Amendment No. 2 to Form S-4 for Advanced Medical Optics, Inc.
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As filed with the Securities and Exchange Commission on January 25, 2005

Registration No. 333-121009

 


UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 


 

Amendment No. 2 to

FORM S-4

REGISTRATION STATEMENT

UNDER

THE SECURITIES ACT OF 1933

 


 

ADVANCED MEDICAL OPTICS, INC.

(Exact name of registrant as specified in its charter)

 

Delaware   3841   33-0986820

(State or other jurisdiction of

incorporation or organization)

 

(Primary Standard Industrial

Classification Code Number)

 

(I.R.S. Employer

Identification No.)

 


 

1700 E. St. Andrew Place

Santa Ana, California 92705

(714) 247-8200

(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)

 


 

Aimee S. Weisner, Esq.

Corporate Vice President, General Counsel and Secretary

1700 E. St. Andrew Place

Santa Ana, California 92705

(714) 247-8200

(Name, address, including zip code, and telephone number, including area code, of agent for service)

 


 

Copies to:

 

Brian J. McCarthy, Esq.

Skadden, Arps, Slate, Meagher

& Flom LLP

300 South Grand Avenue

Los Angeles, California 90071

(213) 687-5000

 

John F. Runkel, Jr., Esq.

Senior Vice President of Business

Development & General Counsel

VISX, Incorporated

3400 Central Expressway

Santa Clara, California 95051

(408) 773-2020

 

John V. Roos, Esq.

Page Mailliard, Esq.

Michael S. Ringler, Esq.

Wilson Sonsini Goodrich & Rosati,

Professional Corporation

650 Page Mill Road

Palo Alto, California 94304-1050

(650) 493-9300

Approximate date of commencement of proposed sale to the public: As soon as practicable after the effectiveness of this registration statement and the satisfaction or waiver of all other conditions under the merger agreement described herein.

 

If the securities being registered on this form are to be offered in connection with the formation of a holding company and there is compliance with General Instruction G, check the following box.  ¨

 

If this form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  ¨

 

If this form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  ¨

 


 

The Registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment that specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933, or until the registration statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine.

 

The information in this joint proxy statement/prospectus is not complete and may be changed. AMO may not sell these securities until the registration statement filed with the Securities and Exchange Commission, of which this document is a part, is declared effective. This joint proxy statement/prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any jurisdiction where the offer, solicitation or sale is not permitted or would be unlawful prior to registration or qualification under the securities laws of any such jurisdiction. Any representation to the contrary is a criminal offense.

Subject to completion, dated January 25, 2005



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LOGO    LOGO

 

MERGER PROPOSED—YOUR VOTE IS VERY IMPORTANT

 

The boards of directors of Advanced Medical Optics, Inc. and VISX, Incorporated have each unanimously approved the merger of VISX with a wholly owned subsidiary of AMO. If the proposed merger is completed, VISX stockholders are expected to receive 0.552 of a share of AMO common stock and $3.50 in cash for each share of VISX common stock they own at the completion of the merger. However, in certain circumstances described in this joint proxy statement/prospectus, VISX stockholders could receive a different mix of cash and AMO common stock than is currently anticipated. As a result, VISX stockholders will not know at the time of the VISX special meeting the number of shares of AMO common stock and the amount of cash they will receive in the merger. Each outstanding option to purchase VISX common stock that has an exercise price equal to or less than $26.93 will be converted at the effective time of the merger into an option to acquire AMO common stock and will become fully vested and immediately exercisable and assumed by AMO.

 

Based on the number of shares of AMO and VISX common stock outstanding on November 9, 2004, VISX stockholders are expected to hold approximately 41.5% of the fully diluted shares of AMO common stock immediately after the merger and are expected to receive an aggregate of approximately $184 million in cash. AMO stockholders will continue to own their existing shares, which will not be affected by the merger.

 

AMO common stock trades on the New York Stock Exchange under the symbol “AVO.” As of January 24, 2005, the last trading day before the date of this joint proxy statement/prospectus, the closing price for AMO common stock was $39.90.

 

AMO and VISX cannot complete the merger unless AMO stockholders approve the issuance of shares of AMO common stock in the merger and VISX stockholders approve and adopt the merger agreement and the merger contemplated by the merger agreement. The obligations of AMO and VISX to complete the merger are also subject to the satisfaction or waiver of several other conditions to the merger, including the expiration of antitrust waiting periods. More information about AMO, VISX and the merger is contained in this joint proxy statement/prospectus. We encourage you to read carefully this joint proxy statement/prospectus before voting, including the section entitled “ Risks Relating to the Merger” beginning on page 23.

 

The AMO board of directors unanimously recommends that AMO stockholders vote “FOR” the proposal to approve the issuance of shares of AMO common stock in the merger. The VISX board of directors unanimously recommends that VISX stockholders vote “FOR” the proposal to approve and adopt the merger agreement and the merger contemplated by the merger agreement.

 

The proposals are being presented to the respective stockholders of each company at their special meetings. The dates, times and places of the meetings are as follows:

 

For AMO stockholders:

    

For VISX stockholders:

                    ,         ,         a.m., local time

    

                    ,         ,              a.m., local time at

Advanced Medical Optics, Inc.

1700 East St. Andrew Place

Santa Ana, California 92705

    

VISX, Incorporated

3400 Central Expressway

Santa Clara, California 95051

 

Your vote is very important. Whether or not you plan to attend your respective company’s special meeting, please take the time to vote by completing and mailing to us the enclosed proxy card or, if the option is available to you, by granting your proxy electronically over the Internet or by telephone. If your shares are held in “street name,” you must instruct your broker in order to vote.

 

Sincerely,

    

James V. Mazzo

  

Elizabeth H. Dávila

President and Chief Executive Officer

  

Chairman and Chief Executive Officer

Advanced Medical Optics, Inc.

  

VISX, Incorporated

 

None of the Securities and Exchange Commission, any state securities regulator or any regulatory authority has approved or disapproved of these transactions or the securities to be issued under this joint proxy statement/prospectus or determined if the disclosure in this joint proxy statement/prospectus is accurate or adequate. Any representation to the contrary is a criminal offense.

 

This joint proxy statement/prospectus is dated                     ,             , and is being mailed to stockholders of AMO and VISX on or about                     ,             .


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ADDITIONAL INFORMATION

 

This joint proxy statement/prospectus incorporates by reference important business and financial information about AMO and VISX from documents that are not included in or delivered with this joint proxy statement/prospectus. For a more detailed description of the information incorporated by reference into this joint proxy statement/prospectus and how you may obtain it, see “Additional Information—Where You Can Find More Information” beginning on page 141.

 

You can obtain any of the documents incorporated by reference into this joint proxy statement/prospectus from AMO or VISX, as applicable, or from the Securities and Exchange Commission, which is referred to as the SEC, through the SEC’s website at www.sec.gov. Documents incorporated by reference are available from AMO and VISX without charge, excluding any exhibits to those documents, unless the exhibit is specifically incorporated by reference as an exhibit in this joint proxy statement/prospectus. AMO stockholders and VISX stockholders may request a copy of such documents by contacting the applicable department at:

 

Advanced Medical Optics, Inc.

 

VISX, Incorporated

1700 East St. Andrew Place

 

3400 Central Expressway

Santa Ana, California 92705

 

Santa Clara, California 95051

Attn: Investor Relations

 

Attn: Investor Relations

 

In addition, you may obtain copies of the information relating to AMO, without charge, by sending an e-mail to investors@AMO-inc.com or by calling (714) 247-8348.

 

You may obtain copies of the information relating to VISX, without charge, by sending an e-mail to ir@VISX.com or by calling (408) 773-7600.

 

We are not incorporating the contents of the websites of the SEC, AMO, VISX or any other person into this document. We are only providing the information about how you can obtain certain documents that are incorporated by reference into this joint proxy statement/prospectus at these websites for your convenience.

 

In order for you to receive timely delivery of the documents in advance of the AMO and VISX special meetings, AMO or VISX, as applicable, should receive your request no later than                     ,             .


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ADVANCED MEDICAL OPTICS, INC.

1700 East St. Andrew Place

Santa Ana, California 92705

 

NOTICE OF SPECIAL MEETING OF STOCKHOLDERS

 

TO BE HELD ON                     , 2005

 


 

To the Stockholders of Advanced Medical Optics, Inc.:

 

We will hold a special meeting of stockholders of AMO at AMO’s principal executive offices located at 1700 East St. Andrew Place, Santa Ana, California 92705, on             , 2005, at              a.m. local time, for the following purposes:

 

1. To consider and vote upon a proposal to approve the issuance of shares of AMO common stock in the merger, pursuant to the Agreement and Plan of Merger, dated as of November 9, 2004, by and among Advanced Medical Optics, Inc., Vault Merger Corporation, a wholly owned subsidiary of AMO, and VISX, Incorporated, as amended.

 

2. To consider and vote upon a proposal to approve an amendment to the AMO certificate of incorporation to increase the number of authorized shares of AMO common stock from 120,000,000 to 240,000,000.

 

3. To consider and vote upon a proposal to approve the AMO 2005 Incentive Compensation Plan.

 

4. To consider and vote upon a proposal to approve the Amended and Restated AMO 2002 Employee Stock Purchase Plan.

 

5. To consider and vote upon a proposal to approve the Amended and Restated AMO 2002 International Stock Purchase Plan.

 

AMO stockholders will also be asked to consider and vote upon any other business as may properly come before the special meeting or any adjournments or postponements of the special meeting.

 

These items of business are described in this joint proxy statement/prospectus. Only AMO stockholders of record at the close of business on Wednesday, January 26, 2005, the record date for the special meeting, are entitled to notice of and to vote at the special meeting and any adjournments or postponements of the special meeting. A list of stockholders eligible to vote at the AMO special meeting will be available for inspection at the special meeting and at the executive offices of AMO during regular business hours for a period of no less than ten days prior to the special meeting.

 

The AMO board of directors unanimously recommends that you vote “FOR” the proposal to approve the issuance of shares of AMO common stock in the merger, “FOR” the proposal to amend the AMO certificate of incorporation to increase the number of authorized shares of AMO common stock, “FOR” the proposal to approve the AMO 2005 Incentive Compensation Plan, “FOR” the proposal to approve the Amended and Restated AMO 2002 Employee Stock Purchase Plan and “FOR” the proposal to approve the Amended and Restated AMO 2002 International Stock Purchase Plan.

 

Your vote is very important. If you are the record holder of your shares, whether or not you plan to attend the special meeting, please complete, date and sign the enclosed proxy card as soon as possible and return it in the postage-prepaid envelope provided, or use our 24-hour a day telephone or Internet voting options to submit a proxy. If you hold your shares through a broker or nominee (i.e., in street name), whether or not you plan to attend the special meeting, please complete, sign and return the voting instruction form provided to you by the record holder of your shares. In addition, you should check the voting instruction form provided to you by the record holder of your shares to determine whether you will be able to submit voting instructions by telephone or the Internet. Submitting a proxy over the Internet, by telephone or by mailing the enclosed proxy card will ensure your shares are represented at the special meeting, but will not prevent you from attending and voting in person at the special meeting. However, if you do not submit a proxy or voting instructions now, or if you do not vote in person at the special meeting, the effect may be the same as a vote against the proposals being submitted to AMO stockholders at the special meeting or may have a negative effect on AMO’s ability to obtain the necessary quorum or the number of votes necessary to be cast on a particular proposal. For more detailed instructions on how to vote your shares, please refer to the section of this joint proxy statement/prospectus entitled “The AMO Special Meeting” beginning on page 29.

 

By Order of the Board of Directors,

 

AIMEE S. WEISNER

Corporate Vice President,

General Counsel and Secretary

Advanced Medical Optics, Inc.

 

                    ,        


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VISX, INCORPORATED

3400 Central Expressway

Santa Clara, California 95051

 

NOTICE OF SPECIAL MEETING OF STOCKHOLDERS

 

TO BE HELD ON                     , 2005

 


 

To the Stockholders of VISX, Incorporated:

 

We will hold a special meeting of stockholders of VISX at VISX’s principal executive offices located at 3400 Central Expressway, Santa Clara, California 95051, on             , 2005 at          a.m. local time, to consider and vote upon a proposal to approve and adopt the Agreement and Plan of Merger, dated as of November 9, 2004, by and among Advanced Medical Optics, Inc., Vault Merger Corporation, a wholly owned subsidiary of AMO, and VISX, Incorporated, as amended, and the merger contemplated by the merger agreement, pursuant to which Vault Merger Corporation would merge with VISX and each outstanding share of VISX common stock is expected to be converted into the right to receive 0.552 of a share of AMO common stock and $3.50 in cash, subject to adjustment as more fully described in the attached joint proxy statement/prospectus.

 

VISX stockholders will also be asked to consider and vote upon such other business as may properly come before the special meeting, or any adjournment or postponement of the special meeting.

 

The VISX board of directors has unanimously approved the merger agreement and the merger contemplated by the merger agreement, and recommends that you vote “FOR” the proposal to approve and adopt the merger agreement and the merger contemplated by the merger agreement, as described in this joint proxy statement/prospectus.

 

Only VISX stockholders of record at the close of business on Wednesday, January 26, 2005, the record date for the special meeting, are entitled to notice of, and to vote at, the special meeting and any adjournments or postponements of the special meeting. A complete list of VISX stockholders entitled to vote at the VISX special meeting will be available for inspection at the executive offices of VISX during regular business hours for a period of no less than ten days before the special meeting. You should be prepared to present photo identification for admittance to the special meeting (including adjournments or postponements). In addition, if you are a record holder, your name is subject to verification against the list of record holders on the record date prior to being admitted to the meeting. If you are not a record holder but hold shares through a broker or nominee (i.e., in “street name”), you should be prepared to provide proof of beneficial ownership on the record date, such as your most recent account statement prior to January 26, 2005, or similar evidence of ownership. If you do not comply with the procedures outlined above, you may not be admitted to the special meeting.

 

Your vote is very important. If you are the record holder of your shares, whether or not you plan to attend the special meeting, please complete, date and sign the enclosed proxy card as soon as possible and return it in the postage-prepaid envelope provided, or use our 24-hour a day telephone or Internet voting options to submit a proxy. If you hold your shares through a broker or nominee (i.e., in “street name”), whether or not you plan to attend the special meeting, please complete, sign and return the voting instruction form provided to you by the record holder of your shares. In addition, you should check the voting instruction form provided to you by the record holder of your shares to determine whether you will be able to submit voting instructions by telephone or the Internet. Submitting a proxy over the Internet, by telephone or by mailing the enclosed proxy card will ensure your shares are represented at the special meeting, but will not prevent you from attending and voting in person at the special meeting. However, if you do not submit a proxy or voting instructions now, or if you do not vote in person at the special meeting, the effect will be the same as a vote against the proposal to approve and adopt the merger agreement and the merger contemplated by the merger agreement. For more detailed instructions on how to vote your shares, please refer to the section of this joint proxy statement/prospectus entitled “The VISX Special Meeting” beginning on page 49.

 

By Order of the Board of Directors,

 

JOHN F. RUNKEL, JR.

Senior Vice President of Business Development, General Counsel and Secretary

VISX, Incorporated

 

                    ,         


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TABLE OF CONTENTS

 

     Page

QUESTIONS AND ANSWERS ABOUT THE MERGER

   1

SUMMARY

   8

The Companies

   8

The Merger

   9

AMO Board of Directors after the Merger

   10

Ownership of AMO after the Merger

   10

Opinions of Financial Advisors

   10

Share Ownership of Directors and Executive Officers

   11

Interests of Directors and Executive Officers of VISX in the Merger

   11

Listing of AMO Common Stock and Delisting and Deregistration of VISX Common Stock

   13

Conditions to Completion of the Merger

   14

Financing

   14

Regulatory Matters

   14

Agreement to Complete the Merger

   15

No Solicitation

   15

Termination of the Merger Agreement

   15

Break-up Fees

   15

Material United States Federal Income Tax Consequences of the Merger

   16

Accounting Treatment

   16

Risks Relating to the Merger

   16

Legal Proceedings Regarding the Merger

   16

Material Differences in Rights of AMO Stockholders and VISX Stockholders

   17

Summary Selected Historical Financial Data

   17

Selected Unaudited Pro Forma Condensed Combined Financial Data

   20

Comparative Per Share Information

   21

Comparative Per Share Market Price Data

   21

RISKS RELATING TO THE MERGER

   23

CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS

   27

THE AMO SPECIAL MEETING

   29

General

   29

Date, Time, and Place

   29

Purpose; Other Matters

   29

Recommendation of the AMO Board of Directors

   29

Equity Compensation Plans Approved by Stockholders

   43

Record Date; Outstanding Shares; Voting Rights

   44

Admission to the Special Meeting

   44

Quorum and Vote Required

   44

Voting by AMO Directors and Executive Officers

   46

Voting; Proxies, Revocation

   46

Abstentions and Broker Non-Votes

   47

Proxy Solicitation

   48

Postponements and Adjournments

   48

Assistance

   48

THE VISX SPECIAL MEETING

   49

Date, Time and Place

   49

 

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     Page

Purpose; Other Matters

   49

Recommendation of the VISX Board of Directors

   49

Record Date; Outstanding Shares; Voting Rights

   49

Admission to the Special Meeting

   49

Quorum and Vote Required

   50

Voting by VISX Directors and Executive Officers

   50

Voting; Proxies, Revocation

   50

Abstentions and Broker Non-Votes

   51

Postponements and Adjournments

   51

Proxy Solicitation

   51

Assistance

   52

THE MERGER

   53

Background of the Merger

   53

Recommendation of the AMO Board of Directors

   61

Recommendation of the VISX Board of Directors

   63

Reasons for the Merger

   65

Opinion of AMO’s Financial Advisor

   66

Opinion of VISX’s Financial Advisor

   72

Material United States Federal Income Tax Consequences of the Merger

   80

Accounting Treatment

   82

Regulatory Matters

   82

Dissenters’ or Appraisal Rights

   83

Listing of AMO Common Stock and Delisting and Deregistration of VISX Common Stock after the Merger

   86

Restrictions on Sales of Shares of AMO Common Stock Received in the Merger

   87

Interests of Executive Officers and Directors of VISX in the Merger

   87

Non-Employee Director Stock Option Acceleration and Phantom Units

   90

Legal Proceedings Regarding the Merger

   91

THE MERGER AGREEMENT

   92

The Merger

   92

Closing and Effective Time of the Merger

   92

Treatment of Securities

   92

Fractional Shares

   93

Treatment of VISX Stock Options, Deferred Phantom Stock and ESPP

   93

Exchange Fund; Exchange of Stock Certificates

   94

Distributions with Respect to Unexchanged Shares

   95

Termination of Exchange Fund; No Liability

   95

Lost, Stolen and Destroyed Certificates

   95

Alternative Merger Consideration

   95

Representations and Warranties

   96

Conduct of Business before Completion of the Merger

   98

AMO and VISX Prohibited from Soliciting Other Offers

   100

Obligations of each of the AMO and VISX Boards of Directors with Respect to its Recommendation and Holding a Meeting of its Stockholders

   101

Regulatory Matters

   102

AMO and VISX Rights Agreements

   102

Public Announcements

   103

Indemnification and Insurance

   103

AMO Board of Directors after the Merger

   103

 

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     Page

Reasonable Best Efforts to Complete the Merger

   104

Conditions to Obligations to Complete the Merger

   105

Material Adverse Effect

   106

Termination; Break-Up Fees and Expenses

   107

FINANCING

   110

Interest Rate and Fees

   110

Certain Representations, Warranties, Covenants and Conditions

   111

UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS

   112

COMPARISON OF STOCKHOLDER RIGHTS AND CORPORATE GOVERNANCE MATTERS

   125

DESCRIPTION OF AMO CAPITAL STOCK

   139

General

   139

Common Stock

   139

Preferred Stock

   139

Anti-Takeover Provisions

   139

Transfer Agent

   139

ADDITIONAL INFORMATION

   140

Stockholder Proposals

   140

Legal Matters

   140

Experts

   140

Where You Can Find More Information

   141

Annexes


    

Annex A

  

Agreement and Plan of Merger

Annex B

  

Form of Certificate of Amendment to the Amended and Restated Certificate of Incorporation of Advanced Medical Optics, Inc.

Annex C

  

AMO 2005 Incentive Compensation Plan

Annex D

  

Amended and Restated AMO 2002 Employee Stock Purchase Plan

Annex E

  

Amended and Restated AMO 2002 International Stock Purchase Plan

Annex F

  

Section 262 of the Delaware General Corporation Law

Annex G

  

Opinion of Morgan Stanley & Co. Incorporated

Annex H

  

Opinion of Goldman, Sachs & Co.

 

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QUESTIONS AND ANSWERS ABOUT THE MERGER

 

The following are some questions that you, as a stockholder of AMO or VISX, may have regarding the merger and the other matters being considered at the respective special meetings of AMO and VISX stockholders and brief answers to those questions. AMO and VISX urge you to read carefully the remainder of this joint proxy statement/prospectus because the information in this section does not provide all the information that might be important to you with respect to the merger and the other matters being considered at their respective special meetings of stockholders. Additional important information is also contained in the annexes to and the documents incorporated by reference into this joint proxy statement/prospectus.

 

Q: Why am I receiving this joint proxy statement/prospectus?

 

A: AMO and VISX have agreed to the merger of VISX with a wholly owned subsidiary of AMO under the terms of a merger agreement that is described in this joint proxy statement/prospectus. A copy of the merger agreement is attached to this joint proxy statement/prospectus as Annex A.

 

In order to complete the merger, AMO stockholders must vote to approve the issuance of shares of AMO common stock in the merger and VISX stockholders must approve and adopt the merger agreement and the merger contemplated by the merger agreement. AMO and VISX will hold separate special meetings of their respective stockholders to obtain these approvals.

 

This joint proxy statement/prospectus contains important information about the merger, the merger agreement and the special meetings of the respective stockholders of AMO and VISX, which you should read carefully.

 

Your vote is very important. We encourage you to vote as soon as possible. The enclosed voting materials allow you to vote your shares without attending your respective company’s special meeting. For more specific information on how to vote, please see the questions and answers for each of the AMO and VISX stockholders below.

 

Q: Why are AMO and VISX proposing the merger?

 

A: AMO and VISX both believe that the merger will provide substantial strategic and financial benefits to the stockholders of both companies because the merger will allow stockholders of both companies the opportunity to participate in a larger, more diversified company. We both also believe that the combination will create a stronger and more competitive provider of ophthalmic medical devices that we believe to be well positioned to create more stockholder value than either AMO or VISX could on its own. VISX is also proposing the merger to provide its stockholders with the opportunity to receive a premium for their shares as well as the opportunity to participate in the growth and opportunities of the combined company and to realize cash for the value of a portion of their shares in the merger. The AMO and VISX boards of directors also considered various negative factors including the incremental debt associated with the merger, the costs and challenges of integrating the businesses of AMO and VISX, and the risk that the potential benefits sought in the merger might not be fully realized. To review the reasons for the merger as well as the negative factors considered by the AMO and VISX boards of directors in greater detail, see “The Merger—Recommendation of the AMO Board of Directors” beginning on page 61, “The Merger—Recommendation of the VISX Board of Directors” beginning on page 63, “The Merger—Reasons for the Merger” beginning on page 65 and “Risks Relating to the Merger” beginning on page 23.

 

Q: What will happen in the merger?

 

A: In the merger, Vault Merger Corporation, a wholly owned subsidiary of AMO, will merge with VISX, with VISX surviving as a wholly owned subsidiary of AMO.

 

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Q: What consideration will VISX stockholders receive in the merger?

 

A: VISX stockholders are expected to receive 0.552 of a share of AMO common stock and $3.50 in cash for each share of VISX common stock they own at the completion of the merger, but this mixture of AMO common stock and cash is subject to adjustment as more fully described below. In this joint proxy statement/prospectus, we refer to the stock and cash consideration to be paid to VISX stockholders by AMO as the merger consideration. Each VISX stockholder will receive cash for any fractional share of AMO common stock that the stockholder would otherwise be entitled to receive in the merger after aggregating all fractional shares to be received by the stockholder.

 

Q: Under what circumstances would the mix of cash and stock consideration to be received by VISX stockholders in the merger change?

 

A: As more fully described below, the merger is expected to qualify as a “reorganization” under the Internal Revenue Code of 1986, as amended, which we refer to as the Internal Revenue Code. If neither counsel to AMO nor counsel to VISX is able to render an opinion at the completion of the merger that the merger qualifies as a “reorganization” (based on the mix of cash and stock consideration described above in the preceding answer) within the meaning of Section 368(a) of the Internal Revenue Code, then the amount of the cash merger consideration will be reduced and the amount of the stock merger consideration will be increased, in each case to the minimum extent necessary to enable either counsel to render this opinion at the completion of the merger. See “Risks Relating to the Merger” beginning on page 23.

 

In the event of any such adjustment, the overall economic value of the merger consideration issuable and payable for each share of VISX common stock in the merger as of the closing date will still be calculated based on the trading price of AMO common stock at the closing and therefore will not change. In other words, if an adjustment is made to the mix of cash and stock consideration, the total value of the stock consideration and the cash consideration after any adjustment will still be calculated on the closing date and will be equal to the total value of the stock consideration and the cash consideration prior to the adjustment, but the specific amounts of stock and cash consideration would change. For a full description of the possible adjustment, see “The Merger Agreement—Alternative Merger Consideration” beginning on page 95. AMO and VISX will not know, however, whether any such adjustment is necessary until immediately prior to the completion of the merger. As a result, at the time of the VISX special meeting, VISX stockholders will not know the exact number of shares of AMO common stock to be issued and cash to be paid in the merger for each share of VISX common stock.

 

Q: How will AMO stockholders be affected by the merger and issuance of AMO common stock in the merger?

 

A: After the merger, AMO stockholders will continue to own their existing shares of AMO common stock. Accordingly, AMO stockholders will hold the same number of shares of AMO common stock that they held immediately prior to the merger. However, because AMO will be issuing new shares of AMO common stock to VISX stockholders in the merger, each outstanding share of AMO common stock immediately prior to the merger will represent a smaller percentage of the total number of shares of AMO common stock outstanding after the merger. Based on the number of shares of AMO and VISX common stock outstanding on November 9, 2004, we expect that AMO stockholders before the merger will hold approximately 58.5% of the fully diluted shares of AMO common stock immediately following the merger.

 

Q: When do AMO and VISX expect the merger to be completed?

 

A: AMO and VISX are working to complete the merger as quickly as practicable and currently expect that the merger would be completed in the first quarter of 2005 promptly following the approval and adoption by the VISX stockholders of the merger agreement and the merger contemplated by the merger agreement and approval by the AMO stockholders of the issuance of shares of AMO common stock in the merger.

 

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Q: What are the United States federal income tax consequences of the merger?

 

A: We expect the merger to qualify as a “reorganization” within the meaning of Section 368(a) of the Internal Revenue Code. If the merger qualifies as a “reorganization,” VISX stockholders will generally recognize gain, but not loss, equal to the lesser of:

 

    the amount of cash they receive in the merger; or

 

    the amount equal to the excess, if any, of (i) the sum of the amount of cash and the fair market value of AMO common stock they receive in the merger, over (ii) the adjusted tax basis of their VISX common stock exchanged.

 

No gain or loss will be recognized by VISX, AMO or AMO stockholders as a result of the merger.

 

Tax matters are complicated, and the tax consequences of the merger to each VISX stockholder will depend on the facts of each stockholder’s situation. VISX stockholders are urged to read carefully the discussion in the section entitled “The Merger—Material United States Federal Income Tax Consequences of the Merger” beginning on page 80 and to consult their tax advisors for a full understanding of the tax consequences of their participation in the merger.

 

Q: What are AMO stockholders voting on?

 

A: AMO stockholders are voting on a proposal to approve the issuance of shares of AMO common stock in the merger. The approval of this proposal by AMO stockholders is a condition to the effectiveness of the merger.

 

AMO stockholders are also voting on a proposal to approve an amendment to the AMO certificate of incorporation to increase the number of authorized shares of AMO common stock from 120,000,000 to 240,000,000. Approval of this proposal is not a condition to the effectiveness of the merger. However, as long as AMO stockholders approve the amendment to the AMO certificate of incorporation, even if AMO stockholders do not approve the proposal to issue shares of AMO common stock in the merger or any of the other proposals, the amendment to the AMO certificate of incorporation could be implemented. A copy of the amendment to the AMO certificate of incorporation is attached to this joint proxy statement/prospectus as Annex B.

