.50 and  $3.00 per share
        price  targets  specified  in  the  TIP,  then  for  purposes  of   your
        entitlement  to  receive cash  and stock  benefits  under the  TIP, your
        employment shall be deemed to have terminated one year subsequent to the
        actual termination date so that, in the event that either or both of the
        stock price targets are  achieved during said  one-year period, you  may
        receive  the TIP benefits  resulting from the  achievement of such stock
        price target(s) as  if the same  had been achieved  prior to the  actual
        termination of your employment.
 
     Except  as expressly  amended above, the  Agreement is  hereby ratified and
confirmed in all respects.
 
     If the foregoing is acceptable to  you, please sign where indicated  below,
whereupon  this letter  agreement shall become  a binding  agreement between the
Company and you.
 
                                          THE COOPER COMPANIES, INC.
 
                                          By: Allan E. Rubenstein
                                              ..................................
                                              Allan E. Rubenstein
                                              Acting Chairman of the Board
 

                                          By:  Michael H. Kalkstein
                                               .................................
                                               Michael H. Kalkstein
                                               Chairman, Compensation Committee
 
                                          By:  Robert S. Holcombe
                                               .................................
                                               Robert S. Holcombe
                                               Senior Vice President and
                                               General Counsel
 
AGREED AND ACCEPTED as of
the 2nd day of June, 1993

Steven G. Singer
.................................
Steven G. Singer


                                                                    EXHIBIT 11.1
 
                  THE COOPER COMPANIES, INC. AND SUBSIDIARIES
                   CALCULATION OF NET INCOME PER COMMON SHARE
 


                                                                                   YEARS ENDED OCTOBER 31,
                                                                              ----------------------------------
                                                                                1993         1992         1991
                                                                              --------     --------     --------
                                                                               (IN THOUSANDS, EXCEPT PER SHARE
                                                                                           FIGURES)
                                                                                          (AUDITED)
                                                                                               
Primary:
     Loss from continuing operations before extraordinary items(1).........   $(34,392)    $(17,962)    $(27,128)
                                                                              --------     --------     --------
     Discontinued operations:
          Income (loss) from operations....................................      --           --           --
          Loss on sale of operations.......................................    (13,657)      (9,300)       --
                                                                              --------     --------     --------
                                                                               (13,657)      (9,300)       --
                                                                              --------     --------     --------
     Loss before extraordinary items.......................................    (48,049)     (27,262)     (27,128)
     Extraordinary items...................................................        924          640        5,428
                                                                              --------     --------     --------
     Net income (loss).....................................................   $(47,125)    $(26,622)    $(21,700)
                                                                              --------     --------     --------
                                                                              --------     --------     --------
     Weighted average number of common shares outstanding..................     30,377       27,669       25,878
                                                                              --------     --------     --------
                                                                              --------     --------     --------
     Primary net income (loss) per common share:
          Continuing operations............................................   $  (1.13)    $   (.64)    $  (1.05)
                                                                              --------     --------     --------
          Discontinued operations:
               Income (loss) from operations...............................      --           --           --
               Gain (loss) on sale of operations...........................       (.45)        (.34)       --
                                                                              --------     --------     --------
                                                                                  (.45)        (.34)       --
                                                                              --------     --------     --------
          Income (loss) before extraordinary items.........................      (1.58)        (.98)       (1.05)
          Extraordinary items..............................................        .03          .02          .21
                                                                              --------     --------     --------
     Net income (loss) per common share....................................   $  (1.55)    $   (.96)    $   (.84)
                                                                              --------     --------     --------
                                                                              --------     --------     --------
Fully diluted:
     Loss from continuing operations before extraordinary items(l).........   $(34,392)    $(17,962)    $(27,182)
                                                                              --------     --------     --------
     Discontinued operations:
          Income (loss) from operations....................................      --           --           --
          Loss on sale of operations.......................................    (13,657)      (9,300)       --
                                                                              --------     --------     --------
                                                                               (13,657)      (9,300)       --
                                                                              --------     --------     --------
     Income (loss) before extraordinary items..............................    (48,049)     (27,262)     (27,128)
     Extraordinary items on a fully diluted basis..........................        924          640        5,428
                                                                              --------     --------     --------
     Net income (loss) on a fully diluted basis............................   $(47,125)    $(26,622)    $(21,700)
                                                                              --------     --------     --------
                                                                              --------     --------     --------
     Weighted average number of common share outstanding...................     30,377       27,669       25,878
                                                                              --------     --------     --------
                                                                              --------     --------     --------
     Total common shares assuming full dilution............................     30,377       27,669       25,878
                                                                              --------     --------     --------
                                                                              --------     --------     --------
     Fully diluted net income (loss) per common share:
          Continuing operations............................................   $  (1.13)    $   (.64)    $  (1.05)
                                                                              --------     --------     --------
          Discontinued operations:
               Income (loss) from operations...............................      --           --           --
               Gain (loss) on sale of operations...........................       (.45)        (.34)       --
                                                                              --------     --------     --------
                                                                                  (.45)        (.34)       --
                                                                              --------     --------     --------
     Income (loss) before extraordinary items..............................      (1.58)        (.98)       (1.05)
Extraordinary items........................................................        .03          .02          .21
                                                                              --------     --------     --------
     Net income (loss) per common share on a fully diluted basis...........   $  (1.55)    $   (.96)    $   (.84)
                                                                              --------     --------     --------
                                                                              --------     --------     --------