 

In addition, AMO stockholders are voting on a proposal to approve the AMO 2005 Incentive Compensation Plan. Approval of this proposal is not a condition to the effectiveness of the merger. If AMO stockholders approve the AMO 2005 Incentive Compensation Plan but do not approve the proposal to issue shares of AMO common stock in the merger or any of the other proposals, the 2005 Incentive Compensation Plan will not be implemented. A copy of the AMO 2005 Incentive Compensation Plan is attached to this joint proxy statement/prospectus as Annex C.

 

AMO stockholders are also voting on a proposal to approve the amendment to the AMO 2002 Employee Stock Purchase Plan. Approval of this proposal is not a condition to the effectiveness of the merger. If AMO stockholders approve the Amended and Restated AMO 2002 Employee Stock Purchase Plan but do not approve the proposal to issue shares of AMO common stock in the merger, the Amended and Restated AMO 2002 Employee Stock Purchase Plan will not be implemented. A copy of the Amended and Restated AMO 2002 Employee Stock Purchase Plan is attached to this joint proxy statement/prospectus as Annex D.

 

Further, AMO stockholders are voting on a proposal to approve the amendment to the AMO 2002 International Stock Purchase Plan. Approval of this proposal is not a condition to the effectiveness of the merger. If AMO stockholders approve the Amended and Restated AMO 2002 International Stock Purchase Plan but do not approve the proposal to issue shares of AMO common stock in the merger, the Amended and Restated AMO 2002 International Stock Purchase Plan will not be implemented. A copy of the Amended and Restated AMO 2002 International Stock Purchase Plan is attached to this joint proxy statement/prospectus as Annex E.

 

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AMO stockholders are voting on each proposal separately. Except as described above, the vote of an AMO stockholder on one proposal has no bearing on any of the other proposals, or any other matter that may come before the special meeting.

 

Q: What vote of AMO stockholders is required to approve the issuance of shares of AMO common stock in the merger?

 

A: Approval of the issuance of shares of AMO common stock in the merger requires the affirmative vote of the holders of a majority of shares of AMO common stock cast on such proposal, in person or by proxy, provided that the total vote cast on the proposal represents over 50% of the outstanding shares of AMO common stock entitled to vote on the proposal.

 

Q: What vote of AMO stockholders is required to approve the amendment to the AMO certificate of incorporation to increase the number of authorized shares of AMO common stock?

 

A: The proposal to approve the amendment to the AMO certificate of incorporation to increase the number of authorized shares of AMO common stock requires the affirmative vote of the holders of a majority of the outstanding shares of AMO common stock entitled to vote at the AMO special meeting.

 

Q: What vote of AMO stockholders is required to approve the separate proposals to adopt the AMO 2005 Incentive Compensation Plan, the Amended and Restated AMO 2002 Employee Stock Purchase Plan and the Amended and Restated AMO 2002 International Stock Purchase Plan?

 

A. The separate proposals to approve the adoption of the AMO 2005 Incentive Compensation Plan and the Amended and Restated AMO 2002 Employee Stock Purchase Plan each requires the affirmative vote of the holders of a majority of shares of AMO common stock cast on such proposal, in person or by proxy, provided that the total vote cast on the proposal represents over 50% of the outstanding shares of AMO common stock entitled to vote on the proposal. The vote of AMO stockholders is not required to approve the Amended and Restated AMO 2002 International Stock Purchase Plan, but as a matter of good corporate governance, AMO is seeking the approval of the affirmative vote of the holders of a majority of shares of AMO common stock cast on this proposal, in person or by proxy, provided that the total vote cast on the proposal represents over 50% of the outstanding shares of AMO common stock entitled to vote on the proposal.

 

Q: How does the AMO board of directors recommend that AMO stockholders vote?

 

A: The AMO board of directors believes that the merger is advisable to and in the best interests of AMO and its stockholders and unanimously recommends that AMO stockholders vote “FOR” the proposal to approve the issuance of shares of AMO common stock in the merger.

 

The AMO board of directors also unanimously recommends that AMO stockholders vote “FOR” the proposal to amend the AMO certificate of incorporation to increase the number of authorized shares of AMO common stock, “FOR” the proposal to approve the AMO 2005 Incentive Compensation Plan, “FOR” the proposal to approve the Amended and Restated AMO 2002 Employee Stock Purchase Plan and “FOR” the proposal to approve the Amended and Restated AMO 2002 International Stock Purchase Plan.

 

For a more complete description of the recommendations of the AMO board of directors, see “The AMO Special Meeting—Recommendation of the AMO Board of Directors” beginning on page 29.

 

Q: What are VISX stockholders voting on?

 

A: VISX stockholders are voting on a proposal to approve and adopt the merger agreement and the merger contemplated by the merger agreement. The approval of this proposal by VISX stockholders is a condition to the effectiveness of the merger.

 

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Q: What vote of VISX stockholders is required to approve and adopt the merger agreement and the merger contemplated by the merger agreement?

 

A: The affirmative vote of the holders of a majority of the outstanding shares of VISX common stock entitled to vote at the VISX special meeting is required to approve and adopt the merger agreement and the merger contemplated by the merger agreement.

 

Q: How does the VISX board of directors recommend that VISX stockholders vote?

 

A: The VISX board of directors unanimously recommends that VISX stockholders vote “FOR” the proposal to approve and adopt the merger agreement and the merger contemplated by the merger agreement. The VISX board of directors has determined that the merger agreement and the merger contemplated by the merger agreement are advisable, and fair to and in the best interests of VISX and its stockholders. Accordingly, the VISX board of directors has approved the merger agreement and the merger contemplated by the merger agreement. For a more complete description of the recommendation of the VISX board of directors, see “The VISX Special Meeting—Recommendation of the VISX Board of Directors” beginning on page 49.

 

Q: When and where will the special meetings of stockholders be held?

 

A: The AMO special meeting will take place at 1700 East St. Andrew Place, Santa Ana, California 92705, on             , 2005, at              a.m. local time. The VISX special meeting will take place at VISX’s principal executive offices located at 3400 Central Expressway, Santa Clara, California 95051, on             , 2005, at              a.m. local time.

 

Q: Who can attend and vote at the special meetings?

 

A: All AMO stockholders of record as of the close of business on Wednesday, January 26, 2005, the AMO record date, are entitled to receive notice of and to vote at the AMO special meeting. All VISX stockholders of record as of the close of business on Wednesday, January 26, 2005, the VISX record date, are entitled to receive notice of and to vote at the VISX special meeting. You may cast one vote for each share of your respective company’s common stock that you owned on your respective company’s record date.

 

Q: What should I do now in order to vote on the proposals being considered at my company’s special meeting?

 

A: AMO stockholders of record as of the AMO record date (including participants in the AMO Company Stock Fund of the AMO 401(k) Plan), and VISX stockholders of record as of the VISX record date may vote by proxy by completing, signing, dating and returning the enclosed proxy card in the accompanying pre-addressed postage paid envelope or by submitting a proxy over the Internet or by telephone by following the instructions on the enclosed proxy card. If you hold AMO common stock or VISX common stock in “street name,” which means your shares are held of record by a broker, bank or nominee, you must complete, sign, date and return the enclosed voting instruction form to the record holder of your shares with instructions on how to vote your shares. Please refer to the voting instruction form used by your broker, bank or nominee to see if you may submit voting instructions using the Internet or telephone.

 

Additionally, you may also vote in person by attending your respective company’s special meeting. If you plan to attend your respective company’s special meeting and wish to vote in person, you will be given a ballot at the special meeting. Please note, however, that if your shares are held in “street name,” and you wish to vote at your respective company’s special meeting, you must bring a proxy from the record holder of the shares authorizing you to vote at the special meeting. Whether or not you plan to attend your company’s special meeting, you should submit your proxy card or voting instruction form as described in this joint proxy statement/prospectus.

 

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Q: What will happen if I abstain from voting or fail to vote?

 

A: An abstention occurs when a stockholder attends a meeting, either in person or by proxy, but abstains from voting.

 

An abstention or the failure of an AMO stockholder to vote will have the same effect as voting against the issuance of shares of AMO common stock in the merger, the approval of the amendment to the AMO certificate of incorporation to increase the number of authorized shares of AMO common stock, the approval of the AMO 2005 Incentive Compensation Plan, the approval of the Amended and Restated AMO 2002 Employee Stock Purchase Plan and the approval of the Amended and Restated AMO 2002 International Stock Purchase Plan. The failure of an AMO stockholder to vote or to instruct your broker to vote if your shares are held in “street name” may have a negative effect on AMO’s ability to obtain the number of votes necessary to be cast for approval of the issuance of shares of AMO common stock in the merger in accordance with the listing requirements of the New York Stock Exchange, which is referred to as the NYSE, the approval of the Amended and Restated AMO certificate of incorporation to increase the number of authorized shares of AMO common stock, the approval of the AMO 2005 Incentive Compensation Plan, the approval of the Amended and Restated AMO 2002 Employee Stock Purchase Plan and the approval of the amendment to the AMO 2002 International Stock Purchase Plan.

 

An abstention or the failure of a VISX stockholder to vote or to instruct your broker to vote if your shares are held in “street name” will have the same effect as voting against the proposal to approve and adopt the merger agreement and the merger contemplated by the merger agreement.

 

Q: Can I change my vote after I have delivered my proxy?

 

A: Yes. If you are a holder of record, you can change your vote at any time before your proxy is voted at the special meeting by:

 

    delivering a signed written notice of revocation to the Secretary of your respective company;

 

    signing and delivering a new, valid proxy bearing a later date;

 

    submitting another proxy by telephone or on the Internet (your latest telephone or Internet voting instructions will be followed); or

 

    attending the special meeting and voting in person, although your attendance alone will not revoke your proxy.

 

If your shares are held in “street name” you must contact your broker, bank or other nominee to change your vote.

 

Q: What should I do if I receive more than one set of voting materials for my company’s special meeting?

 

A: You may receive more than one set of voting materials for your company’s special meeting, including multiple copies of this joint proxy statement/prospectus and multiple proxy cards or voting instruction forms. For example, if you hold your shares in more than one brokerage account, you will receive a separate voting instruction form for each brokerage account in which you hold shares. If you are a holder of record and your shares are registered in more than one name, you will receive more than one proxy card. Please complete, sign, date and return each proxy card and voting instruction form that you receive.

 

Q: Am I entitled to appraisal rights?

 

A:

Under Delaware law, holders of VISX common stock have the right to dissent from the merger and obtain payment in cash for the fair value of their shares of common stock, as determined by the Delaware Chancery Court, rather than the merger consideration. The fair value determined by the court could be more than, less than or equal to the value of the merger consideration. To exercise appraisal rights, VISX stockholders must

 

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strictly follow the procedures prescribed by Delaware law. These procedures are summarized under the section entitled “The Merger—Dissenters’ or Appraisal Rights” beginning on page 83. In addition, the text of the applicable provisions of Delaware General Corporation Law, or the DGCL, is included as Annex F to this joint proxy statement/prospectus. Any VISX stockholder wishing to exercise appraisal rights is urged to consult with legal counsel before attempting to exercise those rights.

 

Holders of AMO common stock are not entitled to appraisal rights in connection with the issuance of AMO common stock in the merger.

 

Q: Who can help answer my questions?

 

A: If you have any questions about the merger or how to submit your proxy, or if you need additional copies of this joint proxy statement/prospectus or the enclosed proxy card or voting instructions, you should contact:

 

MacKenzie Partners, Inc.

105 Madison Avenue

New York, New York 10016

Toll-Free: (800) 322-2885

Collect: (212) 929-5500

Email: proxy@mackenziepartners.com

 

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SUMMARY

 

The following is a summary that highlights information contained in this joint proxy statement/prospectus. This summary may not contain all of the information that may be important to you. For a more complete description of the merger agreement and the merger contemplated by the merger agreement, we encourage you to read carefully this entire joint proxy statement/prospectus, including the attached annexes. In addition, we encourage you to read the information incorporated by reference into this joint proxy statement/prospectus, which includes important business and financial information about AMO and VISX that has been filed with the SEC. You may obtain the information incorporated by reference into this joint proxy statement/prospectus without charge by following the instructions in the section entitled “Additional Information—Where You Can Find More Information” beginning on page 141.

 

The Companies

 

Advanced Medical Optics, Inc.

1700 E. St. Andrew Place

Santa Ana, California 92705

(714) 247-8200

 

AMO is a global leader in the development, manufacturing and marketing of ophthalmic surgical and eye care products. AMO focuses on developing a broad suite of innovative technologies and devices to address a wide range of eye disorders. Products in the ophthalmic surgical line include foldable intraocular lenses, phacoemulsification systems, viscoelastics and related products used in cataract and refractive surgery, and microkeratomes used in LASIK procedures. Products in the contact lens care line include disinfecting solutions, daily cleaners, enzymatic cleaners and lens rewetting drops.

 

AMO owns or has the rights to such well-known ophthalmic surgical product brands as Phacoflex®, Clariflex®, Array®, Sensar®, Tecnis®, CeeOn® and Verisyse® intraocular lenses, the Sovereign® and Sovereign® Compact phacoemulsification systems with WhiteStar technology, the Healon® family of viscoelastics, the Baerveldt® glaucoma shunt and the Amadeus microkeratome. Among the well-known contact lens care product brands the company possesses are COMPLETE®, COMPLETE® Blink-N-Clean®, COMPLETE® Moisture PLUS, Consept®F, Consept® 1 Step, Oxysept® 1 Step, UltraCare®, Ultrazyme®, Total Care® and blink branded products. Amadeus is a licensed product of, and a trademark of SIS, Ltd.

 

AMO became an independent company in June 2002 following a spin-off from Allergan, Inc. AMO is based in Santa Ana, California, employs approximately 2,800 people worldwide and has operations in approximately 20 countries and markets products in approximately 60 countries.

 

VISX, Incorporated

3400 Central Expressway

Santa Clara, California 95051

(408) 773-2020

 

VISX is a leader in the design and development of proprietary technologies and systems for laser vision correction of refractive vision disorders. Laser vision correction treats refractive vision disorders by removing sub-micron layers of tissue from the surface of the cornea and reshaping the eye, thereby eliminating or reducing a patient’s reliance on eyeglasses or contact lenses. VISX products include the VISX STAR Excimer Laser System, which is a fully integrated ophthalmic medical device incorporating an excimer laser and a computer-driven workstation; the VISX WaveScan® System, which is a diagnostic device that uses laser beam technology to measure comprehensive refractive errors of the eye and derive comprehensive refractive information about a

 

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patient’s individual optical system; and VISX treatment cards, which provide the user with specific access to proprietary software and are required to operate the VISX STAR Excimer Laser System.

 

VISX sells products worldwide and generates the majority of its revenues through licensing fees charged for the performance of laser vision correction using the VISX STAR Excimer Laser System. The license fee charged for a particular procedure depends on whether the procedure is performed in the United States or internationally, and the type of procedure involved. VISX has also licensed its technology to other laser system companies and generally receives royalties for the sale of its systems or for procedures that are performed in the United States using its systems.

 

VISX is a Delaware corporation organized in 1988. VISX is headquartered in Santa Clara, California and employs approximately 350 people on a full-time basis.

 

The Merger (see page 53)

 

AMO and VISX have agreed to the acquisition of VISX by AMO under the terms of the merger agreement that is described in this joint proxy statement/prospectus. In the merger, Vault Merger Corporation, a wholly owned subsidiary of AMO, will merge with VISX, with VISX surviving as a wholly owned subsidiary of AMO. We have attached the merger agreement to this joint proxy statement/prospectus as Annex A. We encourage you to carefully read the merger agreement in its entirety because it is the legal document that governs the merger.

 

Merger Consideration

 

VISX stockholders are expected to receive 0.552 of a share of AMO common stock and $3.50 in cash for each share of VISX common stock they own at the completion of the merger, but this mixture of AMO common stock and cash is subject to adjustment as more fully described below. The merger is expected to qualify as a “reorganization” under the Internal Revenue Code. If neither counsel to AMO nor counsel to VISX is able to render an opinion at the completion of the merger that the merger qualifies as a “reorganization” within the meaning of Section 368(a) of the Internal Revenue Code, based on the negotiated mixture of cash and stock consideration, then the amount of the cash merger consideration will be reduced and the amount of the stock merger consideration will be increased, in each case to the minimum extent necessary, to enable either counsel to render this opinion at the completion of the merger. In the event of any such adjustment, the number of shares of AMO common stock and amount of cash received by a VISX stockholder may change, but the overall economic value of the merger consideration issuable and payable for each share of VISX common stock in the merger as of the closing date will still be calculated based on the trading price of AMO common stock at the closing and therefore will remain the same. See “Risks Relating to the Merger” beginning on page 23.

 

For a full description of the merger consideration and the possible adjustment to the merger consideration, see “The Merger Agreement—Treatment of Securities” beginning on page 92 and “The Merger Agreement—Alternative Merger Consideration” beginning on page 95.

 

Fractional Shares

 

AMO will not issue fractional shares of AMO common stock in the merger. As a result, each VISX stockholder will receive cash for any fractional share of AMO common stock the stockholder would otherwise be entitled to receive in the merger after aggregating all fractional shares to be received by the stockholder.

 

For a full description of the treatment of fractional shares, see “The Merger Agreement—Fractional Shares” beginning on page 93.

 

Treatment of VISX Stock Options, Deferred Phantom Stock and ESPP

 

Each outstanding option to purchase VISX common stock that has an exercise price equal to or less than $26.93 will be converted at the effective time of the merger into an option to acquire AMO common stock and

 

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will become fully vested and immediately exercisable and assumed by AMO. Each VISX stock option that has an exercise price in excess of $26.93 will become fully vested and immediately exercisable upon the receipt of notice that if the option is not exercised within 15 days (30 days for options granted under VISX’s 1995 Director Option and Stock Deferral Plan), the option will expire and be of no further force or effect. Each outstanding deferral account under VISX’s 1995 Director Option and Stock Deferral Plan with respect to phantom units of VISX common stock will be assumed and converted at the effective time of the merger into a deferral account with respect to phantom units of AMO common stock.

 

Each outstanding purchase right under the 1993 VISX Employee Stock Purchase Plan will be automatically exercised prior to the effective time of the merger and each share of VISX common stock purchased under those exercised rights will be cancelled and converted into the right to receive 0.552 of a share of AMO common stock and $3.50 in cash, subject to adjustment in the event that the mixture of AMO common stock to be issued and cash to be paid in the merger for each share of VISX common stock is adjusted as more fully described beginning on page 95.

 

For a full description of the treatment of VISX equity awards, see “The Merger Agreement—Treatment of VISX Stock Options, Deferred Phantom Stock and ESPP” beginning on page 93.

 

AMO Board of Directors after the Merger (see page 103)

 

Upon completion of the merger, the AMO board of directors will be increased by one member. The directors of AMO prior to the completion of the merger will continue to serve as the directors of AMO after the merger and the vacancy created by the increase in the size of AMO board of directors will be filled by the appointment of Elizabeth H. Dávila, Chairman and Chief Executive Officer of VISX.

 

Ownership of AMO after the Merger

 

Based on the number of shares of AMO and VISX common stock outstanding on November 9, 2004, VISX stockholders will hold approximately 41.5% of the fully diluted shares of AMO common stock immediately after the merger and will receive an aggregate of approximately $184 million in cash. In addition, the amount of AMO common stock issuable for each share of VISX common stock may be increased, and the amount of cash payable for each share of VISX common stock may be decreased. In the event of any such adjustment, VISX stockholders as a whole will hold a larger percentage of the fully diluted AMO common stock immediately after giving effect to the merger.

 

For a full description of the possible adjustment, see “The Merger—Alternative Merger Consideration” beginning on page 95.

 

Opinions of Financial Advisors (see pages 66 and 72)

 

AMO

 

On November 9, 2004, Morgan Stanley & Co. Incorporated, or Morgan Stanley, financial advisor to AMO, delivered to the AMO board of directors its oral opinion, which was subsequently confirmed by delivery of a written opinion dated November 9, 2004, that, as of that date, the merger consideration to be paid by AMO pursuant to the merger agreement was fair from a financial point of view to AMO. The full text of Morgan Stanley’s written opinion is attached to this joint proxy statement/prospectus as Annex G. We encourage you to read this opinion carefully in its entirety for a description of the procedures followed, assumptions made, matters considered and limitations on the review undertaken. Morgan Stanley’s opinion is directed to the AMO board of directors and addresses only the fairness from a financial point of view of the merger consideration to be paid by AMO pursuant to the merger agreement as of the date of the opinion. Morgan Stanley’s opinion does not

 

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constitute a recommendation to any AMO stockholder as to how such stockholder should vote with respect to the proposed transaction. Pursuant to an engagement letter between AMO and Morgan Stanley, AMO has agreed to pay Morgan Stanley a transaction fee equal to the lesser of 0.75% of the aggregate value of the transaction (which, calculated on the basis of market data as of January 21, 2005 would have been $10.2 million) or $11.5 million. Of this transaction fee, $2 million was payable upon the announcement of the transaction.

 

VISX

 

On November 9, 2004, Goldman, Sachs & Co., or Goldman Sachs, financial advisor to VISX, delivered its opinion to the VISX board of directors that, as of the date of the written fairness opinion and based upon and subject to the factors and assumptions set forth in its opinion, the consideration to be received by holders of VISX common stock pursuant to the merger agreement, taken in the aggregate, is fair from a financial point of view to the VISX stockholders.

 

The full text of the written opinion of Goldman Sachs, dated November 9, 2004, which sets forth assumptions made, procedures followed, matters considered and limitations on the review undertaken in connection with the opinion, is attached to this joint proxy statement/prospectus as Annex H. Goldman Sachs provided its opinion for the information and assistance of the VISX board of directors in connection with its consideration of the merger. The Goldman Sachs opinion is not a recommendation as to how any holder of VISX common stock should vote with respect to the merger. Pursuant to an engagement letter between VISX and Goldman Sachs, VISX has agreed to pay Goldman Sachs a transaction fee equal to the greater of $10 million or 0.75% of the aggregate consideration paid to VISX stockholders in connection with the transaction, which represents a fee of approximately $9.3 million calculated on the basis of market data as of January 21, 2005, all of which is payable upon consummation of the transaction.

 

Share Ownership of Directors and Executive Officers

 

At the close of business on the AMO record date, directors and executive officers of AMO and their affiliates beneficially owned and were entitled to vote approximately              shares of AMO common stock, collectively representing approximately     % of the shares of AMO common stock outstanding on that date.

 

At the close of business on the VISX record date, directors and executive officers of VISX and their affiliates beneficially owned and were entitled to vote approximately              shares of VISX common stock, collectively representing     % of the shares of VISX common stock outstanding on that date.

 

Interests of Directors and Executive Officers of VISX in the Merger (see page 87)

 

In considering the recommendation of the VISX board of directors with respect to the merger agreement and the merger contemplated by the merger agreement, you should be aware that members of the VISX board of directors and VISX executive officers have interests in the merger contemplated by the merger agreement that may be different than, or in addition to, the interests of VISX stockholders, generally. These interests include:

 

    the continued indemnification of, and provision of directors’ and officers’ insurance coverage to, current directors and officers of VISX following the merger;

 

    the appointment of Elizabeth H. Dávila, currently the Chairman and Chief Executive Officer of VISX, to the AMO board of directors upon completion of the merger;

 

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    the potential receipt of severance payments, payable to the following executive officers in the following respective amounts if he or she were to be terminated without cause or were to resign pursuant to an involuntary termination at any time within the 24-month period following the completion of the merger:

 

Name and Title


   Total Severance
Payment


Elizabeth H. Dávila

Chairman of the Board and Chief Executive Officer

   $ 2,662,878.06

Douglas H. Post

President and Chief Operation Officer

   $ 2,874,855.15

John F. Runkel, Jr.

Senior Vice President of Business Development and General Counsel

   $ 2,092,245.39

Derek A. Bertocci

Senior Vice President and Chief Financial Officer

   $ 1,911,805.45

Carol F. H. Harner

Senior Vice President, Research and Development

   $ 1,266,107.66

Donald L. Fagen

Vice President, Global Sales

   $ 1,011,263.83

Alan F. Russell

Vice President of Regulatory & Clinical Affairs

   $ 1,575,251.77

Joaquin V. Wolff

Vice President, Global Marketing

   $ 990,867.12

Catherine E. Murphy

Vice President, Human Resources

   $ 1,476,537.52

Theresa A. Johnson

Vice President, Operations

   $ 1,507,972.92

 

and

 

    the accelerated vesting of officers’ and directors’ outstanding stock options and phantom units of VISX common stock, as a result of which the following directors and executive officers will hold fully vested options and phantom units as set forth below, assuming the value of the merger consideration paid in the merger in respect of each share of VISX common stock is $26.52:

 

Non-Employee Directors


   Aggregate
Shares
Subject to
Outstanding
Options*


   Aggregate
Shares
Subject to
Unvested
Options


   Weighted
Average
Exercise
Price of
All
Options


   Value of All
Options**


   Phantom
Units


   Unvested
Phantom
Units


Laureen De Buono

   50,000    27,188    $ 12.25    $ 713,600.00    1,537    328

Glendon E. French

   54,000    3,000    $ 23.51    $ 423,777.50    880    —  

John W. Galiardo

   104,612    3,986    $ 16.89    $ 1,269,116.36    —      —  

Jay T. Holmes

   123,000    3,000    $ 26.35    $ 1,067,815.00    3,074    656

Gary S. Petersmeyer

   39,043    13,125    $ 16.67    $ 384,481.47    1,537    328

Richard B. Sayford

   60,000    3,000    $ 21.73    $ 548,585.00    880    —  

* Each aggregate share amount includes an option grant exercisable for 10,000 shares (11,972 solely in the case of Mr. Galiardo). These grants were made on May 13, 2004 in connection with the planned annual increase for members of the VISX board of directors.
**

Illustrates the economic value of all options held by each non-employee director assuming the acceleration of all such options in the merger and the exercise of all options with exercise prices below $26.52, or in-the-money options, immediately upon completion of the merger. Calculated for each non-employee director by multiplying the shares subject to in-the-money options

 

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by the difference between the value of the merger consideration as of November 9, 2004 ($26.52) and the exercise price of such in-the-money options.

 

Executive Officers and Employee Director


   Aggregate
Shares
Subject to
Outstanding
Options


    Aggregate
Shares
Subject to
Unvested
Options


   Weighted
Average
Exercise
Price of
All
Options


   Value of All
Options*


Elizabeth H. Dávila

Chairman of the Board and Chief Executive Officer

   1,900,108     466,668    $ 17.26    $ 18,318,889.07

Douglas H. Post

President and Chief Operating Officer

   471,959     232,713    $ 18.97    $ 3,723,547.93

John F. Runkel, Jr.

Senior Vice President of Business Development and General Counsel

   128,000 **   108,126    $ 16.41    $ 1,294,692.27

Derek A. Bertocci

Senior Vice President and Chief Financial Officer

   335,821     103,128    $ 17.90    $ 2,895,083.50

Carol F.H. Harner

Senior Vice President, Research and Development

   205,681     84,752    $ 21.01    $ 1,317,430.52

Donald L. Fagen

Vice President, Global Sales

   104,500     68,751    $ 15.09    $ 1,194,677.50

Alan F. Russell

Vice President of Regulatory & Clinical Affairs

   142,500     71,877    $ 16.67    $ 1,403,988.75

Joaquin V. Wolff

Vice President, Global Marketing

   98,440     44,898    $ 16.16    $ 1,060,263.31

Catherine E. Murphy

Vice President, Human Resources

   103,000     71,251    $ 14.43    $ 1,245,076.25

Theresa A. Johnson

Vice President, Operations

   132,000     62,459    $ 21.83    $ 971,885.84

* Illustrates the economic value of all options held by each executive officer assuming the acceleration of all such options in the merger and the exercise of all options with exercise prices below $26.52, or in-the-money options, immediately upon completion of the merger. Calculated for each executive officer by multiplying the shares subject to in-the-money options by the difference between the value of the merger consideration as of November 9, 2004 ($26.52) and the exercise price of such in-the-money options.
** Includes options exercisable for 35,000 shares issued to Mr. Runkel on August 19, 2004 in connection with his promotion to senior vice president of business development.

 

The VISX board of directors was aware of these interests and considered them, among other matters, in making its recommendation.

 

Listing of AMO Common Stock and Delisting and Deregistration of VISX Common Stock (see page 86)

 

Application will be made to have the shares of AMO common stock issued in the merger approved for listing on the NYSE. If the merger is completed, VISX common stock will no longer be listed on the NYSE and will be deregistered under the Securities Exchange Act of 1934, as amended, which is referred to as the Exchange Act, and VISX will no longer file periodic reports with the SEC.

 

Merely voting against the merger will not preserve the right of VISX stockholders to appraisal under the DGCL. Also, because a submitted proxy not marked “against” or “abstain” will be voted “FOR” the proposal to approve and adopt the merger agreement and the merger contemplated by the merger agreement, the submission of a proxy not marked “against” or “abstain” will result in the waiver of appraisal rights. VISX stockholders who hold shares in the name of a broker or other nominee must instruct their nominee to take the steps necessary to enable them to demand appraisal of their shares.

 

Annex F to this joint proxy statement/prospectus contains the full text of Section 262 of the DGCL, which relates to the rights of appraisal. We encourage you to read these provisions carefully and in their entirety.

 

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Table of Contents

Conditions to Completion of the Merger (see page 103)

 

A number of conditions must be satisfied before the merger will be completed. These include among others:

 

    the receipt of the approval of the issuance of shares of AMO common stock in the merger by AMO stockholders, and the approval and adoption of the merger agreement and the merger contemplated by the merger agreement by VISX stockholders;

 

    the expiration or termination of the waiting period, or any extension of the waiting period, under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, which is referred to as the HSR Act, and receipt of all clearances, consents and approvals necessary for completion of the merger under United States and foreign antitrust laws;

 

    the absence of any legal restraints or prohibitions preventing the completion of the merger;

 

    the authorization for listing on the NYSE of the shares of AMO common stock to be issued in the merger;

 

    the delivery of tax opinions of legal counsel to the effect that the merger will qualify as a “reorganization” within the meaning of Section 368(a) of the Internal Revenue Code;

 

    the representations and warranties of each party contained in the merger agreement being true and correct, except to the extent that breaches of these representations and warranties would not result in a material adverse effect on the representing party;

 

    the performance or compliance in all material respects of each party with all agreements and covenants contained in the merger agreement at the completion of the merger; and

 

    the absence of events or developments since the date of the merger agreement that would reasonably be expected to have a material adverse effect with respect to either party.

 

Each of AMO, Vault Merger Corporation and VISX may waive the conditions to the performance of its respective obligations under the merger agreement and complete the merger even though one or more of these conditions has not been met. If either AMO or VISX were to waive the condition that the parties receive legal opinions that the transaction will qualify as a “reorganization” within the meaning of Section 368(a) of the Internal Revenue Code, both companies would re-solicit stockholder approval of the merger prior to completing the merger. Neither AMO nor VISX can give any assurance that all of the conditions to the merger will be either satisfied or waived or that the merger will occur.

 

Financing (see page 110)

 

AMO has obtained commitments from Morgan Stanley Senior Funding, Inc. and Bank of America, N.A. to provide financing in connection with the merger under AMO’s existing senior secured credit facilities for revolving credit loans and/or term loans in an aggregate amount of $200 million, or a new senior secured credit facility in an aggregate amount of $500 million. Borrowings under the facilities are subject to the execution of definitive agreements and are expected to be collateralized by substantially all the assets of AMO and its domestic subsidiaries.

 

Regulatory Matters (see page 82)

 

The merger is subject to antitrust laws. AMO and VISX have made all required filings under applicable antitrust laws with the Antitrust Division of the United States Department of Justice, referred to as the Antitrust Division, and the United States Federal Trade Commission, referred to as the FTC. The applicable waiting periods associated with those filings have expired and applicable regulatory clearances have been obtained. AMO and VISX are also required to make, and have made, applicable foreign antitrust filings and all foreign antitrust

 

14


Table of Contents

clearances, consents or approvals necessary for the completion of the merger have been obtained. Under the terms of the merger agreement, AMO is not required to sell, dispose of or hold separately any assets or businesses or interests in any assets or businesses of AMO, VISX or their respective affiliates, or make any other change in any portion of the businesses of VISX or AMO or incur any limitation on the conduct of the business of VISX or AMO in order to obtain any clearances, consents or approvals in connection with the merger.

 

Agreement to Complete the Merger (see page 104)

 

Each of AMO and VISX has agreed to cooperate fully with the other party and, subject to provisions in the merger agreement discussed above under Regulatory Matters, use its reasonable best efforts to take, or cause to be taken, all actions necessary, proper or advisable under applicable law and regulations to complete the merger as promptly as practicable, but in no event later than June 30, 2005.

 

No Solicitation (see page 100)

 

The merger agreement contains detailed provisions that prohibit AMO and VISX and the subsidiaries of each of them, and their officers, directors and representatives from taking any action to solicit or engage in discussions or negotiations with any person or group with respect to an acquisition proposal as defined in the merger agreement, including an acquisition that would result in the person or group acquiring more than a 25% interest in the party’s total outstanding securities, a sale of more than 25% of the party’s assets or a merger or other business combination. The merger agreement does not, however, prohibit either party or its board of directors from considering and recommending to the party’s stockholders an unsolicited acquisition proposal from a third party if specified conditions are met.

 

Termination of the Merger Agreement (see page 107)

 

Under circumstances specified in the merger agreement, either AMO or VISX may terminate the merger agreement. Subject to the limitations set forth in the merger agreement, the circumstances generally include if:

 

    the merger is not completed by June 30, 2005;

 

    a non-appealable final order of a court or other action of any governmental authority has the effect of permanently prohibiting completion of the merger;

 

    the required approval of the stockholders of each of AMO and VISX has not been obtained at its special meeting;

 

    the other party breaches its representations, warranties or covenants in the merger agreement such that its conditions to completion of the merger regarding representations, warranties or covenants would not be satisfied;

 

    the other party has not complied with the provisions of the merger agreement relating to non-solicitation and board recommendations;

 

    if there is an increase in the stock portion of the merger consideration that would cause the total number of shares of AMO common stock to be issued by AMO in connection with the merger to constitute more than 44.9% of the outstanding shares of AMO common stock following the merger; or

 

    the other party consents to termination.

 

Break-up Fees (see page 107)

 

If the merger is not completed under certain circumstances specified in the merger agreement, AMO or VISX may be required to pay the other expenses in the amount of $8 million or a break-up fee of $45 million.

 

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Table of Contents

Material United States Federal Income Tax Consequences of the Merger (see page 80)

 

AMO and VISX expect that the merger will qualify as a “reorganization” within the meaning of Section 368(a) of the Internal Revenue Code, and it is a condition to closing that each of AMO and VISX receive opinions from legal counsel to the effect that the merger will so qualify. If the merger qualifies as a reorganization within the meaning of Section 368(a) of the Internal Revenue Code, then, in general, no gain or loss will be recognized for United States federal income tax purposes by VISX, AMO, or AMO stockholders. VISX stockholders will generally recognize gain, but not loss, equal to the lesser of:

 

    the amount of cash they receive in the merger; or

 

    the amount equal to the excess, if any, of (i) the sum of the amount of cash and the fair market value of AMO common stock they receive in the merger, over (ii) the adjusted tax basis of their VISX common stock exchanged.

 

Under certain circumstances, the merger agreement requires AMO and VISX to reduce the amount of the cash to be received by VISX stockholders in the merger to the minimum extent necessary, and increase the amount of stock to be received by VISX stockholders in the merger to the minimum extent necessary, to enable legal counsel to render their respective opinion or opinions, as the case may be, that the merger qualifies as a reorganization within the meaning of Section 368(a) of the Internal Revenue Code. AMO and VISX will not know whether any such adjustment is necessary until immediately prior to the completion of the merger because any determination regarding the tax qualification of the merger as a “reorganization” cannot be made until the date upon which AMO and VISX intend to complete the merger. For a full description of the possible adjustment, see “The Merger Agreement—Alternative Merger Consideration” beginning on page 95.

 

Tax matters are complicated, and the tax consequences of the merger to each VISX stockholder will depend on the facts of each stockholder’s situation. VISX stockholders are urged to read carefully the discussion in the section entitled “The Merger—Material United States Federal Income Tax Consequences” and to consult their tax advisors for a full understanding of the tax consequences of their participation in the merger.

 

Accounting Treatment (see page 82)

 

AMO will account for the merger as a business combination under United States generally accepted accounting principles.

 

Risks Relating to the Merger (see page 23)

 

In evaluating the merger agreement and the merger, in the case of VISX stockholders, or the issuance of shares of AMO common stock in the merger, in the case of AMO stockholders, you should carefully read this joint proxy statement/prospectus and especially consider the factors discussed in the section entitled “Risks Relating to the Merger”.

 

Legal Proceedings Regarding the Merger (see page 91)

 

As of the date of this joint proxy statement/prospectus, VISX and AMO are aware of two purported class action lawsuits that have been filed against VISX and its board of directors in connection with the merger. Among other things, the lawsuits seek to prevent the closing of the merger. While it is not feasible to predict or determine with certainty the final outcome of these lawsuits, we believe these lawsuits are without merit, and are not likely to give rise to any liability that would materially affect VISX’s financial condition or results of operations. VISX intends to contest the lawsuits vigorously.

 

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Table of Contents

Material Differences in Rights of AMO Stockholders and VISX Stockholders (see page 125)

 

VISX stockholders receiving merger consideration in the form of shares of AMO common stock will have different rights once they become AMO stockholders due to differences between the governing documents of AMO and VISX. These differences are described in detail under “Comparison of Stockholder Rights and Corporate Governance Matters” beginning on page 125.

 

Summary Selected Historical Financial Data

 

AMO and VISX are providing the following information to aid you in your analysis of the financial aspects of the merger.

 

AMO

 

The selected consolidated financial data below as of and for each of the years in the five-year period ended December 31, 2003 has been derived from AMO’s audited consolidated financial statements as of December 31, 2003, 2002, 2001 and 2000 and for the years ended December 31, 2003, 2002, 2001, 2000 and 1999 and from AMO’s unaudited consolidated financial statement as of December 31, 1999, except for the financial data for the nine months ended September 24, 2003 and 2004, which is derived from AMO unaudited condensed consolidated financial statements. The unaudited results reflect all the adjustments (consisting only of normal recurring adjustments) that AMO management considers necessary for a fair statement of operating results. The information is only a summary and should be read in conjunction with AMO consolidated financial statements, accompanying notes and management’s discussion and analysis of results of operations and financial condition, all of which can be found in publicly available documents, including those incorporated by reference into this joint proxy statement/prospectus. See “Additional Information—Where You Can Find More Information” beginning on page 141.

 

    Nine Months Ended

       
    September 24,

    September 26,

    Year Ended December 31,

 
    Pro Forma
for Pfizer
Acquisition
2004(1)


    2004(2)

    2003(3)

    Pro Forma
for Pfizer
Acquisition
2003(1)(3)


  2003(3)

  2002(3)

  2001

    2000

    1999

 
    (in thousands, except per share amounts)  

Statement of Operations:

                                                                 

Net sales

  $ 592,291     $ 517,414     $ 434,464     $ 748,433   $ 601,453   $ 538,087   $ 543,095     $ 570,573     $ 577,644  

Cost of sales

    221,392       212,577       163,763       299,370     227,811     204,338     212,090       231,426       236,002  

Gross profit

    370,899       304,837       270,701       449,063     373,642     333,749     331,005       339,147       341,642  

Selling, general and administrative

    265,204       236,620       205,106       334,615     276,695     235,977     222,885       241,047       255,666  

Research and development

    32,467       31,043       26,996       40,201     37,413     29,917     28,990       29,878       27,765  

In-process research and development

    —         28,100       —         —       —       —       —         —         —    

Restructuring/impairment (reversal)

    —         —         —         —       —       —       —         (2,237 )     (6,527 )

Operating income

    73,228       9,074       38,599       74,247     59,534     67,855     79,130       70,459       64,738  

Interest expense

    23,832       19,327       20,442       36,359     24,224     13,764     3,302       3,625       6,500  

Loss (gain) on investments, net

    —         —         —         —       —       3,935     793       (231 )     —    

Unrealized loss (gain) on derivative instruments

    (830 )     (830 )     (59 )     246     246     3,199     (1,294 )     —         —    

Other, net

    1,775       127,977       17,161       17,802     17,802     2,385     385       (1,135 )     441  

Earnings (loss) before income taxes

    48,451       (137,400 )     1,055       19,840     17,262     44,572     75,944       68,200       57,797  

Provision for income taxes

    16,958       2,103       443       7,936     6,905     18,662     20,594       19,020       13,347  

 

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Table of Contents
    Nine Months Ended

    
    September 24,

    September 26,

   Year Ended December 31,

    Pro Forma
for Pfizer
Acquisition
2004(1)


  2004(2)

    2003(3)

   Pro Forma
for Pfizer
Acquisition
2003(1)(3)


  2003(3)

  2002(3)

  2001

    2000

  1999

    (in thousands, except per share amounts)

Earnings (loss) before cumulative effect of change in accounting principle

    31,493     (139,503 )     612      11,904     10,357     25,910     55,350       49,180     44,450

Cumulative effect of change in accounting principle, net of $160 of tax

    —       —         —        —       —       —       (391 )     —       —  

Net earnings

  $ 31,493   $ (139,503 )   $ 612    $ 11,904   $ 10,357   $ 25,910   $ 54,959     $ 49,180   $ 44,450

Basic earnings (loss) per share

  $ 0.81   $ (4.36 )   $ 0.02    $ 0.33   $ 0.36     —       —         —       —  

Diluted earnings (loss) per share

  $ 0.77   $ (4.36 )   $ 0.02    $ 0.33   $ 0.35     —       —         —       —  

(1) Pro forma results have been adjusted to give pro forma effect to the acquisition of Pfizer’s surgical ophthalmic business as if that transaction had occurred on January 1, 2003.
(2) Results include incremental cost of sales of $14.1 million from the sale of acquired inventory adjusted to fair value, a $28.1 million in-process research and development charge, and $131.4 million in charges associated with the early extinguishment of debt. Such costs and charges have been excluded from the pro forma results related to the acquisition of Pfizer’s surgical ophthalmic business.
(3) Other, net includes early debt extinguishment costs of $3.5 million incurred in connection with AMO’s spin-off from Allergan, Inc. in 2002 and, in 2003, the impact of a non-recurring charge of $16.8 million, consisting of the aggregate premium of $19.4 million paid in connection with the July 2003 “modified dutch auction” tender offer for, and the subsequent repurchase in September 2003 of, AMO’s 9 1/4% senior subordinated notes and a foreign currency gain of $2.6 million resulting from the settlement of certain intercompany amounts and related transfer of cash utilized to repurchase the 9 1/4% senior subordinated notes in the “modified dutch auction” tender offer and for the prepayment of the AMO term loan during 2003.

 

    

At
September 24,

2004


   At December 31,

        2003

   2002

   2001

   2000

   1999

Balance Sheet Data:

                                         

Cash and cash equivalents

   $ 34,098    $ 46,104    $ 80,578    $ 6,957    $ 12,641    $ 2,250

Current assets

     341,604      252,492      274,494      210,552      228,942      234,538

Total assets

     981,261      461,345      463,206      377,466      404,655      436,532

Current liabilities

     167,753      115,301      108,204      85,551      87,165      113,177

Long term debt, net of current portion

     566,392      233,611      277,559      75,809      100,364      83,232

 

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Table of Contents

VISX

 

VISX has derived the following historical information from VISX audited consolidated financial statements for each of the five years ended December 31, 1999 through 2003 contained in VISX’s annual reports on Form 10-K for the years ended December 31, 2001, 2002 and 2003, except for the financial data for the nine months ended September 30, 2003 and 2004, which is derived from VISX’s unaudited condensed consolidated financial statements. The unaudited results reflect all the adjustments (consisting only of normal recurring adjustments) that VISX’s management considers necessary for a fair statement of operating results. The information is only a summary and should be read in conjunction with VISX’s consolidated financial statements and accompanying notes, as well as management’s discussion and analysis of results of operations and financial condition, all of which can be found in publicly available documents, including those incorporated by reference into this joint proxy statement/prospectus. See “Additional Information—Where You Can Find More Information” beginning on page 141.

 

    

Nine Months Ended

September 30,


   Year Ended December 31,

     2004

   2003

   2003

   2002

   2001

   2000

   1999

     (in thousands, except share and per share amounts)

Statement Of Operations Data:

                                                

Total revenues

   $ 125,452    $ 105,687    $ 143,905    $ 139,926    $ 165,016    $ 190,154    $ 268,691

Cost of revenues

     30,856      40,549      52,070      50,805      58,440      62,684      57,513

Total costs and expenses

     76,617      85,044      109,300      112,056      119,844      134,162      126,593

Income from operations

     48,835      20,643      34,605      27,870      45,172      55,992      142,098

Litigation settlement

     —        —        —        9,000      37,821      11,856      —  

Net income

     32,592      14,439      23,251      15,342      10,909      35,221      91,768

Earnings per share:

                                                

Basic

   $ 0.66    $ 0.29    $ 0.47    $ 0.29    $ 0.19    $ 0.57    $ 1.45

Diluted

   $ 0.64    $ 0.28    $ 0.46    $ 0.29    $ 0.19    $ 0.55    $ 1.35

Shares used for earnings per share:

                                                

Basic

     49,066      49,816      49,471      53,096      56,660      61,431      63,474

Diluted

     50,739      50,995      50,937      53,816      58,081      63,778      68,119

 

     At
September 30,
2004


   At December 31,

        2003

   2002

   2001

   2000

   1999

Balance Sheet Data:

                                         

Cash, cash equivalents and short-term investments

   $ 121,046    $ 86,076    $ 122,955    $ 123,807    $ 229,453    $ 258,359

Working capital

     149,535      107,040      140,173      159,935      245,662      303,546

Total assets

     210,321      163,963      200,592      219,925      321,507      362,721

Retained earnings

     214,510      181,918      158,667      143,325      132,416      97,195

Stockholders’ equity

     166,781      125,799      155,190      176,278      268,772      316,793

 

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Table of Contents

Selected Unaudited Pro Forma Condensed Combined Financial Data

 

The following selected unaudited pro forma condensed combined financial data for the year ended December 31, 2003 and the nine months ended September 24, 2004 gives effect to the merger and AMO’s acquisition of Pfizer’s surgical ophthalmic business as if each had occurred on January 1, 2003. The selected unaudited pro forma condensed combined financial data as of September 24, 2004 gives effect to the merger as if it had occurred on September 24, 2004. The pro forma adjustments are based upon available information and assumptions that AMO’s management believes are reasonable. The selected unaudited pro forma condensed combined financial data are presented for illustrative purposes only. The companies may have performed differently had they always been combined. Stockholders should not rely on this information as being indicative of the historical results that would have been achieved had the companies always been combined or the future results that the combined company will experience after the merger.

 

The pro forma adjustments are based upon available information and certain assumptions that AMO believes are reasonable under the circumstances. A final determination of fair values relating to the merger, which cannot be made prior to the completion of the merger, may differ materially from the preliminary estimates and will include management’s final valuation of the fair value of assets acquired and liabilities assumed. This final valuation will be based on the actual net tangible assets of VISX that exist as of the date of the completion of the merger. The final valuation may change the allocations of the purchase price, which could affect the fair value assigned to the assets and liabilities and could result in a change to the unaudited pro forma condensed combined financial statements data. These adjustments are more fully described in the notes to the unaudited pro forma condensed combined financial statements under the heading “Unaudited Pro Forma Condensed Combined Financial Statements.” beginning on page 112.

 

The selected unaudited pro forma condensed combined financial data (i) have been derived from and should be read in conjunction with the unaudited pro forma condensed combined financial statements and accompanying notes included in this joint proxy statement/prospectus as described under “Unaudited Pro Forma Condensed Combined Financial Statements” beginning on page 112, and (ii) should be read in conjunction with the consolidated financial statements of AMO and VISX and other information filed by AMO and VISX with the SEC and incorporated by reference into this joint proxy statement/prospectus. See “Additional Information—Where You Can Find More Information” beginning on page 141.

 

     Nine Months
Ended
September 24,
2004


   Year Ended
December 31,
2003


    

(in thousands, except

per share amounts)

Income Statement Data:

             

Net sales

   $ 717,743    $ 892,338

Operating income

     99,693      79,026

Net earnings

     44,804      10,939

Net earnings per share

             

Basic

   $ 0.68    $ 0.17

Diluted

   $ 0.65    $ 0.17
          At
September 24,
2004


          (in thousands)

Balance Sheet Data:

             

Total assets

          $ 2,134,388

Total debt, including current portion

            768,442

Stockholders’ equity

            927,952

 

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Table of Contents

Comparative Per Share Information

 

The following tables set forth historical per share information of AMO and VISX and unaudited pro forma condensed combined per share information after giving effect to the merger under the purchase method of accounting, based on an average price per share of AMO common stock of $40.90. The unaudited pro forma combined financial data are not necessarily indicative of the financial position had the merger occurred on September 24, 2004, or operating results that would have been achieved had the merger been in effect as of January 1, 2003 and should not be construed as representative of future financial position or operating results. The unaudited pro forma condensed combined per share information is derived from, and should be read in conjunction with, the unaudited pro forma condensed combined financial statements and accompanying notes included in this joint proxy statement/prospectus as described under “Unaudited Pro Forma Condensed Combined Financial Statements” beginning on page 112. The historical per share information is derived from the audited financial statements as of and for the year ended December 31, 2003 for each of AMO and VISX, except for the financial data for the nine months ended September 24, 2004, which is derived from AMO’s and VISX’s unaudited financial statements.

 

    

Historical

AMO


   

AMO

As Adjusted

for Pfizer(1)


  

Historical

VISX


  

Pro Forma

Combined


  

Pro Forma

Equivalent

of One VISX
Share(2)


Net earnings (loss) per share-basic:

                                   

Year ended December 31, 2003

   $ 0.36     $ 0.33    $ 0.47    $ 0.17    $ 0.09

Nine months ended September 24, 2004

     (4.36 )     0.81      0.66      0.68      0.38

Net earnings (loss) per share-diluted:

                                   

Year ended December 31, 2003

   $ 0.35     $ 0.33    $ 0.46    $ 0.17    $ 0.09

Nine months ended September 24, 2004

     (4.36 )     0.77      0.64      0.65      0.36

Book value per share:

                                   

December 31, 2003

   $ 3.17            $ 2.58      NA      NA

September 24, 2004

     5.29              3.36    $ 14.46    $ 7.98

Cash dividends declared per share

     —         —        —        —        —  

Outstanding shares (in millions)

                                   

December 31, 2003

     29.4              48.7      NA       

September 24, 2004

     36.6              49.6      64.2       

(1) Pro forma results to reflect the impact of the acquisition of Pfizer’s surgical ophthalmic business as if that transaction, which was consummated on June 26, 2004, had occurred on January 1, 2003 and exclude certain non-recurring costs and charges related to the acquisition.
(2) The Pro Forma Equivalent of One VISX Share amounts were calculated by applying the exchange ratio of 0.552 to the pro forma combined net earnings and book value per share. The exchange ratio does not include the $3.50 per share cash consideration.

 

This information is only a summary and should be read in conjunction with the financial statements and accompanying notes of AMO and VISX contained in the annual reports and other information that has been filed with the SEC and incorporated by reference into this joint proxy statement/prospectus and with the unaudited pro forma condensed combined financial statements referred to above. See “Additional Information—Where You Can Find More Information” beginning on page 141.

 

Comparative Per Share Market Price Data

 

AMO common stock trades on the NYSE under the symbol “AVO.” VISX common stock trades on the NYSE under the symbol “EYE.” The following table sets forth the closing prices for AMO common stock and VISX common stock as reported on the NYSE on November 8, 2004, the last trading day before AMO and VISX

 

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announced the merger, and January 24, 2005, the last trading day before the date of this joint proxy statement/prospectus. These historical and pro forma equivalent sales prices per share reflect the fluctuating value of the AMO common stock that VISX stockholders would receive in exchange for each share of VISX common stock if the merger was completed on either of these dates, applying the exchange ratio of 0.552 of a share of AMO common stock plus $3.50 in cash for each share of VISX common stock.

 

    

AMO

Common Stock


  

VISX

Common Stock


  

Pro Forma Equivalent Value

of VISX Common Stock


November 8, 2004

   $ 41.70    $ 16.91    $ 26.52

January 24, 2005

   $ 39.90    $ 25.28    $ 25.52

 

The above tables show only historical comparisons. These comparisons may not provide meaningful information to AMO stockholders in determining whether to approve the issuance of shares of AMO common stock in connection with the merger or to VISX stockholders in determining whether to approve and adopt the merger agreement and approve the merger contemplated by the merger agreement. AMO and VISX stockholders are urged to obtain current market quotations for AMO and VISX common stock and to review carefully the other information contained in this joint proxy statement/prospectus or incorporated by reference into this joint proxy statement/prospectus, when considering whether to approve the issuance of shares of AMO common stock in connection with the merger, in the case of AMO stockholders, or to approve and adopt the merger agreement and approve the merger contemplated by the merger agreement, in the case of VISX stockholders. See “Additional Information—Where You Can Find More Information” beginning on page 141.

 

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RISKS RELATING TO THE MERGER

 

In addition to the other information included in this joint proxy statement/prospectus, including the matters addressed in “Cautionary Statement Concerning Forward-Looking Statements,” you should carefully consider the following risks before deciding whether to vote for approval and adoption of the merger agreement and the merger contemplated by the merger agreement, in the case of VISX stockholders, or for approval of the issuance of shares of AMO common stock in the merger, in the case of AMO stockholders.

 

The issuance of shares of AMO common stock to VISX stockholders in the merger will substantially reduce the percentage interests of AMO stockholders.

 

If the merger is completed, we expect that approximately              million shares of AMO common stock will be issued to VISX stockholders and, upon exercise of assumed options, up to              million shares will be issued to holders of assumed options. Based on the number of shares of AMO and VISX common stock outstanding on November 9, 2004, VISX stockholders before the merger will own, in the aggregate, approximately 41.5% of the fully diluted shares of AMO common stock immediately after the merger. The issuance of approximately up to              million shares of AMO common stock to VISX stockholders and holders of assumed options will cause a significant reduction in the relative percentage interest of current AMO stockholders in earnings, voting, liquidation value and book and market value. In addition, under certain circumstances described more fully in the following risk factor, the amount of AMO common stock issuable for each share of VISX common stock may be increased, and the amount of cash payable for each share of VISX common stock may be decreased. In the event of any such adjustment, VISX stockholders as a whole will hold a larger percentage of the fully diluted AMO common stock immediately after giving effect to the merger.

 

The merger consideration may be adjusted in order to qualify the merger as a reorganization within the meaning of Section 368(a) of the Internal Revenue Code.

 

We intend for the merger to qualify as a “reorganization” within the meaning of Section 368(a) of the Internal Revenue Code. However, if neither Skadden, Arps, Slate, Meagher & Flom LLP, counsel to AMO, nor Wilson Sonsini Goodrich & Rosati, Professional Corporation, counsel to VISX, is able to render an opinion at the completion of the merger that the merger qualifies as a reorganization within the meaning of Section 368(a) of the Internal Revenue Code, based on the negotiated mix of cash and stock consideration, then the amount of the cash merger consideration will be reduced and the amount of the stock merger consideration will be increased, in each case to the minimum extent necessary to enable either counsel to render this opinion at the completion of the merger. As a result of this adjustment of the merger consideration, VISX stockholders could receive a different mix of cash and AMO common stock for each share of VISX common stock than is currently anticipated. For a full description of the possible adjustment, see “The Merger Agreement—Alternative Merger Consideration” beginning on page 95.

 

The price of AMO common stock may decline, which would decrease the value of the stock portion of the merger consideration to be received by VISX stockholders in the merger and may prevent the completion of the merger.

 

The price of AMO common stock might decline from the $41.70 price per share at the close of trading on November 8, 2004, the last full trading day prior to the public announcement of the proposed merger. Accordingly, if the price of AMO common stock declines prior to the completion of the merger, the value of the stock portion of the merger consideration to be received by VISX stockholders in the merger will decrease as compared to the value on the date the merger was announced. See “The Merger Agreement—Treatment of Securities” beginning on page 92. If on the closing date of the merger AMO common stock is trading below the price at which AMO’s and VISX’s counsel is able to render the opinion discussed in the immediately preceding risk factor, then the amount of the cash merger consideration will be reduced and the amount of the stock merger consideration will be increased, in each case to the minimum extent necessary for either of AMO’s or VISX’s counsel to be able to render such opinion. If the increase in stock merger consideration results in the aggregate

 

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stock merger consideration issuable to the VISX stockholders in the merger, to holders of VISX stock options assumed in the merger and to the holders of units of phantom stock accounts assumed in the merger constituting more than 44.9% of the number of outstanding shares of AMO common stock immediately following the completion of the merger, then either AMO or VISX may terminate the merger agreement. We currently estimate that the stock merger consideration would be increased to a level that would trigger this termination right if the trading price of AMO common stock declined to approximately $17.75.