 
- ------------
 
(1) After  dividend  requirements on  Senior Exchangeable  Redeemable Restricted
    Voting Preferred Stock of $320 in 1993, $1,804 in 1992 and $2,325 in 1991.

SIGNIFICANT SUBSIDIARIES OF
THE COOPER COMPANIES, INC.
A DELAWARE CORPORATION

JURISDICTION OF
NAME INCORPORATION
- --------------------------------------------------------------------------- ---------------

CooperSurgical, Inc........................................................ Delaware
PCI GmbH................................................................... Germany
CooperVision, Inc.......................................................... New York
CoastVision, Inc........................................................... California
CooperVision Pharmaceuticals, Inc.......................................... Delaware
CooperVision Inc........................................................... Canada
CooperVision Contact Lens Insurance Agency, Inc............................ New York
Optics Cayman Islands Insurance Ltd........................................ Cayman Islands
Hospital Group of America, Inc............................................. Delaware
Hospital Group of Delaware, Inc............................................ Delaware
Hospital Group of Illinois, Inc............................................ Illinois
Hospital Group of New Jersey, Inc.......................................... New Jersey
Hampton Learning Center, Inc............................................... New Jersey
PSG Management, Inc........................................................ Delaware






                              ACCOUNTANTS' CONSENT
 
To the Stockholders and Board of Directors of
THE COOPER COMPANIES, INC.
 
     We consent to incorporation by reference in the Registration Statement Nos.
33-50016  and 33-11298  on Form  S-3 and  Registration Statement  Nos. 33-27938,
33-36325 and 33-36326 on Form S-8 of  The Cooper Companies, Inc. of our  reports
dated  January  24, 1994,  relating to  the consolidated  balance sheets  of The
Cooper Companies,  Inc.  as  of  October  31, 1993  and  1992  and  the  related
consolidated  statements of operations, stockholders'  equity and cash flows and
related schedules for each of the  years in the three-year period ended  October
31,  1993, the balance sheets of CooperSurgical, Inc. as of October 31, 1993 and
1992 and the statements of operations, stockholders' deficit and cash flows  and
related  schedules for each of the years  in the three-year period ended October
31, 1993, and the consolidated balance sheets of Hospital Group of America, Inc.
as of October 31, 1993, 1992, May  29, 1992 and April  30, 1991 and the  related
consolidated  statements of operations, stockholder's  equity and cash flows and
related schedules for the year  ended October 31, 1993, for the period from  May
30,  1992 to October 31, 1992, for the period from June 1, 1991 to May 29, 1992,
for the period from May 1, 1991 to May 31, 1991 and for the year ended April 30,
1991, which reports appear in the October 31, 1993 Annual Report on Form 10-K of
The Cooper Companies,  Inc. We also  consent to  the reference to  us under  the
heading 'Experts' in such registration statements.
 
     Our  reports  dated  January  24,  1994,  on  the  aforementioned financial
statements contain explanatory paragraphs  that express substantial doubt  about
the  ability  of  The Cooper Companies, Inc., CooperSurgical, Inc.  and Hospital
Group  of America, Inc. to continue  as going concerns. The financial statements
and financial  statement schedules  do not  include any  adjustments that  might
result from the outcome of these uncertainties.

                                                KPMG PEAT MARWICK
 
  
San Francisco, California
January 27, 1994