 

In addition, because the date that the merger is completed will be later than the date of the special meetings, AMO and VISX stockholders will not know the exact value of the AMO common stock that will be issued in the merger at the time they vote on the merger proposals. As a result, if the market price of AMO common stock at the completion of the merger is lower than the market price on the date of the special meetings, the value of the AMO common stock that VISX stockholders will receive for the AMO common stock portion of the merger consideration will be less than the value on the dates of the special meetings.

 

During the twelve-month period ending on January 24, 2005, the most recent practicable date prior to the printing of this joint proxy statement/prospectus, the closing price of AMO common stock varied from a low of $21.47 to a high of $43.69, and ended that period at $39.90. We encourage you to obtain current market quotations for AMO common stock before you vote your shares.

 

Even though AMO and VISX have obtained the regulatory approvals required to complete the merger, governmental authorities could still seek to block or challenge the merger.

 

The merger is subject to review by the Antitrust Division and the FTC under the HSR Act. Under the HSR Act, AMO and VISX are required to make pre-merger notification filings and to await the expiration or early termination of the statutory waiting period prior to completing the merger. The merger is also subject to review by certain other governmental authorities under the antitrust laws of various other jurisdictions where VISX conducts business. We have made all required regulatory filings, the applicable waiting periods have expired and we have therefore obtained all regulatory clearances, consents and approvals required to complete with the merger. However, after the statutory waiting periods have expired, and even after completion of the merger, governmental authorities could seek to block or challenge the merger as they deem necessary or desirable in the public interest. In addition, in some jurisdictions, a competitor, customer or other third party could initiate a private action under the antitrust laws challenging or seeking to enjoin the merger, before or after it is completed. AMO, VISX or the combined company may not prevail, or may incur significant costs, in defending or settling any action under the antitrust laws.

 

AMO will have more indebtedness after the merger, which could adversely affect its cash flows and business.

 

In order to complete the merger, AMO anticipates arranging for and funding at least $200 million of new financing. Proceeds from the financing will be used to fund the cash portion of the consideration paid to VISX stockholders. AMO debt outstanding as of September 24, 2004 was approximately $568.4 million. As a result of the increase in debt, demands on AMO cash resources will increase after the completion of the merger. The increased levels of debt could, among other things:

 

    require AMO to dedicate a substantial portion of its cash flow from operations to payments on its debt, thereby reducing funds available for working capital, capital expenditures, dividends, acquisitions and other purposes;

 

    increase AMO’s vulnerability to, and limit flexibility in planning for, adverse economic and industry conditions;

 

    affect AMO’s credit rating;

 

    limit AMO’s ability to obtain additional financing to fund future working capital, capital expenditures, additional acquisitions and other general corporate requirements;

 

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    create competitive disadvantages compared to other companies with less indebtedness; and

 

    limit AMO’s ability to apply proceeds from an offering or asset sale to purposes other than the repayment of debt.

 

Although AMO and VISX expect that the merger will result in benefits to the combined company, the combined company may not realize those benefits because of integration and other challenges.

 

AMO’s ability to realize the anticipated benefits of the merger will depend, in part, on the ability of AMO to integrate the business of VISX with the business of AMO. The combination of two independent companies is a complex, costly and time-consuming process. This process may disrupt the business of either or both of the companies, and may not result in the full benefits expected by AMO and VISX. The difficulties of combining the operations of the companies include, among others:

 

    coordinating marketing functions;

 

    unanticipated issues in integrating information, communications and other systems;

 

    unanticipated incompatibility of purchasing, logistics, marketing and administration methods;

 

    retaining key employees;

 

    consolidating corporate and administrative infrastructures;

 

    the diversion of management’s attention from ongoing business concerns; and

 

    coordinating geographically separate organizations.

 

We cannot assure you that the combination of VISX with AMO will result in the realization of the full benefits anticipated from the merger. For a full description of the benefits anticipated from the merger, see “The Merger—Reasons for the Merger” beginning on page 65.

 

If the proposed merger is not completed, AMO and VISX will have incurred substantial costs that may adversely affect AMO’s and VISX’s financial results and operations and the market price of AMO and VISX common stock.

 

AMO and VISX have incurred and will incur substantial costs in connection with the proposed merger. These costs are primarily associated with the fees of attorneys, accountants and AMO’s and VISX’s financial advisors. In addition, AMO and VISX have each diverted significant management resources in an effort to complete the merger and are each subject to restrictions contained in the merger agreement on the conduct of its business. If the merger is not completed, AMO and VISX will have incurred significant costs, including the diversion of management resources, for which each will have received little or no benefit. Also, if the merger is not completed under certain circumstances specified in the merger agreement, AMO or VISX may be required to pay the other expenses in the amount of $8 million or a break-up fee of $45 million. See “The Merger Agreement—Termination; Break-Up Fees and Expenses” beginning on page 107.

 

In addition, if the merger is not completed, AMO and VISX may experience negative reactions from the financial markets and AMO’s and VISX’s collaborative partners, customers and employees. Each of these factors may adversely affect the trading price of AMO and/or VISX common stock and AMO’s and/or VISX’s financial results and operations.

 

Provisions of the merger agreement may deter alternative business combinations and could negatively impact the stock prices of AMO and VISX if the merger agreement is terminated in certain circumstances.

 

Restrictions in the merger agreement on solicitation generally prohibit AMO and VISX from soliciting any acquisition proposal or offer for a merger or business combination with any other party, including a proposal that might be advantageous to the stockholders of AMO or VISX when compared to the terms and conditions of the

 

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merger described in this joint proxy statement/prospectus. In addition, if the merger is not completed under certain circumstances specified in the merger agreement, AMO or VISX may be required to pay the other expenses in the amount of $8 million or a break-up fee of $45 million. These provisions may deter third parties from proposing or pursuing alternative business combinations that might result in greater value to AMO or VISX stockholders than the merger. In the event the merger is terminated by AMO or VISX in circumstances that obligate either party to pay the expenses or break-up fee to the other party, including where either party terminates the merger agreement because the other party’s board of directors withdraws its support of the merger, AMO’s and/or VISX’s stock prices may decline. See “ The Merger Agreement—Termination; Break-Up Fees and Expenses” beginning on page 107.

 

Certain directors and executive officers of VISX have interests in the merger that may be different from, or in addition to, the interests of VISX stockholders.

 

When considering the VISX board of directors’ recommendation that VISX stockholders vote in favor of the proposal to approve and adopt the merger agreement and the merger contemplated by the merger agreement, VISX stockholders should be aware that some directors and executive officers of VISX have interests in the merger that may be different from, or in addition to, the interests of VISX stockholders. These interests include the appointment of VISX’s current Chairman and Chief Executive Officer to the AMO board of directors following completion of the merger, potential for severance payments to VISX’s executive officers under change of control agreements, acceleration of vesting of options, phantom stock units as a result of the merger and the right to continued indemnification and insurance coverage by AMO for acts or omissions occurring prior to the merger. As a result of these interests, these directors and officers could be more likely to vote to approve and adopt the merger agreement and the merger contemplated by the merger agreement than if they did not hold these interests, and may have reasons for doing so that are not the same as the interests of other VISX stockholders. For a full description of the interests of directors and executive officers of VISX in the merger, see “The Merger—Interests of Executive Officers and Directors of VISX in the Merger” beginning on page 87.

 

VISX is unable to obtain Arthur Andersen LLP’s consent to incorporate by reference into this joint proxy statement/prospectus Arthur Andersen’s report on VISX’s financial statements for the fiscal year ended December 31, 2001 that were audited by Arthur Andersen, which means that VISX stockholders would likely have no effective remedy against Arthur Andersen if it is discovered that these financial statements contained any material misstatements or omissions.

 

VISX’s annual report on Form 10-K for the fiscal year ended December 31, 2003, which was filed with the SEC on March 15, 2004, is incorporated by reference into this joint proxy statement/prospectus and includes both VISX’s financial statements audited by Arthur Andersen for the fiscal year ended December 31, 2001 and the related independent auditors’ report of Arthur Andersen. SEC rules require that we obtain and file the consent of Arthur Andersen to inclusion of their report in this joint proxy statement/prospectus. As a result of Arthur Andersen’s conviction of federal obstruction of justice charges in June 2002, however, Arthur Andersen is no longer in a position to reissue their audit reports or to provide consents to include financial statements in documents filed with the SEC.

 

Without Arthur Andersen’s consent, any remedies of VISX stockholders against Arthur Andersen that would otherwise be available in the event of a material misstatement or omission in the December 31, 2001 financial statements may be materially reduced or eliminated. Under Section 11 of the Securities Act of 1933, as amended, VISX stockholders would have certain claims against Arthur Andersen if Arthur Andersen consented to include its report in this joint proxy statement/prospectus to the extent there were material misstatements or omissions related to Arthur Andersen’s audit and opinion included in the December 31, 2002 financial statements. Further, without Arthur Andersen’s consent, there could be similar claims and remedies under the antifraud provisions of the Securities Act, the Exchange Act and applicable state securities laws that will also not be available against Arthur Andersen for the audit and material misstatements or omissions, if any. We believe it is unlikely that VISX stockholders could recover damages, if any, from Arthur Andersen for any claim against Arthur Andersen.

 

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CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS

 

This joint proxy statement/prospectus and the other documents incorporated by reference into this proxy statement/prospectus contain or may contain “forward-looking statements” intended to qualify for the safe harbor from liability established by the Private Securities Litigation Reform Act of 1995. These statements can be identified by the fact that they do not relate strictly to historical or current facts. We have based these forward-looking statements on our current expectations about future events. Further, statements that include words such as “may,” “will,” “project,” “might,” “expect,” “believe,” “anticipate,” “intend,” “could,” “would,” “estimate,” “continue” or “pursue,” or the negative of these words or other words or expressions of similar meaning, may identify forward-looking statements. These forward-looking statements are found at various places throughout this joint proxy statement/prospectus and the other documents incorporated by reference. These forward-looking statements, including, without limitation, those relating to future actions, new projects, strategies, future performance, the outcome of contingencies such as legal proceedings and future financial results, in each case relating to AMO or VISX, respectively, wherever they occur in this joint proxy statement/prospectus or the other documents incorporated by reference herein, are necessarily estimates reflecting the best judgment of the respective management of AMO and VISX and involve a number of risks and uncertainties that could cause actual results to differ materially from those suggested by the forward-looking statements. These forward-looking statements should, therefore, be considered in light of various important factors, including those set forth in this joint proxy statement/prospectus and incorporated by reference into this joint proxy statement/prospectus. In addition to the risk factors identified elsewhere, important factors that could cause actual results to differ materially from estimates or projections contained in the forward-looking statements include, without limitation:

 

    the effects of local and national economic, credit and capital market conditions on the economy in general, and on the ophthalmic medical device industry in particular, and the effects of foreign exchange rates and interest rates;

 

    the ability to obtain the approvals of each company’s stockholders, to obtain or meet the closing conditions in the merger agreement, including applicable regulatory and tax requirements, and to otherwise complete the merger in a timely manner;

 

    the ability to timely and cost-effectively integrate the operations of AMO and VISX;

 

    the ability to realize the synergies and other perceived advantages resulting from the merger;

 

    access to available and feasible financing, including financing for the merger, on a timely basis;

 

    the ability to retain key personnel both before and after the merger;

 

    the ability of each company to successfully execute its business strategies;

 

    the extent and timing of market acceptance of new products or product indications;

 

    the ability of each company to procure, maintain, enforce and defend its patents and proprietary rights;

 

    changes in laws, including increased tax rates, regulations or accounting standards, third party relations and approvals, and decisions of courts, regulators and governmental bodies;

 

    litigation outcomes and judicial actions, including costs and existing or additional litigation associated with the merger, and legislative action, referenda and taxation;

 

    the ability of AMO or the combined company to continue to increase customer loyalty;

 

    the ability to recoup costs of capital investments through higher revenues;

 

    environmental restrictions, soil and water conditions, weather and other hazards, site access matters and building permit issues;

 

    the effects of environmental and structural building conditions relating to our properties;

 

    acts of war or terrorist incidents; and

 

    the effects of competition, including locations of competitors and operating and market competition.

 

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You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this joint proxy statement/prospectus or, in the case of documents incorporated by reference, as of the date of those documents. Neither AMO nor VISX undertakes any obligation to publicly update or release any revisions to these forward-looking statements to reflect events or circumstances after the date of this joint proxy statement/prospectus or to reflect the occurrence of unanticipated events, except as required by law.

 

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THE AMO SPECIAL MEETING

 

General

 

This joint proxy statement/prospectus is being provided to AMO stockholders as part of a solicitation of proxies by the AMO board of directors for use at a special meeting of AMO stockholders. This joint proxy statement/prospectus provides AMO stockholders with information they need to know to be able to vote or instruct their vote to be cast at the AMO special meeting.

 

Date, Time, and Place

 

The AMO special meeting will be held on             , 2005 at             a.m., local time, at 1700 East St. Andrew Place, Santa Ana, California 92705.

 

Purpose; Other Matters

 

The AMO special meeting is being held for the following purposes:

 

    to consider and vote upon a proposal to approve the issuance of shares of AMO common stock in the merger;

 

    to consider and vote upon a proposal to approve an amendment to the AMO certificate of incorporation to increase the number of authorized shares of AMO common stock from 120,000,000 to 240,000,000;

 

    to consider and vote upon a proposal to approve the AMO 2005 Incentive Compensation Plan;

 

    to consider and vote upon a proposal to approve the Amended and Restated AMO 2002 Employee Stock Purchase Plan; and

 

    to consider and vote upon a proposal to approve the Amended and Restated AMO 2002 International Stock Purchase Plan.

 

AMO stockholders will also be asked to consider and vote upon any other business as may properly come before the special meeting or any adjournments or postponements of the special meeting. AMO does not expect that any matter other than the proposals presented in this joint proxy statement/prospectus will be brought before the AMO special meeting. However, if other matters incident to the conduct of the special meeting are properly presented at the special meeting or any adjournment or postponement of the special meeting, the persons named as proxies will vote in accordance with their best judgment with respect to those matters.

 

AMO stockholders are voting on each proposal separately. Except as described below, the vote of an AMO stockholder on one proposal has no bearing on any of the other proposals, or any other matter that may come before the special meeting. In their discretion, the proxies are authorized to vote upon such other business as may properly be presented to the meeting or any adjournments, postponements, continuations or reschedulings thereof. If you vote “AGAINST” any of the proposals, the proxies are not authorized to vote for any adjournments, postponements, continuations or reschedulings of the meeting, including for the purpose of soliciting additional proxies, unless you so indicate by marking the appropriate box on the proxy card.

 

Recommendation of the AMO Board of Directors

 

Proposal 1

 

The AMO board of directors has unanimously approved a resolution, subject to stockholder approval, to approve the issuance of shares of AMO common stock in the merger and unanimously recommends that AMO stockholders vote “FOR” approval of the issuance of shares.

 

Approval of this proposal by AMO stockholders is a condition to the effectiveness of the merger.

 

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Proposal 2

 

The AMO board of directors has also unanimously approved a resolution, subject to stockholder approval, to amend the AMO certificate of incorporation to increase the number of authorized shares of AMO common stock from 120,000,000 to 240,000,000 and unanimously recommends that AMO stockholders vote “FOR” approval of the amendment to the AMO certificate of incorporation.

 

Approval of this proposal is not a condition to the effectiveness of the merger. However, as long as the AMO stockholders approve the amendment to the AMO certificate of incorporation, even if the AMO stockholders do not approve the proposal to issue shares of AMO common stock in the merger or any of the other proposals, the amendment to the AMO certificate of incorporation could be implemented.

 

If this proposal is approved by AMO stockholders, the authorized number of shares of AMO common stock will increase from 120,000,000 to 240,000,000. AMO intends to file the amendment to the AMO certificate of incorporation to increase the number of authorized shares of AMO common stock as soon as practicable following approval by the AMO stockholders. The form of the certificate of amendment to the AMO certificate of incorporation is attached to this joint proxy statement/prospectus as Annex B. AMO reserves the right to abandon, upon approval of the AMO board of directors, the proposed amendment to the AMO certificate of incorporation to increase the number of authorized shares of AMO common stock at any time prior to the filing of the amendment with the Secretary of State of the State of Delaware, including after approval of the AMO stockholders has been obtained.

 

The AMO board of directors believes it is desirable to authorize additional shares of AMO common stock so that there will be sufficient shares available for issuance for purposes that the AMO board of directors may later determine to be in the best interests of AMO and its stockholders. Such purposes could include the offer of shares for cash, acquisitions, financings, mergers, stock splits, employee benefit programs and other general corporate purposes. No further action or authorization by AMO stockholders would be necessary prior to the issuance of additional shares of AMO common stock, unless required by applicable law or regulation.

 

Of the 120,000,000 shares of AMO common stock currently authorized for issuance, an aggregate of 37,068,948 shares were outstanding on January 7, 2005. An aggregate of 11,900,000 shares have been reserved for issuance under AMO’s stock-based compensation plans. In addition, AMO reserved for issuance the following numbers of shares: (a) 6,816,796 shares upon conversion of $140.0 million aggregate principal amount (of which $8.6 million aggregate principal amount remains outstanding) of AMO’s 3.5% Convertible Senior Subordinated Notes due 2023, which we refer to as the 3.5% Notes (based on the current conversion rate of 48.6914 shares of AMO common stock per $1,000 principal amount of the 3.5% Notes), (b) 6,966,575 shares upon conversion of $350.0 million aggregate principal amount (all of which remains outstanding) of AMO’s 2.5% Convertible Senior Subordinated Notes due 2024, which we refer to as the 2.5% Notes (based on the current conversion rate of 19.9045 shares of AMO common stock per $1,000 principal amount of the 2.5% Notes), and (c) 7,947,482 shares issuable in certain refinancings of the 3.5% Notes for common stock (of which 7,020,784 shares have been issued). In accordance with the terms of the indenture governing the 2.5% Notes, AMO has elected to satisfy in cash its conversion obligation with respect to the principal amount of any 2.5% Notes converted after December 15, 2004, with any remaining amount of the conversion obligation to be satisfied in shares of AMO common stock, calculated as set forth in the indenture based on (a) the current conversion rate of 19.9045 shares of AMO common stock per $1,000 principal amount of 2.5% Notes, and (b) the applicable stock price (as defined in the indenture). The current conversion rates of the 3.5% Notes and the 2.5% Notes are subject to adjustment as provided in the respective indentures. In the merger, AMO would issue approximately 27,600,000 shares of AMO common stock, based on the merger consideration of 0.552 shares of AMO common stock (not counting the $3.50 in cash for each VISX share) for each share of VISX common stock outstanding, which as of December 31, 2004 was 49,923,381.

 

The proposed increase in the authorized shares could have a number of effects on AMO stockholders, depending on the exact nature and circumstances of any actual issuance of shares. An issuance of additional

 

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shares by AMO could have an effect on the potential realizable value of an AMO stockholder’s investment. In the absence of a proportionate increase in AMO’s earnings and book value, an increase in the aggregate number of outstanding shares of AMO common stock caused by the issuance of the additional shares would dilute the earnings per share and book value per share of all outstanding shares. If such factors were reflected in the price per share of AMO common stock, the potential realizable value of a stockholder’s investment could be adversely affected.

 

In addition, the increase could have an anti-takeover effect, in that additional shares could be issued (within the limits imposed by applicable law) in one or more transactions that could make a change in control or takeover of AMO more difficult. For example, additional shares could be issued by AMO to dilute the stock ownership or voting rights of persons seeking to obtain control of AMO. Similarly, the issuance of additional shares to certain persons allied with AMO’s management could have the effect of making it more difficult to remove AMO’s current management by diluting the stock ownership or voting rights of persons seeking to cause such removal. The proposed amendment to increase the authorized AMO common stock is not prompted by any specific effort or takeover threat currently perceived by AMO.

 

Proposal 3

 

General

 

The AMO board of directors has adopted the AMO 2005 Incentive Compensation Plan, subject to the approval of the AMO stockholders. The AMO board of directors believes the proposed plan, pursuant to which 5,000,000 shares of AMO common stock will be reserved for issuance of awards, is essential to maintain AMO’s balanced and competitive total compensation programs. AMO currently grants awards under its 2002 Incentive Compensation Plan, which is referred to as the 2002 Plan. As of November 30, 2004, 2,013,529 shares of AMO common stock remained available for future grants under the 2002 Plan and 5,788,548 shares of AMO common stock were subject to outstanding awards granted under the 2002 Plan. Immediately following the merger, AMO will be assuming the rights and obligations of VISX with respect to the VISX 2000 Stock Plan. The number of shares available for grant under the VISX 2000 Stock Plan to employees of VISX will be adjusted to reflect both the last reported sales price of AMO common stock on the day the merger is completed and the $3.50 in cash paid to VISX stockholders in the merger. The proposed plan would enable AMO to continue to attract, retain and provide equity incentives to selected employees and other individuals to promote the financial success of AMO. In the event the 2005 Incentive Compensation Plan becomes effective, no new awards will be granted under the 2002 Plan or the VISX 2000 Stock Plan. In the event the 2005 Incentive Compensation Plan does not become effective, AMO will continue making awards under the 2002 Plan and, upon completion of the merger, the VISX 2000 Stock Plan, in accordance with the terms of such plans. If this proposal is not approved by AMO stockholders, the number of options that could be granted under the VISX 2000 Stock Plan is approximately 1,800,000 as of January 6, 2005.

 

Reflecting AMO’s commitment to strong governance practices, including relating to compensation matters, the AMO 2005 Incentive Compensation Plan prohibits the repricing of stock options, the grant of discounted stock options or reload stock options, and loans to employees to finance a transaction under this plan. A “reload stock option” is one that entitles the optionee to the automatic grant of additional options in connection with an exercise of the original option.

 

In 1993, Section 162(m) was added to the Internal Revenue Code. Section 162(m) may limit AMO’s ability to deduct for United States federal income tax purposes compensation in excess of $1 million paid to each of its Chief Executive Officer and its four other highest paid executive officers in any one fiscal year. Grants of awards under the proposed plan would be subject to the $1 million deduction limitation unless the proposed plan complies with the requirements for “performance-based compensation.” One of the requirements of “performance-based compensation” is that AMO stockholders approve the material terms of the proposed plan.

 

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The following is a summary of the principal features of the proposed plan. The summary is qualified by and subject to the actual provisions of the proposed plan attached to this joint proxy statement/prospectus as Annex C.

 

Summary of the AMO 2005 Incentive Compensation Plan

 

Purpose and Eligibility

 

The purpose of the proposed plan is to advance the interests of AMO and the AMO stockholders by affording AMO directors, employees and consultants an opportunity to acquire or increase a proprietary interest in AMO or to otherwise benefit from AMO’s success through the grant of stock options, dividend equivalents, restricted stock, stock appreciation rights, stock payments, performance awards or other awards granted or sold under the proposed plan, collectively referred to as incentive awards. AMO thereby seeks to attract, retain and motivate those highly competent individuals upon whose judgment, initiative, leadership and continued efforts AMO’s success in large measure depends.

 

All of AMO’s regular employees, its independent directors, and certain consultants are eligible to receive incentive awards under the proposed plan if selected by the Organization, Compensation and Corporate Governance Committee, referred to as the committee, of the AMO board of directors. Currently, all of AMO’s approximately 2,800 employees are eligible for selection, in addition to AMO’s six independent directors. In addition, following the merger, approximately an additional 350 employees of VISX will also be eligible for selection. The target population for regular grants of awards is currently approximately 250 employees and will expand to approximately 340 with the addition of the VISX employees.

 

Administration, Amendment and Termination

 

The committee is responsible for administering the proposed plan and is composed of two or more persons appointed by the AMO board of directors. All committee members must be both “non-employee” as defined by Rule 16b-3 under the Exchange Act and “outside directors” for purposes of Section 162(m) of the Internal Revenue Code. The committee has the authority to interpret the proposed plan, determine the terms and conditions of incentive awards and make all other determinations necessary and/or advisable for the administration of the proposed plan. The committee may, with the consent of a participant, amend the terms of any existing incentive award previously granted to the participant, in a manner consistent with the proposed plan. The committee may not, however, reduce the exercise price of an outstanding stock option without first obtaining approval from the AMO stockholders. The committee also has authority to prescribe, amend and rescind rules and regulations relating to the proposed plan.

 

The AMO board of directors may alter, amend, suspend or terminate the proposed plan at any time. However, the AMO board of directors may not take any action to increase the maximum number of shares that may be sold or issued under the proposed plan or alter the class of eligible participants without the approval of the AMO stockholders.

 

Dividend Equivalents

 

The committee may, in its discretion and at no additional cost, grant a holder of an incentive award denominated in shares of AMO common stock an amount payable in cash, common stock or a combination thereof that is equivalent to the amount of dividends paid to AMO stockholders who own an equal number of shares of AMO common stock.

 

Option Grants to Employees and Consultants

 

Stock options granted under the proposed plan may be incentive stock options, or ISOs, intended to qualify under the provisions of Section 422 of the Internal Revenue Code or nonqualified stock options which do not so

 

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qualify. The committee determines the exercise price of AMO common stock that is subject to an option at the date the option is granted. The exercise price of an option may be less than the fair market value on the date of grant of the common stock subject to the option; however, the exercise price for an ISO may not be less than the fair market value on the date of grant of the common stock subject to the ISO. Options may be exercised as determined by the committee provided that an ISO may not be exercised after ten years from the date of grant.

 

The proposed plan provides for automatic acceleration of vesting of options in the event of a change in control or an employee’s termination due to death, total disability or job elimination. In the event employment terminates for cause, all options, vested and unvested, expire on the date of termination. In all other situations, options are exercisable upon termination only to the extent vested, unless otherwise determined by the committee.

 

Performance Awards

 

The committee may grant awards, payable in cash, common stock, restricted stock or a combination thereof to employees and consultants, with the terms and conditions determined by the committee at the time of grant. The committee will determine the performance criteria to be utilized to calculate the value of the performance awards, the term of the performance awards, the event or events giving rise to the right to payment of a performance award, and the form (cash, common stock and/or restricted stock) and time of payment of performance awards.

 

The performance criteria may be any one of the following:

 

    net income;

 

    pre-tax income;

 

    operating income;

 

    cash flow;

 

    earnings per share;

 

    return on equity;

 

    return on invested capital or assets;

 

    cost reduction or savings;

 

    funds from operations;

 

    appreciation in the fair market value of AMO common stock;

 

    earnings before any one or more of the following items: interest, taxes, depreciation or amortization; or

 

    total stockholder return.

 

Restricted Stock

 

The committee may award restricted stock to employees, consultants and independent directors. Shares of restricted stock are nontransferable and subject to a substantial risk of forfeiture until specific conditions are met as set forth in the proposed plan and in any statement evidencing the grant. The committee determines the purchase price (if any), terms of payment of the purchase price, restrictions upon the restricted stock and when the restrictions will lapse.

 

Upon termination of a participant’s employment, consultancy or directorship for death or total disability, restrictions on all shares lapse. In the event an employee is terminated for job elimination, restrictions lapse on a prorated number of shares. In all other cases, all shares of restricted stock are forfeited and are repurchased by AMO if the participant paid any purchase price.

 

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Stock Appreciation Rights

 

The committee may approve the grant to employees or consultants of a stock appreciation right, or a right to receive a number of shares of AMO common stock or, in the discretion of the committee, an amount in cash or a combination of shares and cash, based on the increase in the fair market value of the shares subject to the right during a period as specified by the committee. They may be related or unrelated to stock options.

 

Stock Payments

 

The committee may approve payments in shares of AMO common stock to replace all or any portion of the compensation (other than base salary) that would otherwise become payable to any regular employee or consultant in cash.

 

Securities Subject to Plan

 

The aggregate number of shares of AMO common stock reserved for issuance under the proposed plan is 5,000,000. The maximum number of shares AMO common stock available for issuance pursuant to the exercise of ISOs is 5,000,000. Shares subject to the unexercised portion of any incentive award that expires, terminates or is canceled and shares issued pursuant to an incentive award that AMO reacquires will again become available for the grant of further incentive awards under the proposed plan.

 

The proposed plan provides that the maximum number of shares with respect to which incentive awards may be granted to any individual in any given calendar year is 500,000. The maximum dollar amount of performance awards paid in cash in the aggregate to any individual in any calendar year is $500,000.

 

The maximum number of shares issuable under the proposed plan, the number and kind of shares or other securities subject to then outstanding incentive awards, and the price for each share or other unit of any other securities subject to then outstanding incentive awards, will be appropriately and proportionately adjusted to reflect mergers, consolidations, sales or exchanges of all or substantially all of AMO’s properties, reorganizations, recapitalizations, reclassifications, stock dividends, stock splits, reverse stock splits, spin-offs or other distributions with respect to such shares of common stock (or any stock or securities received with respect to such common stock) or a reduction in the value of the outstanding shares of common stock by reason of an extraordinary cash dividend.

 

On January 24, 2005, the closing price of AMO common stock on the NYSE was $39.90 per share.

 

United States Federal Income Tax Consequences

 

The following is a brief description of the United States federal income tax treatment which will generally apply to incentive awards made under the proposed plan, based on United States federal income tax laws currently in effect. The exact United States federal income tax treatment of an incentive award will depend on the specific nature of the incentive award. Such an incentive award may, depending on the conditions applicable to the incentive award, be taxable as an option, as restricted or unrestricted stock, as a cash payment, or otherwise. Employees that participate in the plan are advised to consult with their tax advisor for particular federal, as well as state and local, income and any other tax advice.

 

Incentive Stock Options. Pursuant to the proposed plan, employees may be granted options which are intended to qualify as ISOs under the provisions of Section 422 of the Internal Revenue Code. Generally, the optionee is not taxed and AMO is not entitled to a deduction on the grant or the exercise of an ISO. However, if the optionee sells the shares acquired upon the exercise of an ISO at any time within (a) one year after the date of transfer of ISO shares to the optionee pursuant to the exercise of the ISO or (b) two years after the date of grant of the ISO, then (1) the optionee will recognize capital gain equal to the excess, if any, of the sales price over the

 

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fair market value of the ISO shares on the date of exercise, (2) the optionee will recognize ordinary income equal to the excess, if any, of the lesser of the sales price or the fair market value of the ISO shares on the date of exercise, over the exercise price of the ISO, (3) the optionee will recognize capital loss equal to the excess, if any, of the exercise price of the ISO over the sales price of the ISO shares, and (4) AMO will generally be entitled to a deduction equal to the amount of ordinary income recognized by the optionee. If the optionee sells the ISO shares at any time after the optionee has held the ISO shares for at least (i) one year after the date of transfer of the ISO shares to the optionee pursuant to the exercise of the ISO and (ii) two years after the date of grant of the ISO, then the optionee will recognize capital gain or loss equal to the difference between the sales price and the exercise price of the ISO, and AMO will not be entitled to any deduction.

 

The amount by which the fair market value of the ISO shares received upon exercise of an ISO exceeds the exercise price will be included as a positive adjustment in the calculation of an optionee’s “alternative minimum taxable income,” or AMTI in the year of exercise. The “alternative minimum tax” imposed on individual taxpayers is generally equal to the amount by which 28% (26% of AMTI below certain amounts) of the individual’s AMTI (reduced by certain exemption amounts) exceeds his or her regular income tax liability for the year.

 

Nonqualified Options. The grant of an option or other similar right to acquire stock which does not qualify for treatment as an ISO is generally not a taxable event for the optionee. Upon exercise of the option, the optionee will generally recognize ordinary income in an amount equal to the excess of the fair market value of the stock acquired upon exercise (determined as of the date of the exercise) over the exercise price of the option, and AMO will be entitled to a tax deduction equal to that amount.

 

Restricted Stock. Incentive awards under the proposed plan may also include the grant or sale of restricted stock. Unless the recipient makes an election within 30 days after the receipt of the restricted stock, the recipient generally will not be taxed on the receipt of restricted stock until the restrictions on the stock expire or are removed. When the restrictions expire or are removed, the recipient will recognize ordinary income (and AMO will be entitled to a deduction) in an amount equal to the excess of the fair market value of the stock at that time over the purchase price (if any). However, if the recipient makes an election within 30 days of the receipt of restricted stock, he or she will recognize ordinary income (and AMO will be entitled to a deduction) equal to the excess of the fair market value of the stock on the date of receipt (determined without regard to vesting restrictions) over the purchase price (if any).

 

Stock Appreciation Rights. Recipients of stock appreciation rights, or SARs, generally do not recognize income upon the grant of the rights. When a participant elects to receive payment of a SAR, the participant recognizes ordinary income in an amount equal to the cash and fair market value of shares of common stock received, and AMO is entitled to a deduction equal to that amount.

 

Performance Awards, Dividends, and Dividend Equivalents. A payment made under a performance award (e.g., stock and cash bonuses), dividends and dividend equivalent payments are taxable as ordinary income when actually or constructively received by the recipient. As to any performance award paid in common stock, the amount taxable as ordinary income is the aggregate fair market value of the common stock determined as of the date received. AMO is entitled to deduct the amount of a performance award, dividends, and dividend equivalent payments when these amounts are taxable as compensation to the recipient.

 

Miscellaneous Tax Issues. Incentive awards may be granted under the plan which do not fall clearly into the categories described above. The United States federal income tax treatment of these incentive awards will depend upon the specific terms of the awards. Generally, AMO will be required to make arrangements for withholding applicable taxes with respect to any ordinary income recognized by a participant in connection with incentive awards made under the proposed plan. In addition, the American Jobs Creation Act of 2004 may change the tax treatment of incentive awards granted under the plan to the extent the incentive awards are subject to Section 409A of the Internal Revenue Code.

 

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Special rules will apply in cases where a recipient of an incentive award pays the exercise or purchase price of the incentive award or applicable withholding tax obligations under the proposed plan by delivering previously owned shares of common stock or by reducing the amount of shares otherwise issuable pursuant to the incentive award. The surrender or withholding of such shares will in certain circumstances result in the recognition of income with respect to such shares or a carryover basis in the shares acquired.

 

The proposed plan generally provides for accelerated vesting or payment of incentive awards in connection with a change in ownership or control. In that event and depending upon the individual circumstances of the recipient, certain amounts with respect to these awards may constitute “excess parachute payments” under the “golden parachute” provisions of the Internal Revenue Code. Pursuant to these provisions, a recipient will be subject to a 20% excise tax on any “excess parachute payment” and AMO will be denied any deduction with respect to the payment. Recipients of incentive awards are advised to consult their tax advisors as to whether accelerated vesting of an incentive award in connection with a change of ownership or control would give rise to an excess parachute payment.

 

AMO generally obtains a deduction equal to the ordinary income recognized by the recipient of an incentive award. AMO’s deduction for these amounts (including amounts attributable to the ordinary income recognized with respect to options, restricted stock, SARs, and performance awards) may be limited under Section 162(m) of the Internal Revenue Code to $1 million (per person) annually if this plan is not approved by AMO stockholders. The $1 million annual limit generally only applies to nonperformance-based compensation paid to AMO’s Chief Executive Officer and its other four most highly compensated officers.

 

New Plan Benefits

 

At this time AMO cannot determine the amount of incentive awards under the AMO 2005 Incentive Compensation Plan, if approved, that will be granted in the future to specific officers, officers as a group, or non-officer employees as a group. Grants under the AMO 2005 Incentive Compensation Plan will be made at the discretion of the committee and, accordingly, are not yet determinable. In addition, benefits under the AMO 2005 Incentive Compensation Plan will depend on a number of factors, including the fair market value of AMO common stock on future dates and the exercise decisions made by participants. Consequently, it is not possible to determine the benefits that might be received by participants of incentive awards that will be made thereunder during 2004 or the incentive awards that would have been made thereunder during 2003 had the AMO 2005 Incentive Compensation Plan been in effect.

 

Recent Accounting Development

 

On December 16, 2004, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standard (“SFAS”) No. 123 (revised), “Share-Based Payment.” This standard requires expensing of stock options and other share-based payments and supercedes the FASB’s earlier rule (the original SFAS 123) that had allowed companies to choose between expensing stock options or showing pro forma disclosure only. AMO will be required to implement the new pronouncement and begin recording share-based expense at the beginning of the third quarter of fiscal 2005.

 

The AMO board of directors recommends that stockholders vote “FOR” the approval of the AMO 2005 Incentive Compensation Plan.

 

Approval of this proposal is not a condition to the effectiveness of the merger. If AMO stockholders approve the AMO 2005 Incentive Compensation Plan but do not approve the proposal to issue shares of AMO common stock in the merger, the 2005 Incentive Compensation Plan will not be implemented and the 2002 Plan will remain in effect.

 

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Proposal 4

 

In June 2002, the AMO board of directors adopted, and AMO’s then sole stockholder subsequently approved, the AMO 2002 Employee Stock Purchase Plan, which, as amended and restated, is referred to as the ESPP. The aggregate number of shares initially reserved under the ESPP (together with shares reserved under the 2002 AMO International Stock Purchase Plan, which is referred to as the International ESPP, in the aggregate) was equal to the lesser of (i) 290,000 shares of common stock, or (ii) one percent of the shares of AMO common stock outstanding as of June 29, 2002, and increased once per year beginning October 1, 2003 by the lesser of (x) 290,000 shares of AMO common stock, or (y) one percent of the shares of AMO common stock outstanding as of the last day of the second quarter of the then current year as reported on AMO’s Form 10-Q for such quarter, such aggregate number reduced by the purchase rights granted under the International ESPP.

 

As of November 30, 2004, an aggregate of 401,061 shares of AMO common stock had been issued under the ESPP and International ESPP and only 466,174 shares of AMO common stock remained available for future issuance before the next scheduled annual increase.

 

On November 18, 2004, the AMO board of directors approved amendments to the ESPP that, subject to the approval of AMO stockholders, would:

 

    increase the number of shares available for issuance under the ESPP,

 

    extend the term of the ESPP, and

 

    reflect other administrative ESPP changes.

 

Reasons for the Amendments: Merger Commitments Will Prematurely Deplete Available Reserves.

 

AMO stockholders are being asked to approve an increase in ESPP and International ESPP shares on each November 1 beginning November 1, 2005, and ending (and including), November 1, 2014, by the lesser of (i) 400,000 shares of AMO common stock, or (ii) one percent of the shares of AMO common stock outstanding as of the last day of the second quarter of the then current year as reported on AMO’s Form 10-Q for such quarter in lieu of the increase on each October 1 beginning October 1, 2005, by the lesser of (i) 290,000 shares of common stock, or (ii) one percent of the shares of AMO common stock outstanding as of the last day of the second quarter of the then current year as reported on AMO’s Form 10-Q for such quarter. The AMO board of directors believes this increase in the number of shares available for issuance under the ESPP is necessary to accommodate the enrollment of VISX employees who will be entitled to participate in the ESPP and International ESPP within thirty days following completion of the merger. In the event the AMO stockholders do not approve the Amended and Restated AMO 2002 Employee Stock Purchase Plan and the Amended and Restated AMO 2002 International Stock Purchase Plan, the ESPP and the International ESPP will continue in accordance with their terms without giving effect to the amendments.

 

The following is a summary of the principal features of the ESPP, as amended and restated. The summary is qualified by and subject to the actual provisions of the Amended and Restated AMO 2002 Employee Stock Purchase Plan, a copy of which is attached to this joint proxy statement/prospectus as Annex D.

 

Summary of the ESPP

 

Purpose and Eligibility

 

The purposes of the ESPP are (i) to assist eligible employees of AMO and certain of its subsidiary corporations in acquiring ownership of shares of AMO common stock pursuant to a plan which is intended to qualify as an “employee stock purchase plan,” within the meaning of Section 423(b) of the Internal Revenue Code and (ii) to help these employees provide for their future security and to encourage them to remain in AMO’s employment.

 

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Employees are eligible to participate if they are employed by AMO or any designated subsidiary; provided, however, an employee may not be granted the right to purchase stock under the ESPP if the employee (i) immediately after the grant would own stock possessing 5% or more of the total combined voting power or value of all classes of AMO’s capital stock, or (ii) holds rights to purchase stock under any of AMO’s employee stock purchase plans that together accrue at a rate which exceeds $25,000 worth of stock for each calendar year. As of the AMO record date, a total of      employees have elected to participate in the ESPP.

 

Administration

 

The committee administers the ESPP and is composed of two or more persons appointed by the AMO board of directors. All committee members must be “non-employee directors” as defined by Rule 16b-3 under the Exchange Act. The committee has the power to interpret the ESPP and the terms of the purchase rights granted under the ESPP and to adopt rules for the administration, interpretation, and application of the ESPP as are consistent with the ESPP and to interpret, amend or revoke those rules.

 

Duration, Amendment and Termination

 

The AMO board of directors may alter, amend, suspend or terminate the ESPP at any time. However, the AMO board of directors may not take any action to increase the maximum number of shares that may be sold or issued under the plan or alter the class of eligible participants without the approval of the AMO stockholders and may not take any action to abbreviate the offering period then in effect, unless such action is in connection with a change in control or required in order for the ESPP to qualify as an “employee stock purchase plan” within the meaning of Section 423(b) of the Internal Revenue Code.

 

Unless earlier terminated by the AMO board of directors, the ESPP currently expires in June 2012. AMO stockholders are being asked to approve an amendment to the ESPP to extend the term until after the scheduled purchase under the ESPP occurs on October 31, 2015.

 

Offering Periods

 

The ESPP initially contained offering periods that commenced October 1 and April 1 of each year, and ended on March 31 and September 30, respectively. On August 15, 2004, the AMO board of directors amended the ESPP to provide that the offering period commencing on October 1, 2004, would end on April 30, 2005, and thereafter offering periods would commence on May 1 and November 1 of each year and end on April 30 and October 31, respectively.

 

Participation in the ESPP

 

The ESPP permits eligible employees to contribute up to 10% of the employee’s compensation through automatic payroll deductions. The maximum number of shares an employee may purchase during a single offering period is 10,000.

 

Purchase Price; Payment of Purchase Price

 

The price of AMO common stock offered under the ESPP is an amount equal to 85% of the lower of the fair market value of AMO common stock at the beginning or at the end of each offering period. The purchase price of the shares is accumulated by payroll deductions over the offering period.

 

Withdrawal; Termination of Employment

 

Employees may end their participation in the ESPP at any time during an offering period. In that event, any amounts withheld through payroll deductions and not otherwise used to purchase shares will be returned to them. Participation ends automatically upon termination of employment with AMO.

 

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Change in Control

 

In the event of a change in control of AMO, the committee will provide that all outstanding purchase rights under the plan will (i) continue, (ii) be assumed by the successor or survivor corporation, or a parent or subsidiary thereof, or (iii) be substituted for by similar purchase rights covering the stock of the successor or survivor corporation, or a parent or subsidiary thereof, with appropriate adjustments as to the number and kind of shares and prices. In the event that all outstanding purchase rights do not continue or are not assumed or substituted for, the committee will provide that all outstanding purchase rights will be exercised immediately prior to the change in control and the purchase rights will terminate immediately after they are exercised.

 

Securities Subject to Plan

 

Currently, a maximum of 2,900,000 shares of AMO common stock are authorized under the ESPP (together with the International ESPP). AMO stockholders are being asked to approve an increase in the number of shares subject to the ESPP on each November 1 beginning November 1, 2005, and ending (and including), November 1, 2014, by the lesser of (i) 400,000 shares of AMO common stock, or (ii) one percent of the shares of AMO common stock outstanding as of the last day of the second quarter of the then current year as reported on AMO’s Form 10-Q for such quarter in lieu of the increase on each October 1 beginning October 1, 2005, by the lesser of (i) 290,000 shares of AMO common stock, or (ii) one percent of the shares of AMO common stock outstanding as of the last day of the second quarter of the then current year as reported on AMO’s Form 10-Q for such quarter. If the proposal is approved by the AMO stockholders, a maximum of 4,867,235 shares of AMO common stock would be authorized under the ESPP (together with the International ESPP) through October 2015.

 

The maximum number of shares issuable under the ESPP, the number of shares or other securities subject to then outstanding purchase rights, and the price for each share or other securities subject to then outstanding purchase rights, will be appropriately and proportionately adjusted to reflect mergers, consolidations, sales or exchanges of all or substantially all of AMO’s properties, reorganizations, recapitalizations, reclassifications, stock dividends, stock splits, reverse stock splits, spin-offs or other distributions with respect to such shares of common stock (or any stock or securities received with respect to such common stock) or a reduction in the value of the outstanding shares of common stock by reason of an extraordinary cash dividend.

 

On January 24, 2005, the closing price of AMO common stock on the NYSE was $39.90 per share.

 

United States Federal Income Tax Consequences

 

The following is a brief description of the United States federal income tax treatment which will generally apply to shares of AMO common stock acquired under the ESPP, based on United States federal income tax laws currently in effect. Employees that participate in the ESPP are advised to consult with their tax advisor for particular United States federal, as well as state and local, income and any other tax advice.

 

Under the ESPP, no income will be taxable to a participant until the shares purchased under the ESPP are sold or otherwise disposed of. Upon sale or other disposition of the shares, the participant will generally be subject to tax and the amount of the tax will depend upon the holding period. If the shares are sold or otherwise disposed of more than two (2) years from the first day of the offering period and more than one (1) year from the date of transfer of the stock to the participant, then the participant will recognize ordinary income measured as the lesser of (i) the excess of the fair market value of the shares at the time of the sale or disposition over the purchase price, or (ii) an amount equal to 15% of the fair market value of the shares as of the first day of the offering period. Any additional gain will be treated as long-term capital gain. If the shares are sold or otherwise disposed of before the expiration of both of these holding periods, the participant will recognize ordinary income generally measured as the excess of the fair market value of the shares on the date the shares are purchased over the purchase price. Any additional gain or loss on the sale or disposition will be long-term or short-term capital gain or loss, depending on the holding period. AMO is not entitled to a deduction for amounts taxed as ordinary

 

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income or capital gain to a participant except to the extent ordinary income is recognized by participants upon a sale or disposition of shares prior to the expiration of the holding period(s) described above.

 

The ESPP is intended to comply with Section 423 of the Internal Revenue Code. The International ESPP is not intended to comply with Section 423 of the Code, but includes provisions to provide tax advantages to employees in the foreign jurisdictions where the International ESPP is offered. By complying with foreign rules, AMO did not want to risk disqualification of the ESPP under the Code, and therefore segregated the two plans to protect the United States benefit.

 

New Plan Benefits

 

At this time AMO cannot determine the amount of benefits under the Amended and Restated AMO 2002 Employee Stock Purchase Plan, if approved, that will be granted in the future, or that would have been made thereunder during 2003 had the ESPP been in effect, to specific officers, officers as a group, or non-officer employees as a group.

 

Recent Accounting Development

 

On December 16, 2004, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standard (“SFAS”) No. 123 (revised), “Share-Based Payment.” This standard requires expensing of stock options and other share-based payments and supercedes the FASB’s earlier rule (the original SFAS 123) that had allowed companies to choose between expensing stock options or showing pro forma disclosure only. AMO will be required to implement the new pronouncement and begin recording share-based expense at the beginning of the third quarter of fiscal 2005.

 

The AMO board of directors recommends that stockholders vote “FOR” the approval of the Amended and Restated AMO 2002 Employee Stock Purchase Plan.

 

Approval of this proposal is not a condition to the effectiveness of the merger. If AMO stockholders approve the Amended and Restated AMO 2002 Employee Stock Purchase Plan but do not approve the proposal to issue shares of AMO common stock in the merger, the Amended and Restated AMO 2002 Employee Stock Purchase Plan will not be implemented and the AMO 2002 Employee Stock Purchase Plan will remain as currently in effect.

 

Proposal 5

 

In June 2002, the AMO board of directors adopted, and AMO’s then sole stockholder subsequently approved, the AMO 2002 International Stock Purchase Plan, which, as amended and restated, is referred to as the International ESPP. The aggregate number of shares initially reserved under the International ESPP (together with shares reserved under the ESPP, in the aggregate) was equal to the lesser of (i) 290,000 shares of AMO common stock, or (ii) one percent of the shares of AMO common stock outstanding as of the June 29, 2002, and increased once per year beginning October 1, 2003 by the lesser of (x) 290,000 shares of AMO common stock, or (y) one percent of the shares of AMO common stock outstanding as of the last day of the second quarter of the then current year as reported on AMO’s Form 10-Q for such quarter, such aggregate number reduced by the purchase rights granted under the ESPP.

 

As of November 30, 2004, an aggregate of 401,061 shares of AMO common stock had been issued under the International ESPP and ESPP and only 466,174 shares of AMO common stock remained available for future issuance before the next scheduled annual increase.

 

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On November 18, 2004, the AMO board of directors approved amendments to the International ESPP that, subject to the approval of the AMO stockholders, would:

 

    increase the number of shares available for issuance under the International ESPP,

 

    extend the term of the International ESPP, and

 

    reflect other administrative International ESPP changes.

 

Reasons for the Amendments: Merger Commitments Will Prematurely Deplete Available Reserves.

 

AMO stockholders are being asked to approve an increase in International ESPP and ESPP shares on each November 1 beginning November 1, 2005, and ending (and including), November 1, 2014, by the lesser of (i) 400,000 shares of AMO common stock, or (ii) one percent of the shares of AMO common stock outstanding as of the last day of the second quarter of the then current year as reported on AMO’s Form 10-Q for such quarter in lieu of the increase on each October 1 beginning October 1, 2005, by the lesser (i) 290,000 shares of AMO common stock, or (ii) one percent of the shares of AMO common stock outstanding as of the last day of the second quarter of the then current year as reported on AMO’s Form 10-Q for such quarter. The AMO board of directors believes this increase in the number of shares available for issuance under the International ESPP is necessary to accommodate the enrollment of VISX employees who will be entitled to participate in the International ESPP within thirty days following completion of the merger. In the event the AMO stockholders do not approve the Amended and Restated AMO 2002 Employee Stock Purchase Plan and the Amended and Restated AMO 2002 International Stock Purchase Plan, the ESPP and the International ESPP will continue in accordance with their terms without giving effect to the amendments.

 

The following is a summary of the principal features of the International ESPP, as amended and restated. The summary is qualified by and subject to the actual provisions of the Amended and Restated AMO 2002 International Stock Purchase Plan, a copy of which is attached to this joint proxy statement/prospectus as Annex E.

 

Summary of the International Stock Purchase Plan

 

Purpose and Eligibility

 

The purposes of the International ESPP are (i) to assist eligible employees of certain of AMO’s subsidiary corporations outside of the United States in acquiring ownership of shares of AMO common stock and (ii) to help these employees provide for their future security and to encourage them to remain in AMO’s employment.

 

Employees are eligible to participate if they are employed by any designated subsidiary; provided, however, an employee may not be granted the right to purchase stock under the International ESPP if the employee (i) immediately after the grant would own stock possessing 5% or more of the total combined voting power or value of all classes of AMO’s capital stock, or (ii) holds rights to purchase stock under any of AMO’s employee stock purchase plans that together accrue at a rate which exceeds $25,000 worth of stock for each calendar year. As of the AMO record date, a total of              employees have elected to participate in the International ESPP.

 

Administration

 

The committee administers the International ESPP and is composed of two or more persons appointed by the AMO board of directors. All committee members must be “non-employee directors” as defined by Rule 16b-3 under the Exchange Act. The committee has the power to interpret the International ESPP and the terms of the purchase rights granted under the International ESPP and to adopt rules for the administration, interpretation, and application of the International ESPP as are consistent with the International ESPP and to interpret, amend or revoke those rules.

 

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Duration, Amendment and Termination

 

The AMO board of directors may alter, amend, suspend or terminate the International ESPP at any time. However, the AMO board of directors may not take any action to increase the maximum number of shares that may be sold or issued under the plan or alter the class of eligible participants without the approval of the AMO stockholders and may not take any action to abbreviate the offering period then in effect, unless such action is in connection with a change in control or the offering period under the ESPP is abbreviated in order for the ESPP to qualify as an “employee stock purchase plan” within the meaning of Section 423(b) of the Internal Revenue Code.

 

Unless earlier terminated by the AMO board of directors, the International ESPP currently expires in June 2012. AMO stockholders are being asked to approve an amendment to the International ESPP to extend the term until after the scheduled purchase under the International ESPP occurs on October 31, 2015.

 

Offering Periods

 

The International ESPP initially contained offering periods that commenced October 1 and April 1 of each year, and ended on March 31 and September 30, respectively. On August 15, 2004, the AMO board of directors amended the International ESPP to provide that the offering period commencing on October 1, 2004, would end on April 30, 2005, and thereafter offering periods would commence on May 1 and November 1 of each year and end on April 30 and October 31, respectively.

 

Participation in the International ESPP

 

The International ESPP permits eligible employees to contribute up to 10% of the employee’s compensation through automatic payroll deductions. The maximum number of shares an employee may purchase during a single offering period is 10,000.

 

Purchase Price; Payment of Purchase Price

 

The price of AMO common stock offered under the International ESPP is an amount equal to 85% of the lower of the fair market value of AMO common stock at the beginning or at the end of each offering period. The purchase price of the shares is accumulated by payroll deductions over the offering period.

 

Withdrawal; Termination of Employment

 

Employees may end their participation in the International ESPP at any time during an offering period. In that event, any amounts withheld through payroll deductions and not otherwise used to purchase shares will be returned to them. Participation ends automatically upon termination of employment with AMO.

 

Change in Control

 

In the event of a change in control of AMO, the committee will provide that all outstanding purchase rights under the plan will (i) continue, (ii) be assumed by the successor or survivor corporation, or a parent or subsidiary thereof, or (iii) be substituted for by similar purchase rights covering the stock of the successor or survivor corporation, or a parent or subsidiary thereof, with appropriate adjustments as to the number and kind of shares and prices. In the event that all outstanding purchase rights do not continue or are not assumed or substituted for, the committee will provide that all outstanding purchase rights will be exercised immediately prior to the change in control and the purchase rights will terminate immediately after they are exercised.

 

Securities Subject to Plan

 

The International ESPP and ESPP share the same share reserve. Currently, a maximum of 2,900,000 shares of AMO common stock are authorized under the International ESPP (together with the ESPP). AMO

 

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stockholders are being asked to approve an increase in the number of shares subject to the International ESPP on each November 1 beginning November 1, 2005, and ending (and including), November 1, 2014, by the lesser of (i) 400,000 shares of AMO common stock, or (ii) one percent of the shares of AMO common stock outstanding as of the last day of the second quarter of the then current year as reported on AMO’s Form 10-Q for such quarter in lieu of the increase on each October 1 beginning October 1, 2005, by the lesser of (i) 290,000 shares of AMO common stock, or (ii) one percent of the shares of AMO common stock outstanding as of the last day of the second quarter of the then current year as reported on AMO’s Form 10-Q for such quarter. If the proposal is approved by the AMO stockholders, a maximum of 4,867,235 shares of AMO common stock would be authorized under the International ESPP (together with the ESPP) through October 2015.

 

The maximum number of shares issuable under the International ESPP, the number of shares or other securities subject to then outstanding purchase rights, and the price for each share or other securities subject to then outstanding purchase rights, will be appropriately and proportionately adjusted to reflect mergers, consolidations, sales or exchanges of all or substantially all of AMO’s properties, reorganizations, recapitalizations, reclassifications, stock dividends, stock splits, reverse stock splits, spin-offs or other distributions with respect to such shares of AMO common stock (or any stock or securities received with respect to such common stock) or a reduction in the value of the outstanding shares of AMO common stock by reason of an extraordinary cash dividend.

 

On January 24, 2005, the closing price of AMO common stock on the NYSE was $39.90 per share.

 

New Plan Benefits

 

At this time AMO cannot determine the amount of benefits under the Amended and Restated AMO 2002 International Stock Purchase Plan, if approved, that will be granted in the future, or that would have been made thereunder during 2003 had the International ESPP been in effect, to specific officers, officers as a group, or non-officer employees as a group.

 

Recent Accounting Development

 

On December 16, 2004, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standard (“SFAS”) No. 123 (revised), “Share-Based Payment.” This standard requires expensing of stock options and other share-based payments and supercedes the FASB’s earlier rule (the original SFAS 123) that had allowed companies to choose between expensing stock options or showing pro forma disclosure only. AMO will be required to implement the new pronouncement and begin recording share-based expense at the beginning of the third quarter of fiscal 2005.

 

The AMO board of directors recommends that stockholders vote “FOR” the approval of the Amended and Restated AMO 2002 International Stock Purchase Plan.

 

Approval of this proposal is not a condition to the effectiveness of the merger. If AMO stockholders approve the Amended and Restated AMO 2002 International Stock Purchase Plan but do not approve the proposal to issue shares of AMO common stock in the merger, the Amended and Restated AMO 2002 International Stock Purchase Plan will not be implemented and the AMO 2002 International Stock Purchase Plan will remain as currently in effect.

 

Equity Compensation Plans Approved by Stockholders

 

All of AMO’s equity compensation plans were approved by Allergan, Inc., as AMO’s sole stockholder, prior to AMO’s spin-off from Allergan, and AMO stockholders also approved the 2002 Incentive Compensation Plan at the AMO 2003 annual stockholders meeting, and approved its amendment at the AMO 2004 annual stockholders meeting.

 

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The following table sets forth, for each of our equity compensation plans, the number of outstanding option grants and the number of shares remaining available for issuance as of the end of fiscal 2004.

 

Equity Compensation Plan Information

 

Category of Plan


  

Number of
Securities

to be Issued
Upon

Exercise of
Outstanding
Options (1)


   Weighted
Average
Exercise
Price of
Outstanding
Options


  

Number of
Securities
Remaining
Available

for Future
Issuance
Under Equity
Compensation
Plans (2)


Equity Compensation Plans Approved by Security Holders

   5,734,466    $ 15.642    2,645,072

Equity Compensation Plans Not Approved by Security Holders

   0      —      0
    
  

  

Total

   5,734,466    $ 15.642    2,645,072

(1) Includes 1,718,222 options which remain outstanding under the AMO 2002 Incentive Compensation Plan, and which were issued upon conversion of Allergan stock options as a consequence of AMO’s spin-off. Does not include an aggregate of 19,880 shares of restricted stock issued under such Plan.
(2) Includes 466,174 shares currently authorized for issuance, in the aggregate, under our 2002 Employee Stock Purchase Plan and 2002 International Stock Purchase Plan. These plans contain evergreen features which provide that each year on October 1 (though October 1, 2011), the number of authorized shares (for both plans, on an aggregate basis) increases by the lesser of 290,000 shares or 1% of our shares of common stock outstanding. Also includes 149,196 shares authorized for issuance under our Irish Savings Related Share Option Scheme and 150,000 shares authorized for issuance under our AMO (Ireland) Share Participation Scheme. All of such shares have been registered with the SEC. Does not include an aggregate of 19,880 shares of restricted stock issued under the 2002 Incentive Compensation Plan.

 

Record Date; Outstanding Shares; Voting Rights

 

Only holders of record of AMO common stock at the close of business on the AMO record date, Wednesday, January 26, 2005, are entitled to notice of and to vote at the AMO special meeting. As of the AMO record date, there were              shares of AMO common stock outstanding and entitled to vote at the special meeting, held by approximately              holders of record. Each holder of AMO common stock on the AMO record date is entitled to one vote for each share of AMO common stock owned as of the AMO record date.

 

A list of AMO stockholders will be available for review at the AMO special meeting and at the executive offices of AMO during regular business hours for a period of ten days before the AMO special meeting.

 

Admission to the Special Meeting

 

Only AMO stockholders, their designated proxies and guests of AMO may attend the AMO special meeting. If you plan to attend the AMO special meeting and wish to vote in person, you will be given a ballot at the special meeting. Please note, however, that if your shares are held in “street name,” which means your shares are held of record by a broker, bank or other nominee, and you wish to vote at the AMO special meeting, you must bring to the special meeting a proxy from the record holder of the shares authorizing you to vote at the AMO special meeting.

 

Quorum and Vote Required

 

A quorum of stockholders is necessary to hold a valid special meeting of AMO stockholders. The required quorum for the transaction of business at the AMO special meeting is a majority of the outstanding shares of AMO common stock entitled to vote and present, whether in person or by proxy, at the AMO special meeting.

 

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All shares of AMO common stock represented at the AMO special meeting, including abstentions and “broker non-votes” will be treated as shares that are present and entitled to vote for purposes of determining the presence of a quorum. “Broker non-votes” are shares held by a broker or other nominee that are represented at the meeting, but with respect to which the broker or nominee is not instructed by the beneficial owner of the shares to vote on the particular proposal and the broker does not have discretionary voting power on the proposal.

 

Proposal 1

 

In accordance with NYSE listing requirements, the approval of the issuance of shares of AMO common stock in the merger requires the affirmative vote of the holders of a majority of shares of AMO common stock cast on such proposal, in person or by proxy, provided that the total vote cast on the proposal represents over 50% of the outstanding shares of AMO common stock entitled to vote on the proposal. Votes “for,” votes “against” and abstentions count as votes cast, while broker non-votes do not count as votes cast. All outstanding shares of AMO common stock, including broker non-votes, count as shares entitled to vote. Thus the total sum of votes “for,” plus votes “against,” plus abstentions, which is referred to as the NYSE votes cast, must be greater than 50% of the total outstanding shares of AMO common stock. Once this requirement is satisfied, the number of votes “for” the proposal must be greater than 50% of NYSE votes cast. Brokers and other nominees will not have discretionary voting authority on this proposal and thus broker non-votes will result from this proposal. Broker non-votes could have a negative effect on AMO’s ability to obtain the necessary number of NYSE votes cast. An abstention will have the same effect as a vote against the proposal.

 

Proposal 2

 

In accordance with the requirements of the DGCL, approval of the amendment to the AMO certificate of incorporation to increase the number of authorized shares of AMO common stock requires the affirmative vote of the holders of a majority of the shares of outstanding AMO common stock and entitled to vote on the proposal. For this proposal, an abstention will have the same effect as a vote against the proposal. It is expected that brokers and other nominees will have discretionary voting authority on this proposal and thus broker non-votes will not result from this proposal.

 

Proposal 3

 

In accordance with NYSE listing requirements, the approval of the AMO 2005 Incentive Compensation Plan requires the affirmative vote of the holders of a majority of shares of AMO common stock cast on such proposal, in person or by proxy, provided that the total vote cast on the proposal represents over 50% of the outstanding shares of AMO common stock entitled to vote on the proposal. Votes “for,” votes “against” and abstentions count as votes cast, while broker non-votes do not count as votes cast. All outstanding shares of AMO common stock, including broker non-votes, count as shares entitled to vote. Thus the total NYSE votes cast must be greater than 50% of the total outstanding shares of AMO common stock. Once this requirement is satisfied, the number of votes “for” the proposal must be greater than 50% of NYSE votes cast. It is expected that brokers and other nominees will not have discretionary voting authority on this proposal and thus broker non-votes will result from this proposal. Broker non-votes could have a negative effect on AMO’s ability to obtain the necessary number of NYSE votes cast. An abstention will have the same effect as a vote against the proposal.

 

Proposal 4

 

The approval of the Amended and Restated AMO 2002 Employee Stock Purchase Plan requires the affirmative vote of the holders of a majority of shares of AMO common stock cast on such proposal, in person or by proxy, provided that the total vote cast on the proposal represents over 50% of the outstanding shares of AMO common stock entitled to vote on the proposal. Votes “for,” votes “against” and abstentions count as votes cast, while broker non-votes do not count as votes cast. All outstanding shares of AMO common stock, including broker non-votes, count as shares entitled to vote. Thus the total sum of votes “for,” plus votes “against,” plus

 

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abstentions, which is referred to as the votes cast, must be greater than 50% of the total outstanding shares of AMO common stock. Once this requirement is satisfied, the number of votes “for” the proposal must be greater than 50% of votes cast. It is expected that brokers and other nominees will not have discretionary voting authority on this proposal and thus broker non-votes will result from this proposal. Broker non-votes could have a negative effect on AMO’s ability to obtain the necessary number of votes cast. An abstention will have the same effect as a vote against the proposal.

 

Proposal 5

 

In order to approve the Amended and Restated AMO 2002 International Stock Purchase Plan, AMO is seeking the affirmative vote of the holders of a majority of shares of AMO common stock cast on such proposal, in person or by proxy, provided that the total vote cast on the proposal represents over 50% of the outstanding shares of AMO common stock entitled to vote on the proposal. Votes “for,” votes “against” and abstentions count as votes cast, while broker non-votes do not count as votes cast. All outstanding shares of AMO common stock, including broker non-votes, count as shares entitled to vote. Thus the total votes cast must be greater than 50% of the total outstanding shares of AMO common stock. Once this requirement is satisfied, the number of votes “for” the proposal must be greater than 50% of votes cast. It is expected that brokers and other nominees will not have discretionary voting authority on this proposal and thus broker non-votes will result from this proposal. Broker non-votes could have a negative effect on AMO’s ability to obtain the necessary number of votes cast. An abstention will have the same effect as a vote against the proposal.

 

Voting by AMO Directors and Executive Officers

 

As of the AMO record date, the directors and executive officers of AMO as a group beneficially owned and were entitled to vote approximately              shares of AMO common stock, or approximately         % of the AMO common stock on that date.

 

Voting; Proxies, Revocation

 

General

 

AMO stockholders of record as of the AMO record date (including participants in the AMO Company Stock Fund of the AMO 401(k) Plan) may vote their shares by attending the AMO special meeting and voting their shares in person, by completing, signing and dating their proxy cards and mailing them in the enclosed pre-addressed envelopes, or by using the 24-hour a day telephone or Internet voting options. AMO stockholders holding shares of AMO common stock in “street name,” which means that their shares are held of record by a broker or nominee, may vote by mail by completing, signing and dating the voting instruction forms for the AMO special meeting provided by their brokers or nominees and returning their voting instruction forms to the record holders of their shares. Even if you plan to attend the meeting, AMO recommends that you vote prior to the meeting. You can always change your vote as described below.

 

Voting by Proxy

 

All properly signed proxies that are received prior to the AMO special meeting and that are not revoked will be voted at the special meeting according to the instructions indicated on the proxies. If you do not specify how you wish AMO to vote your shares, your shares will be voted “FOR” approval of the issuance of shares of AMO common stock in the merger, “FOR” approval of the amendment to AMO certificate of incorporation to increase the number of authorized shares of AMO common stock, “FOR” approval of the AMO 2005 Incentive Compensation Plan, “FOR” approval of the Amended and Restated AMO 2002 Employee Stock Purchase Plan, and “FOR” approval of the Amended and Restated AMO 2002 International Stock Purchase Plan. Proxy holders will also vote shares according to their discretion on any other matter properly brought before the meeting.

 

You may receive more than one proxy card depending on how you hold your shares. Generally, you need to either call the toll–free number, vote by accessing the Internet, or sign and return all of your proxy cards to vote

 

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all of your shares. For example, if you hold shares through someone else, such as a stockbroker, you may get proxy material from that person. Shares registered in your name and shares held in the AMO 401(k) Plan are covered by a separate proxy card. If a proxy card representing shares in the AMO 401(k) Plan is not voted, those shares will be voted by the trustee of the plan in accordance with the direction of AMO’s corporate benefits committee.

 

As of November 30, 2004, there were approximately 477,324 shares of AMO common stock held by employees of AMO through the AMO 401(k) Plan. Each share of AMO common stock held by this plan will be voted by the trustee of the plan in accordance with the instructions it receives from the respective plan participant. Shares of AMO common stock for which the trustee has not received instructions from the respective plan participant, or for which the plan participant has revoked his or her proxy before the special meeting, will be considered unvoted. All unvoted shares of common stock in the plan will be voted at the AMO special meeting by the trustee as instructed by AMO’s corporate benefits committee.

 

Changing Your Vote

 

AMO stockholders may change their votes at any time prior to the vote at the AMO special meeting. AMO stockholders of record may change their votes by granting new proxies bearing a later date (which automatically revoke the earlier proxies) or by attending the AMO special meeting and voting in person. Attendance at the AMO special meeting in and of itself will not cause previously granted proxies to be revoked, unless AMO stockholders so request. AMO stockholders may also revoke their proxies by notifying the Secretary of AMO in writing. Written notices of revocation and other communications with respect to revocation of AMO proxies should be addressed to:

 

Advanced Medical Optics, Inc.

1700 East St. Andrew Place

Santa Ana, CA 92705

Attn: Secretary

 

AMO stockholders who hold their AMO shares in street name may change their votes by submitting new voting instructions to the record holders of their shares or by attending the AMO special meeting and voting in person, provided that they have obtained a signed legal proxy from the record holders of their shares giving them the right to vote their shares at the AMO special meeting. AMO stockholders who hold their shares in street name should contact the record holders of their shares for information about obtaining legal proxies for the AMO special meeting.

 

Abstentions and Broker Non-Votes

 

For Proposal 1, abstentions will have the same effect as voting against approval of the issuance of shares of AMO common stock in the merger and broker non-votes could have a negative effect on AMO’s ability to obtain the necessary number of NYSE votes cast.

 

For Proposal 2, abstentions will have the same effect as voting against approval of the amendment to the AMO certificate of incorporation to increase the authorized number of shares of AMO common stock.

 

For Proposal 3, abstentions will have the same effect as voting against approval of the AMO 2005 Incentive Compensation Plan and broker non-votes could have a negative effect on AMO’s ability to obtain the necessary quorum for the vote.

 

For Proposal 4, abstentions will have the same effect as voting against approval of the Amended and Restated AMO 2002 Employee Stock Purchase Plan and broker non-votes could have a negative effect on AMO’s ability to obtain the necessary quorum for the vote.

 

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For Proposal 5, abstentions will have the same effect as voting against approval of the Amended and Restated AMO 2002 International Stock Purchase Plan and broker non-votes could have a negative effect on AMO’s ability to obtain the necessary quorum for the vote.

 

Under the listing requirements of the NYSE, brokers who hold shares of AMO common stock in “street name” for a beneficial owner of those shares typically have the authority to vote in their discretion on “routine” proposals when they have not received instructions from beneficial owners. However, brokers are not allowed to exercise their voting discretion with respect to the approval of matters which the NYSE determines to be “non- routine,” such as approval of the issuance of shares of AMO common stock in the merger, without specific instructions from the beneficial owner. These non-voted shares are referred to as “broker non-votes.” If your broker holds your AMO common stock in “street name,” your broker will vote your shares only if you provide instructions on how to vote by filling out the voter instruction form sent to you by your broker with this joint proxy statement/prospectus.

 

Proxy Solicitation

 

AMO is soliciting proxies for the AMO special meeting from AMO stockholders. AMO will bear the entire cost of soliciting proxies from AMO stockholders, except that AMO and VISX have each agreed to share equally all expenses incurred in connection with the filing with the SEC of the registration statement of which this joint proxy statement/prospectus forms a part, and the printing and mailing of this joint proxy statement/prospectus and related proxy materials. In addition to the solicitation of proxies by mail, AMO will request that brokers, banks and other nominees send proxies and proxy materials to the beneficial owners of AMO common stock held by them and secure their voting instructions, if necessary. AMO will reimburse those record holders for their reasonable expenses. AMO has also made arrangements with MacKenzie Partners, Inc. to assist it in soliciting proxies, and has agreed to pay a fee of approximately $9,500 plus expenses for those services. AMO also may use several of its regular employees, who will not be specially compensated, to solicit proxies from AMO stockholders, either personally or by telephone, Internet, telegram, facsimile or special delivery letter.

 

Please do not send in any AMO stock certificates with your proxy cards or voting instruction forms.

 

Postponements and Adjournments

 

Postponements and adjournments may be made for the purpose of, among other things, soliciting additional proxies. An adjournment may be made from time to time by approval of the holders of shares representing a majority of the votes present in person or by proxy at the special meeting, whether or not a quorum exists, without further notice other than by an announcement made at the special meeting. AMO does not currently intend to seek an adjournment of the AMO special meeting.

 

Assistance

 

If you need assistance in completing your proxy card or have questions regarding the AMO special meeting, please contact AMO Investor Relations at (714) 247-8200 or write to Advanced Medical Optics, Inc., 1700 East St. Andrew Place, Santa Ana, CA 92705, Attn: Investor Relations, or contact MacKenzie Partners, Inc. toll-free at (800) 322-2885, or collect for banks and brokers at (212) 929-5500.

 

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THE VISX SPECIAL MEETING

 

Date, Time and Place

 

The special meeting of VISX stockholders will be held on            , 2005, at              a.m. local time at VISX’s principal executive offices located at 3400 Central Expressway, Santa Clara, California 95051.

 

Purpose; Other Matters

 

At the VISX special meeting, the VISX stockholders will be asked to consider and vote upon a proposal to approve and adopt the merger agreement and approve the merger contemplated by the merger agreement. VISX stockholders will also be asked to consider and vote upon such other business as may properly come before the special meeting, or any adjournment or postponement of the special meeting. VISX is not aware of any business to be acted upon at the VISX special meeting other than the proposals set forth in this joint proxy statement/prospectus. If, however, other matters incident to the conduct of the special meeting are properly brought before the VISX special meeting, or any adjournment or postponement of the special meeting, the persons named as proxies will vote in accordance with their best judgment with respect to those matters. If you vote “AGAINST” the proposal, the proxies are not authorized to vote for any adjournments, postponements, continuations or reschedulings of the meeting, including for the purpose of soliciting additional proxies, unless you so indicate by marking the appropriate box on the proxy card.

 

Recommendation of the VISX Board of Directors

 

After careful consideration, the VISX board of directors, having unanimously determined that the merger is advisable, fair to and in the best interests of VISX and its stockholders, unanimously approved the merger agreement and the merger contemplated by the merger agreement. Accordingly, the VISX board of directors unanimously recommends that VISX’s stockholders vote “FOR” the proposal to approve and adopt the merger agreement and the merger contemplated by the merger agreement.

 

Record Date; Outstanding Shares; Voting Rights

 

Holders of record of VISX common stock at the close of business on the VISX record date, Wednesday, January 26, 2005, are entitled to notice of, and to vote at, the VISX special meeting. As of the VISX record date, there were      shares of VISX common stock outstanding and entitled to vote at the special meeting, held by approximately      holders of record. Each holder of VISX common stock on the VISX record date is entitled to one vote for each share of VISX common stock owned as of the VISX record date on the proposal to approve and adopt the merger agreement and the merger contemplated by the merger agreement.

 

A list of VISX stockholders will be available for review at the VISX special meeting and at the executive offices of VISX during regular business hours for a period of ten days before the VISX special meeting.

 

Admission to the Special Meeting

 

Only VISX stockholders, including joint holders, as of the close of business on the VISX record date and other persons holding valid proxies for the special meeting will be entitled to attend the special meeting. All stockholders and their proxies should be prepared to present photo identification. In addition, record holders’ names are subject to verification against the list of record holders on the record date prior to being admitted to the special meeting. VISX stockholders who are not record holders but hold shares through a broker or nominee (i.e., in “street name”) should be prepared to provide proof of beneficial ownership on the record date, such as a recent account statement prior to the VISX record date, or similar evidence of ownership. Persons who do not provide photo identification or comply with the other procedures outlined above upon request may not be admitted to the special meeting. If you plan to attend the VISX special meeting and wish to vote in person, you will be given a ballot at the special meeting.

 

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Quorum and Vote Required

 

A quorum of stockholders is necessary to hold a valid meeting of VISX stockholders. A majority of the shares of VISX common stock issued and outstanding and entitled to vote on the record date must be present in person or by proxy at the VISX special meeting for a quorum to be established.

 

Approval and adoption of the merger agreement and approval of the merger will require the affirmative vote of the holders of a majority of the shares of VISX common stock outstanding on the VISX record date.

 

Voting by VISX Directors and Executive Officers

 

As of the VISX record date for the VISX special meeting, the directors and executive officers of VISX and their affiliates beneficially owned and were entitled to vote approximately      shares of VISX common stock, which represents approximately     % of the shares of VISX common stock outstanding on that date.

 

Voting; Proxies, Revocation

 

General

 

VISX stockholders of record may vote their shares by attending the VISX special meeting and voting their shares in person, by completing, signing and dating their proxy cards and mailing them in the enclosed pre-addressed envelopes, or by using the 24-hour a day telephone or Internet voting options. VISX stockholders holding shares of VISX common stock in “street name,” which means that their shares are held of record by a broker or nominee, may vote by mail by completing, signing and dating the voting instruction forms for the VISX special meeting provided by their brokers or nominees and returning their voting instruction forms to the record holders of their shares. Even if you plan to attend the meeting, VISX recommends that you vote prior to the meeting. You can always change your vote as described below.

 

Voting by Proxy

 

All properly signed proxies that are received prior to the VISX special meeting and that are not revoked will be voted at the special meeting according to the instructions indicated on the proxies. If VISX stockholders of record do not include instructions on how to vote their properly signed proxy cards for the VISX special meeting, their shares will be voted “FOR” the proposal to approve and adopt the merger agreement and the merger contemplated by the merger agreement.

 

You may receive more than one proxy card depending on how you hold your shares. Generally, you need to either call the toll–free number, vote by accessing the Internet, or sign and return all of your proxy cards to vote all of your shares. For example, if you hold shares through someone else, such as a stockbroker, you may get proxy material from that person.

 

Changing Your Vote

 

VISX stockholders may change their votes at any time prior to the vote at the VISX special meeting. VISX stockholders of record may change their votes by granting new proxies bearing a later date (which automatically revoke the earlier proxies) or by attending the VISX special meeting and voting in person. Attendance at the VISX special meeting in and of itself, will not cause previously granted proxies to be revoked, unless VISX stockholders so request. VISX stockholders may also revoke their proxies by notifying the Secretary of VISX in writing. Written notices of revocation and other communications with respect to revocation of VISX proxies should be addressed to:

 

VISX, Incorporated

3400 Central Expressway

Santa Clara, California 95051

Attn: Secretary

 

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VISX stockholders who hold their VISX shares in street name may change their votes by submitting new voting instructions to the record holders of their shares or by attending the VISX special meeting and voting in person, provided that they have obtained a signed legal proxy from the record holders of their shares giving them the right to vote their shares at the VISX special meeting. VISX stockholders who hold their shares in street name should contact the record holders of their shares for information about obtaining legal proxies for the VISX special meeting.

 

Abstentions and Broker Non-Votes

 

Abstentions and “broker non-votes” will be counted for the purpose of determining whether a quorum is present at the VISX special meeting. Under the listing requirements of the NYSE, brokers who hold shares of VISX common stock in “street name” for a beneficial owner of those shares typically have the authority to vote in their discretion on “routine” proposals when they have not received instructions from beneficial owners. However, brokers are not allowed to exercise their voting discretion with respect to the approval of matters which the NYSE determines to be “non-routine,” such as the proposal to approve and adopt the merger agreement and the merger contemplated by the merger agreement, without specific instructions from the beneficial owner. These non-voted shares are referred to as “broker non-votes.” If a broker holds a VISX stockholder’s common stock in “street name,” that broker will vote shares held in “street name” only to the extent the VISX stockholder provides instructions on how to vote by filling out the voting instruction form sent by the broker with this joint proxy statement/prospectus. Shares held by a broker or nominee that are not voted because the customer has not provided instructions to the broker or nominee will have the same effect as a vote “against” the proposal.

 

For the purpose of determining whether the proposal to approve and adopt the merger agreement and to approve the merger contemplated by the merger agreement has received the requisite number of affirmative votes, abstentions will be counted and have the same effect as a vote “against” the proposal. Failing to vote will also have the same effect as a vote “against” the proposal.

 

Postponements and Adjournments

 

Postponements and adjournments may be made for the purpose of, among other things, soliciting additional proxies. Pursuant to the VISX bylaws, VISX stockholders present in person or represented by proxy at the VISX special meeting have the power to adjourn the meeting without notice other than announcement at the meeting.

 

Proxy Solicitation

 

VISX is soliciting proxies for the VISX special meeting from VISX stockholders. VISX will bear the entire cost of soliciting proxies from VISX stockholders, except that VISX and AMO have each agreed to share equally all expenses incurred in connection with the filing with the SEC of the registration statement of which this joint proxy statement/prospectus forms a part, and the printing and mailing of this joint proxy statement/prospectus and related proxy materials. In addition to the solicitation of proxies by mail, VISX will request that brokers, banks and other nominees send proxies and proxy materials to the beneficial owners of VISX common stock held by them and secure their voting instructions, if necessary. VISX will reimburse those record holders for their reasonable expenses. VISX has also made arrangements with MacKenzie Partners, Inc. to assist it in soliciting proxies, and has agreed to pay a fee of approximately $12,000 plus expenses for those services. VISX also may use several of its regular employees, who will not be specially compensated, to solicit proxies from VISX stockholders, either personally or by telephone, Internet, telegram, facsimile or special delivery letter.

 

Please do not send in any VISX stock certificates with your proxy cards or voting instruction forms.         , the exchange agent for the merger, will send transmittal forms with instructions for the surrender of certificated representing shares of VISX common stock to former VISX stockholders shortly after the merger is completed.

 

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If you hold your shares of VISX common stock in book entry, instructions for the exchange of your shares for the merger consideration will be included in the transmittal forms sent to you by the exchange agent.

 

Assistance

 

If you need assistance in completing your proxy card or have questions regarding the VISX special meeting, please contact VISX Investor Relations at (408) 773-7600 or write to VISX, Incorporated, 3400 Central Expressway, Santa Clara, CA 95051, Attn: Investor Relations, or contact MacKenzie Partners, Inc. toll-free at (800) 322-2885, or collect for banks and brokers at (212) 929-5500.

 

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THE MERGER

 

The following is a description of the material aspects of the merger, including the merger agreement. While AMO and VISX believe that the following description covers the material terms of the merger, the description may not contain all of the information that is important to you. AMO and VISX encourage you to read carefully this entire joint proxy statement/prospectus, including the merger agreement attached to this joint proxy statement/prospectus as Annex A, for a more complete understanding of the merger.

 

Background of the Merger

 

Over the past several years, the VISX board of directors and members of VISX management have worked to secure VISX’s future by broadening its product offerings and geographical presence. As part of this process, the VISX board of directors and VISX management have considered a range of strategic alternatives, including the following:

 

    a stand-alone scenario whereby VISX would continue to sell and innovate in its current area of strategic focus;

 

    an augmentation scenario, whereby VISX would remain independent while pursuing strategic incremental acquisitions to diversify its product portfolio and earnings base;

 

    a sale scenario, whereby VISX would seek to sell the company to one of the few large corporations in the ophthalmic industry; and

 

    a merger scenario, whereby VISX would seek to merge with another mid-size company in the ophthalmic industry in an effort to strengthen both companies by expanding their mutual product offerings.

 

When the AMO opportunity arose, VISX management relied, in part, upon information gained during its earlier strategic assessments to determine that a broader relationship, or business combination, with AMO would be in the best interests of VISX and its stockholders. In particular, VISX management believed that such a relationship or combination could help broaden VISX’s product offerings and geographical presence more quickly and effectively than any other approach.

 

During early March 2004, James V. Mazzo, President and Chief Executive Officer of AMO, initiated an informal discussion with Elizabeth H. Dávila, Chairman and Chief Executive Officer of VISX, regarding the potential for a broader strategic relationship between AMO and VISX, including a possible business combination. During this discussion, Mr. Mazzo and Ms. Dávila did not agree to explore any particular relationship or transaction, but agreed to have further discussions on these general subjects, and Ms. Dávila requested that Mr. Mazzo provide more specific information regarding AMO’s products in development during their next discussion.

 

On March 19, 2004, Mr. Mazzo and Ms. Dávila met in Santa Ana, California, together with William J. Link, Ph.D., a member of the AMO board of directors. The parties discussed the possible rationales for a broader strategic relationship between AMO and VISX, including a possible business combination, and Mr. Mazzo discussed AMO’s research and development pipeline.

 

In early April 2004, Ms. Dávila contacted representatives of Goldman Sachs, who historically had provided investment banking services for VISX, to begin a review and analysis of AMO.

 

On April 29, 2004, representatives of Goldman Sachs met with several senior members of VISX management, including Ms. Dávila, Douglas H. Post, VISX’s President and Chief Operating Officer, Derek A. Bertocci, VISX’s Senior Vice President and Chief Financial Officer, and John F. Runkel, Jr., VISX’s General Counsel, who in August 2004 was named Senior Vice President of Business Development and General Counsel,

 

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to discuss AMO. The discussion focused upon publicly available financial data and also included an analysis of the financial condition and results of operations for both AMO and VISX.

 

At a regularly scheduled meeting of the VISX board of directors on May 12 and 13, 2004, VISX management discussed AMO. The discussion focused upon publicly available financial data and also included an analysis of the financial condition and results of operations for both AMO and VISX.

 

At a regularly scheduled meeting of the AMO board of directors on May 20, 2004, the AMO management informed the AMO board of directors of discussions with VISX regarding a possible business combination. The AMO board of directors authorized management to continue discussions with VISX and to engage financial and legal advisors with respect to a possible business combination. AMO engaged Morgan Stanley as AMO’s financial advisor in connection with a possible business combination with VISX.

 

On June 14, 2004, Mr. Mazzo telephoned Ms. Dávila to further discuss the potential for a broader strategic relationship between AMO and VISX, including a possible business combination. Again, neither Mr. Mazzo nor Ms. Dávila agreed to any particular relationship or transaction at this time, but continued to express interest in, and both agreed to continue to explore the idea of, a broader strategic relationship between the parties.

 

On June 21, 2004, the VISX board of directors convened a special telephonic meeting. Mr. Post also attended the meeting. During this meeting, Ms. Dávila informed the VISX board of directors of her conversations with Mr. Mazzo. The VISX board of directors also determined to engage Goldman Sachs as its financial advisor in connection with a possible business combination with AMO and authorized VISX management to negotiate and execute an engagement letter with Goldman Sachs.

 

On July 16, 2004, Mr. Mazzo and Richard A. Meier, AMO’s Executive Vice President of Operations and Finance and Chief Financial Officer, traveled to Santa Clara, California to meet with Ms. Dávila, Mr. Bertocci and Mr. Post to discuss their respective business models and to explore the possible rationales for a strategic relationship between AMO and VISX, including a possible business combination. During this meeting, Messrs. Mazzo and Meier discussed the strategic rationale for a possible business combination and suggested that the parties consider a tax-free exchange of stock to effect the transaction in a manner that would enable the stockholders of both companies to realize the benefit of a combination.

 

Between July 16, 2004 and July 23, 2004, Mr. Mazzo and Ms. Dávila had telephonic meetings in which they discussed economic contribution and valuation issues relating to a possible business combination.

 

On July 23, 2004, Goldman Sachs highlighted for Ms. Dávila and other members of the VISX management team the key financial considerations and issues arising out of the July 16, 2004 discussions regarding a possible business combination.

 

Between July 23, 2004 and July 29, 2004, Mr. Mazzo and Ms. Dávila had a number of telephonic meetings in which they continued to discuss economic contribution and valuation issues relating to a possible business combination.

 

On July 29 and August 2, 2004, Mr. Mazzo indicated to Ms. Dávila that AMO continued to be interested in exploring a possible business combination between the two companies, and further discussed the proposed structure of the transaction as a 100% stock-for-stock tax-free reorganization, the potential premium that VISX stockholders could receive and the resulting ownership interest for VISX stockholders in the new combined company.

 

On August 4, 2004, VISX engaged Goldman Sachs to act as its financial advisor for the limited purpose of participating in the August 4, 2004 meeting of the VISX board of directors and discussing the possible business combination transaction with AMO, the scope of which engagement was expanded on August 16, 2004 when

 

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VISX engaged Goldman Sachs to act as exclusive financial advisor to the VISX board of directors in connection with the potential business combination between VISX and AMO.

 

On August 4 and 5, 2004, the VISX board of directors convened a two-day regular meeting. Messrs. Post and Runkel of VISX and representatives of Goldman Sachs also attended this meeting. During this meeting, Ms. Dávila updated the VISX board of directors on the status of her discussions with Mr. Mazzo regarding a possible 100% stock-for-stock business combination between AMO and VISX, in which VISX stockholders could hold approximately 48% of the fully diluted shares of AMO common stock immediately following the possible business combination. Representatives of Goldman Sachs then discussed its preliminary analysis of a possible business combination with AMO. The VISX board of directors requested additional analysis from Goldman Sachs regarding a strategic combination with AMO including analysis concerning the addition of a cash component to the consideration. Mr. Runkel then discussed with the VISX board of directors its fiduciary duties in connection with the board’s consideration of a possible business combination.

 

On August 30, 2004, Ms. Dávila and Mr. Post traveled to Costa Mesa, California to meet with Mr. Mazzo and Mr. Meier. During this meeting, the parties further discussed the potential benefits of a possible business combination between AMO and VISX.

 

On September 7 and 8, 2004, the VISX board of directors convened a special meeting in Irving, Texas. Mr. Post of VISX, representatives of Goldman Sachs, and Mr. Mazzo of AMO also attended portions of this meeting. At this meeting, Ms. Dávila updated the VISX board of directors on the status of her discussions with Mr. Mazzo regarding a possible business combination transaction between AMO and VISX. Mr. Post then joined the meeting. Representatives of Goldman Sachs then discussed its updated preliminary analysis of a possible business combination with AMO. The Goldman Sachs representatives also discussed Goldman Sachs’ analysis of including a cash component in the consideration payable to VISX stockholders in connection with a possible business combination between AMO and VISX. The board members and their representatives discussed the tax treatment of any potential cash portion of the consideration and the likely impact adding cash to the mix of consideration would have on the post-transaction ownership interest of the VISX stockholders in the combined company. On September 8, Mr. Mazzo joined the meeting and discussed a possible business combination with the VISX board of directors. Mr. Mazzo, Mr. Post and Ms. Dávila then left the meeting and the outside directors met in an executive session. After discussion, the VISX board of directors directed management to obtain additional information regarding the equity share for the VISX stockholders in the combined company as well as information regarding the proposed operations of VISX as part of the combined company.

 

On September 10, 2004, AMO and VISX executed a mutual confidentiality and non-disclosure agreement.

 

From September 10 through September 29, 2004, Ms. Dávila and Mr. Mazzo had several additional telephonic meetings in which they discussed economic contribution and valuation issues relating to the proposed business combination and the governance and management of the combined company.

 

On September 15, 2004, the VISX board of directors retained Morrison & Foerster LLP to act as special counsel to the outside directors.

 

On September 22, 2004, the AMO board of directors convened a regular meeting at which it received an update from management on recent discussions with VISX, and the AMO board of directors authorized management to engage in further discussions with VISX and to begin a formal due diligence process with respect to the proposed business combination with VISX.

 

On September 29 and 30, 2004, the VISX board of directors convened a regular meeting. Messrs. Post, Bertocci and Runkel of VISX also attended the meeting. During this meeting, Ms. Dávila updated the VISX board of directors on her conversations with Mr. Mazzo since September 8, 2004 regarding the proposed business combination. Upon conclusion of these discussions, the board authorized management to engage in

 

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further discussions with AMO and to begin a formal due diligence process with respect to the proposed business combination.

 

Shortly thereafter, AMO, with the assistance of Morgan Stanley, and VISX, with the assistance of Goldman Sachs, each initiated an extensive business due diligence investigation of the business and operations of the other and of the proposed business combination.

 

On October 7, 2004, the VISX board of directors convened a special meeting. Messrs. Post and Runkel of VISX, representatives of Goldman Sachs, representatives of Wilson Sonsini Goodrich & Rosati, Professional Corporation, outside counsel to VISX, and a representative of Morrison & Foerster LLP, special counsel to the outside directors, also attended this meeting. Mr. Runkel began by updating the VISX board of directors on the status of the legal due diligence process for the proposed business combination. A representative of Goldman Sachs then updated the VISX board of directors on preliminary discussions between Goldman Sachs and Morgan Stanley concerning the proposed business combination.

 

On October 12, 2004, Ms. Dávila and Mr. Post traveled to Costa Mesa, California to meet with Mr. Mazzo and Mr. Meier. During this meeting, Mr. Post discussed the VISX business model and organizational structure. The parties also discussed potential cost and revenue synergies to be realized from a strategic combination of the entities.

 

On October 14, 2004, representatives of AMO and VISX, as well as their respective financial and legal advisors, met at the offices of Wilson Sonsini Goodrich & Rosati, Professional Corporation, in Palo Alto, California to engage in management discussions regarding their respective businesses and operations.

 

On October 15, 2004, the VISX board of directors convened a special meeting. Messrs. Post and Runkel of VISX, representatives of Goldman Sachs, representatives of Wilson Sonsini Goodrich & Rosati, Professional Corporation, and a representative of Morrison & Foerster LLP also attended this meeting. During this meeting, Ms. Dávila updated the VISX board of directors regarding the management discussions described above, and the VISX board of directors discussed with counsel the legal due diligence process. Following these discussions the outside directors met in executive session with a representative of Morrison & Foerster LLP.

 

Also on October 15, 2004, the AMO board of directors convened a special meeting. AMO management updated the AMO board of directors regarding the status of discussions relating to the proposed business combination with VISX. At this meeting, Morgan Stanley reviewed with the AMO board of directors its preliminary financial analysis of the proposed business combination. Representatives of Skadden, Arps, Slate, Meagher & Flom LLP, outside counsel to AMO, outlined the fiduciary duties of the AMO board of directors and various legal and regulatory issues that could arise in connection with the proposed business combination. The AMO board of directors discussed the fact that any transaction that would result in VISX stockholders holding more than 45% of the outstanding shares of AMO common stock following the proposed business combination would trigger a “change in control” under AMO’s stock option plans and employment agreements with AMO management, which would be a negative factor relating to the proposed business combination. The AMO board of directors authorized management to continue discussions with respect to the proposed business combination with VISX, which would include the introduction of a cash component to the proposed consideration.

 

AMO and VISX subsequently convened a series of meetings from October 15, 2004 through November 8, 2004 among the management teams of AMO and VISX, as well as each of their respective financial and legal advisors. During these meetings, each of AMO and VISX performed due diligence on the other to facilitate their ongoing due diligence efforts in connection with the proposed business combination. During this period, Morgan Stanley and Goldman Sachs held a series of discussions regarding the status of due diligence and the potential economic terms of the proposed transaction.

 

On October 19, 2004, AMO’s legal counsel delivered a draft merger agreement to VISX’s legal counsel relating to the proposed business combination.

 

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On October 20, 2004, the VISX board of directors convened a special meeting. Mr. Runkel of VISX, representatives of Wilson Sonsini Goodrich & Rosati, Professional Corporation and a representative of Morrison & Foerster LLP also attended this meeting. During this meeting representatives of Wilson Sonsini Goodrich & Rosati discussed with the VISX board of directors its fiduciary duties as well as future board processes in connection with the board’s consideration of the proposed business combination and various legal and regulatory issues that could arise in connection with the business combination.

 

On October 21, 2004, the VISX board of directors convened another special meeting. Messrs. Post and Runkel of VISX, representatives of Goldman Sachs, representatives of Wilson Sonsini Goodrich & Rosati, Professional Corporation, and a representative of Morrison & Foerster LLP also attended this meeting. During this meeting, Ms. Dávila updated the VISX board of directors on the status of her discussions with AMO regarding the proposed business combination, including the potential form of the transaction consideration. The VISX board of directors also received an update on the status of the due diligence investigation of AMO, including the financial review being conducted by VISX’s management, as assisted by Goldman Sachs, the financial accounting, tax and Sarbanes-Oxley Act financial controls review, the international and domestic legal due diligence review and the regulatory legal review conducted by accounting and legal advisors. The outside directors met in executive session with a representative of Morrison & Foerster LLP.

 

On October 22, 2004, the AMO board of directors convened a special meeting, at which AMO management provided an update on the status of the due diligence process and the draft merger agreement and an overview of the transaction considerations. At this meeting, Morgan Stanley reviewed its revised preliminary financial analysis of the proposed business combination with VISX. AMO’s Organization, Compensation and Corporate Governance Committee discussed the potential negative impact of the change in control provisions in AMO’s stock option plans and employment agreements being triggered by VISX stockholders holding more than 45% of the outstanding shares by AMO common stock immediately following completion of the proposed business combination. The AMO board of directors authorized management to continue negotiations with VISX.

 

From October 22 to October 26, 2004, legal advisors to AMO and VISX held several meetings to negotiate the terms and conditions of the draft merger agreement for the proposed business combination. Additionally, during this time period the parties reached an informal understanding that Ms. Dávila would likely be selected to continue to serve on the board of directors of the combined company and that Mr. Post would continue as an executive officer of the combined company, although no discussions occurred regarding any terms and conditions of Mr. Post’s employment.

 

On October 26, 2004, the VISX board of directors convened a special meeting. Messrs. Post, Bertocci and Runkel of VISX, representatives of Goldman Sachs, representatives of Wilson Sonsini Goodrich & Rosati, Professional Corporation, and a representative of Morrison & Foerster LLP also attended this meeting. At this meeting, a representative of Goldman Sachs provided the VISX board of directors with an update regarding its discussions with representatives of Morgan Stanley and its preliminary financial analyses of the proposed business combination. Representatives from Wilson Sonsini Goodrich & Rosati, Professional Corporation, then reviewed with the VISX board of directors the proposed terms of the draft merger agreement for the proposed business combination. Also on October 26, 2004, VISX’s legal counsel delivered a revised draft of the merger agreement to AMO’s legal counsel.

 

On October 28, 2004, the parties held a full-day financial due diligence session at the offices of Wilson Sonsini Goodrich & Rosati, Professional Corporation in Palo Alto, California. Representatives of Goldman Sachs and Morgan Stanley attended, as well as Messrs. Bertocci and Post from VISX and Mr. Meier from AMO.

 

On October 29, 2004, the AMO board of directors convened a special meeting to receive an update from management on the status of negotiations with VISX on the proposed business combination. In addition, representatives of Skadden, Arps, Slate, Meagher & Flom LLP provided a summary of the due diligence conducted on VISX to date and Morgan Stanley provided its updated preliminary financial analyses of the proposed business combination.

 

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On November 1, 2004, the VISX board of directors convened a special meeting at which it received updates from its financial, legal, accounting, tax and regulatory advisors regarding their respective due diligence investigations of AMO. Messrs. Post, Bertocci, Runkel and Allen Russell, Ph.D., Vice President of Regulatory and Clinical Affairs, all representing VISX, representatives of Goldman Sachs, representatives of Wilson Sonsini Goodrich & Rosati, Professional Corporation and representatives of VISX’s other legal and accounting advisors also attended this meeting. During this meeting, members of VISX’s management and its advisors reviewed their due diligence investigation of AMO and their respective discussions with AMO and its advisors regarding the terms and conditions of the business combination. Mr. Post and Mr. Bertocci reviewed VISX management’s view of the strategic rationale for the business combination, discussed the prospects for VISX as a stand-alone entity, the potential operations and risks of the combined entity, financial projections and anticipated synergies expected from the proposed business combination. VISX’s accounting advisors then discussed their accounting and tax review of AMO, including a specific discussion of tax matters relating to AMO’s spin-off from Allergan and AMO’s Sarbanes-Oxley Section 404 compliance efforts. VISX’s legal advisors then provided a summary of their international and domestic legal due diligence review of AMO and its operations. Dr. Russell then discussed the findings of VISX’s domestic regulatory counsel regarding its regulatory due diligence investigation of AMO. Following the due diligence summaries, a representative of Goldman Sachs then discussed possible structures for, and preliminary financial analyses of, the proposed business combination, after which the directors met in executive session for further discussion. After counsel rejoined the meeting, the VISX board of directors also discussed the proposed terms of the draft merger agreement.

 

On November 2, 2004, AMO’s and VISX’s legal advisors continued to negotiate the proposed terms of the draft merger agreement for the proposed business combination.

 

On the evening of November 2, 2004, representatives of Morgan Stanley on AMO’s behalf delivered AMO’s proposal to representatives of Goldman Sachs regarding certain key terms of the proposed business combination, which included a proposal that VISX stockholders would receive $20 of AMO common stock, based on an exchange ratio to be fixed at signing and $3.50 in cash for each share of VISX common stock, and explained that the proposal reflected an offer AMO believed to be fair in light of the recent decline in VISX’s stock price as well as the recent increase in AMO’s stock price and reflective of the relative values of the two companies.

 

On November 3 and 4, 2004, representatives of Goldman Sachs and Wilson Sonsini Goodrich & Rosati, Professional Corporation, had numerous meetings with representatives of Morgan Stanley and Skadden, Arps, Slate, Meagher & Flom LLP to discuss various financial and legal aspects of the proposed business combination. Additionally, Mr. Mazzo and Ms. Dávila discussed the proposed exchange ratio for the merger.

 

On November 4, 2004, the VISX board of directors convened a special meeting. Messrs. Post and Runkel of VISX, representatives of Goldman Sachs, representatives of Wilson Sonsini Goodrich & Rosati, Professional Corporation, and a representative of Morrison & Foerster LLP also attended this meeting. During this meeting, a representative of Goldman Sachs provided the VISX board of directors with an update regarding discussions between Goldman Sachs and representatives of Morgan Stanley since receiving the November 2, 2004 proposal, which would have resulted in VISX stockholders receiving approximately 0.507 of a share of AMO common stock, based on the price of AMO common stock on November 3, 2004 and $3.50 in cash for each share of VISX common stock held at completion of the proposed business combination, and VISX stockholders holding an aggregate of approximately 39.2% of the fully diluted shares of AMO common stock immediately after completion of the proposed business combination. The VISX board of directors then discussed the recent decline in VISX’s stock price and the recent increase in AMO’s stock price relative to the proposal. The Goldman Sachs representative then summarized Goldman Sachs’ preliminary financial analysis of the proposed business combination based on different exchange ratios. A representative of Wilson Sonsini Goodrich & Rosati, Professional Corporation, then reviewed the terms of the draft merger agreement with the VISX board of directors, after which the VISX board of directors met in executive session to discuss the AMO proposal and other matters and concluded that the AMO offer did not fully take into account the long-term potential value of

 

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the VISX stock and VISX’s economic contribution to the combined entity and, therefore, did not provide VISX stockholders with sufficient share ownership of the combined company. The VISX board of directors authorized VISX management to continue negotiations with AMO regarding the terms and conditions of the proposed business combination and authorized Goldman Sachs to communicate a counter proposal to AMO through Morgan Stanley that included a stock exchange ratio of 0.576 shares of AMO common stock and $3.50 in cash for each share of VISX common stock that would have resulted in VISX stockholders holding approximately 42.5% of the fully diluted shares of AMO common stock immediately after the transaction and receiving $3.50 in cash for each share of VISX common stock. The VISX board of directors believed that its counterproposal more accurately reflected the long-term potential value of its stock and the economic contribution of VISX to the combined company.

 

Thereafter, on the evening of November 4, 2004, representatives of Goldman Sachs on VISX’s behalf communicated the counterproposal to representatives of Morgan Stanley and continued discussions regarding the terms of the proposed business combination.

 

On the morning of November 5, 2004, the VISX board of directors convened a special meeting. Messrs. Post and Runkel of VISX, representatives of Goldman Sachs, representatives of Wilson Sonsini Goodrich & Rosati, Professional Corporation, a representative of Morrison & Foerster LLP, and VISX’s accounting advisors also attended this meeting. During this meeting, VISX’s accounting advisors discussed tax matters related to AMO’s spin-off from Allergan, after which a representative of Goldman Sachs provided the VISX board of directors with an update on discussions with Morgan Stanley since delivering the VISX counterproposal.

 

Later in the day on November 5, 2004, the VISX board of directors convened a subsequent special meeting. Messrs. Post and Runkel of VISX, representatives of Goldman Sachs, representatives of Wilson Sonsini Goodrich & Rosati, Professional Corporation, and a representative of Morrison & Foerster LLP also attended this meeting. During this meeting, a representative of Goldman Sachs updated the VISX board of directors regarding the timing for an expected counterproposal from AMO and discussed the expected counterproposal. A representative of Wilson Sonsini Goodrich & Rosati, Professional Corporation then discussed unresolved areas of the draft merger agreement.

 

On November 5, 2004, the AMO board of directors convened a special meeting. AMO management updated the AMO board of directors regarding discussions with VISX management with respect to the proposed business combination, summarized outstanding issues and outlined a revised offer to VISX. The AMO board of directors supported management’s recommendation for a revised offer based on its belief in the long-term potential value of the VISX stock and analyses of VISX’s relative economic contribution to the combined company. AMO management and the AMO board of directors also discussed the terms of a commitment letter received from Morgan Stanley to, among other things, finance the cash component of the merger consideration, if required.

 

During the evening of November 5, 2004, representatives of Morgan Stanley on AMO’s behalf delivered AMO’s proposal to representatives of Goldman Sachs, which specified an exchange ratio of 0.552 shares of AMO common stock and $3.50 in cash for each share of VISX common stock, and that Ms. Dávila would serve on the board of directors of the combined company. Goldman Sachs communicated the proposal to VISX management, and indicated that this proposal would result in VISX stockholders holding an aggregate of approximately 41.5% of the fully diluted shares of AMO common stock immediately after completion of the proposed business combination and payment of $3.50 in cash for each share of VISX common stock.

 

On November 6, 2004, the parties’ legal advisors continued negotiations on the draft merger agreement for the proposed business combination throughout the day. VISX’s legal counsel then distributed to AMO and its legal advisor a revised draft of the merger agreement, reflecting the then-current state of negotiations.

 

On November 7, 2004, the VISX board of directors convened a special meeting. Messrs. Post and Runkel of VISX, representatives of Goldman Sachs, representatives of Wilson Sonsini Goodrich & Rosati, Professional

 

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Corporation, and a representative of Morrison & Foerster LLP also attended this meeting. During this meeting, a representative of Goldman Sachs provided the VISX board of directors with a summary of the AMO proposal dated November 5, 2004. A Goldman Sachs representative then reviewed certain aspects of the proposed business combination, including the proposed consideration to be received by VISX stockholders and the strategic objectives of VISX. The representative also summarized Goldman Sachs’ preliminary financial analysis of the business combination based on the proposed consideration described above, after which the VISX board of directors met in executive session and discussed the proposal, including the valuation of VISX and the premium it represented to VISX’s stock price. Additionally, the VISX board of directors discussed the potential effects of the business combination on AMO and the value of its stock after the merger given that the proposal contemplated that VISX’s stockholders would receive a substantial portion of their consideration in AMO common stock. Following the executive session of the VISX board of directors, a representative of Wilson Sonsini Goodrich & Rosati, Professional Corporation reviewed the terms of the draft merger agreement with the VISX board of directors, including, among other things, the issues that remained unresolved.

 

On the morning of November 8, 2004, AMO’s legal advisors delivered a revised draft of the merger agreement to VISX’s legal counsel. The parties’ legal advisors then continued negotiations on the draft merger agreement throughout the day.

 

Later that day, on November 8, 2004, the AMO board of directors convened a special meeting. AMO management provided the AMO board of directors with a summary of discussions with VISX since the November 5, 2004 meeting and Morgan Stanley reviewed its updated preliminary financial analyses of the proposed business combination. Representatives of Skadden, Arps, Slate, Meagher & Flom LLP reviewed the proposed merger agreement, provided a summary of the progress in negotiating its definitive terms and highlighted open items that had not yet been resolved between the parties. Later that evening AMO’s legal counsel distributed to the parties and their legal advisors another revised draft of the merger agreement, reflecting the then current state of negotiations.

 

On November 9, 2004, the VISX board of directors convened a special meeting to consider approval of the merger agreement. Prior to the meeting, the members of the VISX board of directors were provided with a substantially final draft of the merger agreement as well as a summary of the draft merger agreement. During the meeting, a representative of Wilson Sonsini Goodrich & Rosati, Professional Corporation, advised the directors of their fiduciary duties in considering the business combination and described the structure of the merger and the provisions of the merger agreement. Representatives of Goldman Sachs presented their financial analyses of the business combination and delivered Goldman Sachs’ oral opinion, subsequently confirmed in writing that, as of November 9, 2004 and based upon and subject to the factors and assumptions set forth in its written fairness opinion, the merger consideration to be received by holders of VISX common stock, taken in the aggregate, pursuant to the merger agreement is fair from a financial point of view to such holders. Following a discussion, the VISX board of directors unanimously determined that the merger was advisable, and fair to and in the best interests of VISX and its stockholders, approved the merger agreement and the proposed merger, resolved to recommend that the VISX stockholders vote to approve and adopt the merger agreement and approve the merger.

 

On November 9, 2004, the AMO board of directors convened a special meeting during which AMO management gave the AMO board of directors a further update as to the status of negotiations with VISX, indicating that the open items discussed at the prior meeting were close to resolution. At this meeting, Morgan Stanley rendered its oral opinion, and subsequently confirmed in writing, that as of that date, and based upon and subject to the considerations described in its opinion and based upon such other matters as Morgan Stanley considered relevant, the merger consideration to be paid by AMO pursuant to the merger agreement was fair to AMO from a financial point of view. Following the presentation by Morgan Stanley, the AMO board of directors unanimously approved the merger agreement and the transactions contemplated thereby and unanimously resolved to recommend that the AMO stockholders approve the issuance of shares of AMO common stock in the merger.

 

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Following the meetings of the board of directors of each of AMO and VISX and following the closing of trading on the NYSE, AMO and VISX executed the merger agreement as of November 9, 2004. During the afternoon of November 9, 2004, AMO and VISX then issued a joint press release announcing the execution of the merger agreement and the proposed merger.

 

Recommendation of the AMO Board of Directors

 

The AMO board of directors believes there are substantial benefits to AMO and the AMO stockholders that can be obtained as a result of the merger. If the merger is completed, the AMO board of directors believes that the acquisition of VISX will combine two highly complementary companies with a broad range of superior technologies and a singular focus on serving the vision care needs of practitioners and patients around the world. At a meeting held on November 9, 2004, the AMO board of directors unanimously determined that the merger and the other transactions contemplated by the merger agreement, including the issuance of AMO common stock in the merger, are advisable and in the best interests of AMO and the AMO stockholders. Therefore, the AMO board of directors resolved to recommend that the AMO stockholders approve the issuance of shares of AMO common stock in the merger.

 

The AMO board of directors consulted with AMO senior management as well as its legal counsel, Skadden, Arps, Slate, Meagher & Flom LLP, and its financial advisor, Morgan Stanley, in reaching its decisions to approve and adopt the merger agreement and the transactions contemplated by the merger agreement, and unanimously recommends that AMO stockholders vote to approve the issuance of shares of AMO common stock in the merger. Particularly persuasive among the factors considered by the AMO board of directors in its deliberations were the reasons for the merger described in the section entitled “Reasons for the Merger” beginning on page 65 of this joint proxy statement/prospectus. The AMO board of directors also considered each of the following factors in its deliberations:

 

    information concerning the financial performance, financial condition, business and prospects of AMO and VISX, as well as conditions in the ophthalmic medical device industry generally;

 

    information concerning the recent and past stock price performance of AMO and VISX common stock, as well as the views of Wall Street equity analysts regarding the two companies;

 

    the prices paid in comparable transactions involving other ophthalmic medical device companies, as well as the trading performance of the stock of comparable companies in the industry;

 

    the largely stock-based merger consideration, which preserves AMO’s financial strength for continued business investment;

 

    the fixed exchange ratio and cash merger consideration amount, which provide a level of certainty as to the aggregate number of shares of AMO common stock to be issued to VISX stockholders and the percentage of the total shares of AMO common stock that current VISX stockholders will own after the merger;

 

    the provisions that prohibit VISX from soliciting other acquisition offers;

 

    the conditions to consummation of the merger, in particular the likelihood of obtaining the necessary regulatory and stockholder approvals;

 

    the provisions that require VISX to pay AMO expenses in the amount of $8 million or a break-up fee of $45 million if the merger agreement is terminated for specified reasons;

 

    an assessment of alternatives to the merger, including development opportunities and other possible acquisition candidates, and the determination that the acquisition of VISX was a strategic fit and presented a unique opportunity to enhance and expand AMO operations, product and service offerings and position for future growth; and

 

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    the written opinion of Morgan Stanley dated November 9, 2004, that, as of that date, and based upon and subject to the considerations described in its opinion, the full text of which is attached to this joint proxy statement/prospectus as Annex G, the merger consideration to be paid by AMO pursuant to the merger agreement was fair from a financial point of view to AMO.

 

The AMO board of directors also considered the following factors, uncertainties and risks in its deliberations concerning the merger. However, the AMO board of directors concluded that these risks were outweighed by the potential benefits of the merger:

 

    the incremental debt associated with the merger could cause AMO to have reduced financial flexibility;

 

    the risk that the potential benefits sought in the merger might not be fully realized;

 

    the possibility that the merger might not be completed, or that completion might be unduly delayed, for reasons beyond AMO’s control;

 

    the possibility that the merger might not be completed and that in certain circumstances, AMO might be required to pay VISX expenses in the amount of $8 million or a break-up fee of $45 million;

 

    the effect of the public announcement of the merger on AMO’s and VISX’s stock prices;

 

    the potential dilution of AMO earnings per share as a result of the issuance of the shares in the merger, and the estimated time period for the merger to be accretive to AMO’s earnings per share;

 

    the risk that AMO management’s efforts to integrate VISX will disrupt AMO’s operations;

 

    the substantial charges to be incurred in connection with the merger, including the costs of integrating the businesses of AMO and VISX and the transaction expenses arising from the merger;

 

    the risk that, despite AMO’s efforts and the efforts of VISX after the merger, the combined company may lose key personnel;

 

    the restrictions on the conduct of AMO’s business during the period between the signing of the merger agreement and the completion of the merger; and

 

    the other risks described in the section entitled “Risks Relating to the Merger” beginning on page 23.

 

It was not practical to, and thus the AMO board of directors did not, quantify, rank or otherwise assign relative weights to the wide variety of factors it considered in evaluating the merger and the merger agreement, nor did the board determine that any one factor was of particular importance in deciding that the merger agreement and associated transactions were in the best interests of AMO and its stockholders. This discussion of information and material factors considered by the AMO board of directors is intended to be a summary rather than an exhaustive list. In considering these factors, individual members of the AMO board of directors may have given different weight to different factors. The board conducted an overall analysis of the factors described above, and overall considered the factors to support its decision in favor of the merger and the merger agreement. The decision of each member of the AMO board of directors was based upon his or her own judgment, in light of all of the information presented, regarding the overall effect of the merger agreement and associated transactions on the AMO stockholders as compared to any potential alternative transactions or courses of action. After considering this information, all members of the AMO board of directors unanimously approved the merger agreement and the transactions contemplated by the merger agreement, including the issuance of AMO common stock in the merger and recommended that the AMO stockholders approve the issuance of shares of AMO common stock in the merger.

 

On the basis of the foregoing, the AMO board of directors unanimously recommends that AMO stockholders vote “FOR” the proposal to approve the issuance of shares of AMO common stock in the merger.

 

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Recommendation of the VISX Board of Directors

 

At a special meeting of the VISX board of directors held on November 9, 2004, the VISX board of directors unanimously:

 

    determined that the merger is advisable, and is fair to and in the best interests of VISX and its stockholders;

 

    approved the merger agreement;

 

    directed that approval and adoption of the merger agreement and approval of the merger be submitted for consideration by VISX stockholders at a VISX special meeting; and

 

    resolved to recommend that the VISX stockholders vote “FOR” the proposal to approve and adopt the merger agreement and the merger contemplated by the merger agreement.

 

In reaching its decision to approve the merger agreement, the VISX board of directors held discussions with representatives of Goldman Sachs, its financial advisor, regarding the past and current business operations, financial condition and future prospects of VISX and AMO, as well as other financial matters. The VISX board of directors also relied on the expertise of Goldman Sachs for quantitative analysis of the financial terms of the merger and consulted with them regarding the fairness, from a financial point of view, to the holders of VISX common stock of the merger consideration to be received by them in the merger. The VISX board of directors also consulted with management, its special accounting and tax advisor and its legal advisors in connection with the merger. Particularly persuasive among the factors considered by the VISX board of directors in its deliberations were the reasons for the merger described in the section entitled “Reasons for the Merger” beginning on page 65 of this joint proxy statement/prospectus. The VISX board of directors also considered each of the following factors in its deliberations:

 

    the fact that the value of the merger consideration, based on the then-current market price for VISX common stock, will provide an opportunity for VISX stockholders to receive a significant premium over the trading value of VISX common stock on November 8, 2004, the last trading day before public announcement of the proposed merger, and also over the average trading value of VISX common stock in recent historical periods;

 

    the fact that the fixed exchange ratio for the stock portion of the merger consideration provides certainty as to the number of shares of AMO common stock to be issued to VISX stockholders and the percentage of shares of AMO common stock that current VISX stockholders will own as a group after the merger;

 

    the fact that VISX stockholders will receive the majority of the merger consideration in stock, which provides them with an opportunity to participate in the potential growth of the combined company following the merger as stockholders of AMO;

 

    the fact that VISX stockholders will receive a portion of the consideration in cash, which provides them with a measure of certainty of value despite stock market or industry volatility compared to a transaction in which they would receive all stock or other non-cash consideration;

 

    the fact that the merger is structured such that VISX stockholders will not be immediately taxed on the stock component of the merger consideration and the requirement under the merger agreement to adjust the stock component of the merger consideration to preserve such tax treatment;

 

    the financial analyses and presentations by Goldman Sachs, and its oral opinion, subsequently confirmed in writing that, as of November 9, 2004, and based upon and subject to the factors and assumptions set forth in its written fairness opinion, the full text of which is attached to this joint proxy statement/prospectus as Annex H, the merger consideration to be received by holders of VISX common stock, taken in the aggregate, pursuant to the merger agreement is fair from a financial point of view to such holders;

 

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    the fact that VISX stockholders will have the opportunity to vote upon the proposal to approve and adopt the merger agreement and the merger contemplated by the merger agreement;

 

    the conditions to consummation of the merger, in particular the likelihood of obtaining the necessary regulatory and stockholder approvals, and the likelihood that the merger will be completed;

 

    reports from management, legal, accounting, tax and financial advisors as to the results of the due diligence investigation of AMO;

 

    current financial market conditions and historical market prices, volatility and trading information with respect to VISX common stock;

 

    the prospects for VISX’s growth and profitability as a stand-alone company, and the risks of such growth and profitability; and

 

    the interests that certain executive officers and directors of VISX may have with respect to the merger. See “The Merger—Interests of Executive Officers and Directors of VISX in the Merger” beginning on page 87.

 

In addition, the VISX board of directors also identified and considered a variety of potentially negative factors in its deliberations concerning the merger, including, but not limited to:

 

    the effect of the public announcement of the merger, and the possibility that the merger might not be completed, on demand for VISX’s products and services, VISX’s operating results, VISX’s stock price and VISX’s ability to attract and retain key management and marketing, sales, technical and other personnel;

 

    the risk that the potential benefits sought in the merger might not be fully realized;

 

    the challenges of integrating the management teams, strategies, cultures and organizations of the companies;

 

    the limitations on the right of VISX to pursue alternative transactions that could conflict with the merger, including the possible effect of the expense and break-up fee provisions in the merger agreement; and

 

    other applicable risks described in the section entitled “Risks Relating to the Merger” beginning on page 23.

 

The VISX board of directors concluded, however, that these negative factors could be managed or mitigated by VISX or by AMO or were unlikely to have a material impact on the merger or AMO after the merger, and that, overall, the potentially negative factors associated with the merger were outweighed by the potential benefits of the merger.

 

The above discussion of material factors considered by the VISX board of directors is not intended to be exhaustive, but does set forth the principal factors considered by the VISX board of directors. The VISX board of directors collectively reached the unanimous conclusion to approve the merger agreement and the merger in light of the various factors described above and other factors that each board member felt were appropriate. In view of the wide variety of factors considered by the VISX board of directors in connection with its evaluation of the merger and the complexity of these matters, the VISX board did not consider it practical, and did not attempt, to quantify, rank or otherwise assign relative weights to the specific factors it considered in reaching its decision. Rather, the VISX board of directors made its recommendations based on the totality of the information presented to and the investigation conducted by it, and the judgments of individual members of the board of directors may have been influenced to a greater or lesser degree by different factors.

 

On the basis of the foregoing, the VISX board of directors unanimously recommends that VISX stockholders vote “FOR” the approval and adoption of the merger agreement and the merger contemplated by the merger agreement.

 

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Reasons for the Merger

 

AMO and VISX believe the merger presents a unique opportunity to create a combined entity that will be able to compete more effectively in the refractive surgical sector, while simultaneously creating a company with a diverse product base that can compete in the broader ophthalmic medical device industry. The AMO and VISX boards of directors and their respective management teams each analyzed numerous alternative strategies to address their respective risks and challenges as stand-alone entities. See the section entitled “Background of the Merger” beginning on page 53. After reviewing and debating their respective strategic alternatives and the opportunity for the combined company presented by the merger, as more fully described below, the AMO and VISX boards of directors each determined to pursue the merger in lieu of the other alternatives because both believe the merger will create a combined company that will be able to achieve the strategic and financial benefits described below.

 

The AMO and VISX boards of directors each identified the following anticipated strategic and financial benefits of the merger:

 

    Leadership in High-Growth Refractive Surgical Sector. The combined company is expected to take a leadership position in the high-growth refractive surgical sector. AMO will contribute its refractive IOL technologies and its Amadeus-brand microkeratomes to VISX’s leading installed base of excimer laser technology and, together, the combined entity will be able to offer refractive and cataract surgeons a full suite of laser and accommodative lens products, including a wide choice of premium brand name IOLs, viscoelastics, lasers, microkeratomes and phacoemulsification equipment.

 

    Increased International Sales Opportunities. The combined company is expected to build upon VISX’s leading position in the United States laser refractive surgery sector by using AMO’s global infrastructure and distribution network to generate additional international revenues from sales of VISX Custom Vue systems.

 

 

    Increased Cross-Selling Opportunities. AMO and VISX will form a global, diversified company that will be able to take advantage of previously unavailable cross-selling opportunities among the expanded customer base.

 

    Enhanced Revenues and Growth. With its expanded customer base, increased international sales and cross-selling opportunities, the combined entity is expected to have significant earnings growth potential and significantly greater revenues than either of AMO or VISX as stand-alone entities.

 

    Enhanced Research and Development Opportunities. The combined company will have greater technical expertise and financial resources to devote to research and development, consistent with each party’s focus on building stockholder value by pursuing technological leadership through continuous innovation. By pooling the resources and skills of both AMO and VISX, the combined company will be better able to deliver new refractive technologies and confront the challenges in the path of meeting the tremendous unmet need from presbyopia.

 

    Customer Support Synergies. The combined company is expected to benefit from VISX’s industry-leading customer support and training. VISX’s field service capabilities can be utilized across the existing AMO organization.

 

    Increased Economic Resilience. The combined company is expected to be better able than VISX or AMO to withstand the vagaries of economic cycles because of its broader range of product offerings.

 

    Reduction in Operating Costs. The combined company is expected to generate a minimum of annualized cost savings of at least $10 million, providing the combined company with a stronger, more efficient operating model than either company could achieve on its own.

 

There can be no assurance that the anticipated strategic and financial benefits of the merger will be achieved, including that the net present value of the combined entity’s anticipated cost savings resulting from the merger will be reflected in the trading price of AMO common stock following the completion of the merger.

 

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Opinion of AMO’s Financial Advisor

 

AMO retained Morgan Stanley to provide financial advice and assistance, including a financial fairness opinion, to the AMO board of directors in connection with the transaction. The AMO board of directors selected Morgan Stanley to act as its financial advisor based on Morgan Stanley’s qualifications, expertise, reputation and its knowledge of the business of AMO. At the meeting of the AMO board of directors on November 9, 2004, Morgan Stanley rendered its oral opinion, subsequently confirmed in writing, that as of November 9, 2004, and based upon and subject to the assumptions, qualifications and limitations set forth therein, the merger consideration to be paid by AMO in the proposed merger was fair from a financial point of view to AMO.

 

The full text of Morgan Stanley’s opinion, dated November 9, 2004, which sets forth, among other things, the assumptions made, procedures followed, matters considered and qualifications and limitations of the reviews undertaken in rendering its opinion is attached to this joint proxy statement/prospectus as Annex G. The summary of Morgan Stanley’s fairness opinion set forth in this document is qualified in its entirety by reference to the full text of the opinion. AMO stockholders should read this opinion carefully and in its entirety. Morgan Stanley’s opinion is directed to the AMO board of directors and addresses only the fairness from a financial point of view of the merger consideration to be paid by AMO pursuant to the merger agreement as of the date of the opinion. Morgan Stanley’s opinion does not constitute a recommendation to any AMO stockholder as to how such stockholder should vote with respect to the proposed transaction.

 

In connection with rendering its opinion, Morgan Stanley, among other things:

 

    reviewed certain publicly available financial statements and other business and financial information of VISX and AMO, respectively;

 

    reviewed certain internal financial statements and other financial and operating data concerning VISX and AMO, prepared by senior executives of VISX and AMO, respectively;

 

    discussed the past and current operations and financial condition and the prospects of VISX and AMO with senior executives of VISX and AMO, respectively;

 

    discussed certain strategic, financial and operational benefits anticipated from the merger with senior executives of VISX and AMO;

 

    reviewed certain financial forecasts of VISX, including certain sensitivity cases, prepared based on discussions with the management of AMO;

 

    reviewed the pro forma impact of the merger on AMO’s earnings per share, consolidated capitalization and financial ratios;

 

    reviewed the reported prices and trading activity for the VISX common stock and the AMO common stock;

 

    compared the financial performance of VISX and AMO and the prices and trading activity of the VISX common stock and the AMO common stock, respectively, with that of certain other comparable publicly-traded companies and their securities;

 

    discussed the strategic rationale for the merger with senior executives of VISX and AMO;

 

    reviewed the financial terms, to the extent publicly available, of certain comparable acquisition transactions;

 

    participated in discussions and negotiations among representatives of VISX and AMO and their financial and legal advisors;

 

    reviewed copies of AMO’s debt financing commitment letters, dated November 8, 2004, from Morgan Stanley Senior Funding, Inc.;

 

    reviewed the draft merger agreement and certain related documents; and

 

    performed such other analyses and considered such other factors as Morgan Stanley deemed appropriate.

 

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In arriving at its opinion, Morgan Stanley assumed and relied upon without independent verification the accuracy and completeness of the information reviewed by it for the purposes of its opinion. With respect to the financial projections of VISX and information relating to certain strategic, financial and operational benefits anticipated from the merger, Morgan Stanley assumed that they were reasonably prepared on bases reflecting the best currently available estimates and judgments of the future financial performance of VISX and AMO. With respect to the financial projections of AMO, Morgan Stanley relied on publicly available estimates of equity research analysts who cover AMO. Morgan Stanley also relied upon, without independent verification, the assessment of the management of AMO of VISX’s technologies, products and intellectual property and the validity of, and risks associated with, VISX’s existing and future technologies, products and intellectual property, including the timing and scope of any associated risks or benefits. Furthermore, Morgan Stanley relied upon the assessment by management of AMO and VISX of their ability to retain key employees of VISX. Morgan Stanley did not make any independent valuation or appraisal of the assets or liabilities of VISX or AMO, nor has it been furnished with any such appraisals. In addition, Morgan Stanley is not a regulatory or legal expert and instead relied on the assessment of regulatory and legal advisors to VISX and AMO in connection with such issues. Morgan Stanley has assumed that the merger agreement will be consummated in accordance with the terms set forth therein without material modification or waiver, including, among other things, that the merger will be treated as a tax-free reorganization, pursuant to the Internal Revenue Code and that all necessary regulatory consents will be obtained. In addition, Morgan Stanley also assumed that the financing of the merger would be consummated on the terms described in the commitment letter. Morgan Stanley’s opinion was necessarily based on financial, economic, market and other conditions as in effect on, and the information made available to it as of, November 9, 2004.

 

The following is a summary of the material financial analyses performed by Morgan Stanley in connection with its oral opinion and the preparation of its written opinion, dated November 9, 2004. Some of these summaries include information in tabular format. In order to understand fully the financial analyses used by Morgan Stanley, the tables must be read together with the text of each summary. The tables alone do not constitute a complete description of the analyses.

 

Historical Share Price Analysis. Morgan Stanley reviewed the historical trading prices and daily trading volume for the VISX common stock for the twelve month period ended November 8, 2004. Morgan Stanley noted that during the same twelve month period the price per share of VISX common stock ranged from $15.50 to $26.80. Morgan Stanley noted that the closing price per share of VISX common stock as of November 8, 2004 was $16.91 and that the implied merger consideration was $26.52, based on a closing price per share of AMO common stock of $41.70 on November 8, 2004.

 

Comparable Company Analysis. Morgan Stanley reviewed and analyzed certain public market trading multiples for stand alone public companies similar to VISX from a size, business mix and geographic perspective and derived an implied value for VISX based on this information. The comparable companies operate within the ophthalmic medical device industry and develop, manufacture and market medical devices that compete with AMO and VISX in the segments of cataract and refractive surgery, contact lens, eye care, eye care products and glaucoma. For purposes of its analysis, Morgan Stanley did not include subsidiaries or divisions of pharmaceutical or medical supply or device companies that operate within the ophthalmic medical device industry since the operating results of these companies would not necessarily represent the results of these subsidiaries or divisions. The multiples analyzed for these comparable companies included aggregate market value (defined as public equity market value plus total book value of debt, total book value of preferred stock and minority interest less cash and other short term investments) divided by estimated 2005 earnings before interest, taxes, depreciation and amortization, which is referred to as EBITDA, common stock price divided by estimated 2005 earnings per share, and common stock price divided by estimated 2005 earnings per share divided by estimated five-year long-term growth rate ratios. Morgan Stanley calculated the financial multiples and ratios based on publicly available financial data as of November 8, 2004. The estimates of 2005 EBITDA for the comparable companies were based on selected Wall Street equity research reports. The estimates of 2005

 

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earnings per share and estimated five-year long-term growth rates were based on the Institutional Brokers Estimate System. For purposes of its analysis, Morgan Stanley identified the following five publicly traded corporations in the ophthalmic medical device industry:

 

    Alcon Inc.;

 

    Advanced Medical Optics, Inc.;

 

    Bausch & Lomb Inc.;

 

    The Cooper Companies, Inc.; and

 

    Ocular Sciences Inc.

 

A summary of the reference range of market trading multiples that Morgan Stanley used are set forth below:

 

     Reference Range of Multiples

Aggregate Value / 2005E EBITDA

   10.5x - 13.5x

Price / 2005E Earnings Per Share

   19.0x - 23.0x

(Price / 2005E Earnings Per Share)/Five-Year Long-Term Growth Rate

   1.2x - 1.3x

 

Using these representative reference ranges of multiples, Morgan Stanley calculated an implied valuation range for VISX by applying the reference ranges of multiples to the applicable VISX operating statistic based on information publicly available in Wall Street equity research reports. Based on such analysis, Morgan Stanley calculated an implied valuation range for VISX common stock of $19.56 to $25.48 per share. Morgan Stanley noted that the implied merger consideration based on the closing price per share of AMO common stock on November 8, 2004 was $26.52.

 

Although the foregoing ophthalmic medical device companies were compared to VISX for purposes of this analysis, Morgan Stanley noted that no company utilized in this analysis is identical to VISX because of differences between the business mix, operations, and other characteristics of VISX and the comparable companies. In evaluating the comparable companies, Morgan Stanley made judgments and assumptions with regard to industry performance, general business, economic, market and financial conditions and other matters, many of which are beyond the control of VISX, such as the impact of competition on the business of VISX and the industry in general, potential industry growth and the absence of any adverse material change in the financial condition and prospects of VISX or the industry or the markets in general. Mathematical analysis (such as determining the average or median) is not in itself a meaningful method of using comparable company data.

 

Discounted Analyst Price Targets. Morgan Stanley reviewed available estimates of the target price for VISX common stock published by Wall Street equity research analysts as of November 8, 2004 to derive an implied value for VISX based on these publicly available estimates. Morgan Stanley discounted the Wall Street analyst price targets for one year at VISX’s estimated cost of equity capital of approximately 11%, based on the capital asset pricing model, a theoretical financial model that estimates the cost of equity capital of a particular company based on such company’s beta. A company’s beta is a metric designed to represent the systemic business risk and financial risk of such company versus the overall market. Based on the foregoing analysis, the Wall Street analyst price targets yielded an implied valuation of VISX common stock of $17.15 to $22.56. Morgan Stanley noted that the implied merger consideration based on closing price per share of AMO common stock on November 8, 2004 was $26.52.

 

Precedent Transactions Analysis. Morgan Stanley compared publicly available information for selected transactions to the relevant financial statistics for VISX based on publicly available Wall Street equity research estimates and derived an implied value for VISX based on this information. For purposes of its analysis, Morgan Stanley did not include transactions involving sales of subsidiaries or divisions of pharmaceutical or medical

 

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supply or device companies since information regarding these transactions was not publicly available. The group of transactions consisted of seven selected ophthalmic medical device transactions within the segments of refractive surgery/vision correction, cataract surgery and contact lens/eye care. For each transaction, Morgan Stanley analyzed, as of the announcement date of each transaction, the multiples implied by the transaction value of (i) aggregate value to the acquired company’s forward sales, (ii) aggregate value to the acquired company’s forward earnings before interest and taxes, which is referred to as EBIT, and (iii) price to the acquired company’s forward earnings per share. In each case, Morgan Stanley applied such multiples to the applicable VISX operating statistic based on publicly available information. The following table sets forth the acquisition transactions that were reviewed in connection with this analysis:

 

    Summit Autonomous/Alcon Holdings (Nestle);

 

    Pfizer Surgical Business/Advanced Medical Optics;

 

    Ocular Sciences/Cooper Companies;

 

    Eye Care Ops (Biocompatibles)/Cooper Companies;

 

    Wesley Jessen VisionCare, Inc./Novartis;

 

    Wesley Jessen VisionCare, Inc./Bausch & Lomb; and

 

    Ocular Sciences/Wesley Jessen VisionCare, Inc.

 

Morgan Stanley then derived from these selected transactions reference ranges of (i) forward sales multiples of 7.0x to 8.0x, (ii) forward EBIT multiples of 13.0x to 15.0x, and (iii) forward earnings per share multiples of 20.0x to 22.0x. In applying these ranges of multiples to the relevant VISX statistic based on Wall Street equity research estimates, Morgan Stanley calculated an implied valuation range for VISX common stock of $19.60 to $30.22 per share.

 

In addition, Morgan Stanley also analyzed the premium paid to the acquired company in the transactions referenced above to the one-day prior and thirty-day prior unaffected stock price of the acquired company. Morgan Stanley then derived a reference range of premiums to the one-day prior unaffected acquired company price of 20% to 50% and premiums to the thirty-day prior unaffected acquired company price of 15% to 40%, and applying these ranges to VISX common stock prices one and thirty-days prior to November 9, 2004, Morgan Stanley calculated an implied valuation range for VISX common stock of $20.29 to $26.47.

 

Morgan Stanley also analyzed approximately thirty precedent transactions across all industries in which stockholders of the acquired company retained a relatively high ownership percentage of the pro forma company, and calculated the premium paid to the one-day unaffected price and the thirty-day average historical exchange ratio, measured prior to the public announcement of such transactions. Morgan Stanley developed a reference range of premiums paid to the one-day unaffected price and the thirty-day average exchange ratio of 15% to 30% and 30% to 50%, respectively. By applying these ranges of premiums to the thirty-day average exchange ratio derived from the quotient obtained by dividing the VISX common stock price by the AMO common stock price and then multiplying such quotient by the AMO common stock price as of November 8, 2004, Morgan Stanley calculated an implied valuation range for VISX common stock of $19.45 to $30.64. Morgan Stanley noted that the implied merger consideration based on the closing price per share of AMO common stock on November 8, 2004 was $26.52.

 

Morgan Stanley noted that the merger and acquisition transaction environment varies over time because of macroeconomic factors such as interest rate and equity market fluctuations and microeconomic factors such as industry results and growth expectations. Morgan Stanley noted that no company or transaction reviewed was identical to the proposed transactions and that, accordingly, these analyses involve complex considerations and judgments concerning differences in financial and operating characteristics of VISX and other factors that would affect the acquisition values in the comparable transactions, including the size and demographic and economic

 

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characteristics of the markets of each company and the competitive environment in which it operates. Mathematical analyses (such as determining the average or median) is not in itself a meaningful method of using comparable transaction data.

 

Discounted Equity Value Analysis. Morgan Stanley performed an analysis of the implied present value per share of VISX common stock on a stand-alone basis based on VISX’s projected future equity value using the fiscal year 2005, 2006 and 2007 estimates provided by VISX management as well as based on similar estimates from published Wall Street equity research reports. To calculate the discounted equity value, Morgan Stanley multiplied the applicable VISX earnings estimate by the next calendar year multiple range of 19.0x to 23.0x, based on the reference range derived from the comparable company analysis, and discounted the implied nominal equity values of VISX to a present value at an illustrative discount rate of 11%, which reflected the VISX average cost of equity capital. Based on the aforementioned projections and assumptions, Morgan Stanley derived an implied valuation range for VISX common stock of $18.62 to $23.62 and $21.25 to $31.13, using Wall Street equity research estimates and VISX management estimates, respectively. Morgan Stanley noted that the implied merger consideration based on the closing price per share of AMO common stock on November 8, 2004 was $26.52.

 

Discounted Cash Flow Analysis. Morgan Stanley performed a five year discounted cash flow analysis, which is designed to represent the value of a company based on its future cash flows and expenses and the riskiness of achieving such projections, of the after-tax unlevered free cash flows derived from VISX for fiscal years 2005 through 2009, which included estimates of synergies. Morgan Stanley performed this analysis based on the following projections: (i) financial forecasts and estimates provided by VISX management, (ii) Wall Street research estimates adjusted based on guidance from AMO management, and (iii) a downside case which reflected adjustments to the financial forecasts and estimates provided by VISX management based on discussions with AMO management. Morgan Stanley estimated a range of terminal values calculated in 2009 based on a range of forward EBITDA multiples of 10.5x to 13.5x. Morgan Stanley then discounted the unlevered free cash flow streams and the estimated terminal value to a present value at a range of discount rates from 10.0% to 12.0%, based on VISX’s estimated weighted average cost of capital. In addition, Morgan Stanley included the value of the estimated synergy benefits expected through the proposed transaction as developed by the management of AMO based upon discussions with the management of VISX.

 

Based on the aforementioned projections and assumptions, the discounted cash flow analysis of VISX yielded an implied valuation range of:

 

    

Implied Value Range per Share

of VISX Common Stock


VISX Management Estimates

   $29.35 - $43.85

Adjusted Wall Street Research Estimates

   $19.11 - $30.06

Downside Case

   $18.85 - $29.62

 

Morgan Stanley noted that the implied merger consideration based on the closing price per share of AMO common stock on November 8, 2004 was $26.52.

 

Pro Forma Impact to AMO. Morgan Stanley analyzed the pro forma impact of the transaction on AMO’s operating statistics, credit/capitalization statistics and projected earnings per share in 2005 through 2009 as published by Wall Street equity analysts. Morgan Stanley’s analysis indicated that after payment of the merger consideration, that the merger would reduce AMO’s total debt divided by EBITDA ratio and total debt divided by total book capitalization, and increase the EBITDA divided by total interest ratio and free cash flow divided by total debt ratio. Morgan Stanley’s analysis also indicated that the merger would improve AMO’s revenue, EBITDA, and free cash flow growth from 2005 through 2009 and it would increase AMO’s EBITDA margin from 2005 to 2009. Furthermore, Morgan Stanley’s analysis indicated that the merger is dilutive to AMO’s estimated earnings per share in 2005 and accretive to estimated earnings per share in 2006 through 2009 based on

 

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generally accepted accounting principles, which include the annual non-cash intangible asset amortization expenses incurred in the merger, as estimated by the management of AMO. Morgan Stanley noted that the merger is accretive to AMO’s estimated cash earnings per share, which exclude the annual non-cash intangible amortization expenses incurred in the merger, in 2005 through 2009. Morgan Stanley also noted that it had included the estimated impact to operating income of the annual cost and revenue synergy benefits that ranged from $22 million to $74 million during the period from 2005 to 2009 expected through the proposed merger as developed by the management of AMO based upon discussions with the management of VISX when it reviewed the pro forma impact of the merger to AMO.

 

In connection with review of the transaction by the AMO board of directors, Morgan Stanley performed a variety of financial and comparable analyses for purposes of rendering its opinion. The preparation of a fairness opinion is a complex process and is not susceptible to partial analysis or summary description. In arriving at its opinion, Morgan Stanley considered the results of all of its analyses as a whole and did not attribute any particular weight to any analysis or factor considered. Furthermore, Morgan Stanley believes that the summary provided and the analyses described above must be considered as a whole and that selecting any portion of the analyses, without considering all of them, would create an incomplete view of the process underlying Morgan Stanley’s analyses and opinion. As a result, the ranges of valuations resulting from any particular analysis or combination of analyses described above should not be taken to be the view of Morgan Stanley with respect to the actual value of VISX common stock.

 

In performing its analyses, Morgan Stanley made numerous assumptions with respect to industry performance, general business and economic conditions and other matters, many of which are beyond the control of Morgan Stanley. Any estimates contained in the analyses of Morgan Stanley are not necessarily indicative of future results or actual values, which may be significantly more or less favorable than those suggested by such estimates. The analyses performed were prepared solely as part of the analyses of Morgan Stanley of the fairness of the merger consideration to be paid by AMO to holders of shares of VISX common stock pursuant to the merger agreement, from a financial point of view, and were prepared in connection with the delivery by Morgan Stanley of its opinion, dated November 9, 2004, to the AMO board of directors.

 

The opinion of Morgan Stanley was one of many factors taken into consideration by the AMO board of directors in making its determination to approve the proposed transaction. The foregoing summary does not purport to be a complete description of the analyses performed by Morgan Stanley.

 

The AMO board of directors selected Morgan Stanley as its financial advisor because of its reputation as an internationally recognized investment banking and advisory firm with substantial experience in transactions similar to this proposed transaction and because Morgan Stanley is familiar with AMO and its business. As part of its investment banking and financial advisory business, Morgan Stanley is continually engaged in the valuation of businesses and their securities in connection with mergers and acquisitions, negotiated underwritings, competitive biddings, secondary distributions of listed and unlisted securities, private placements and valuations for corporate and other purposes.

 

Morgan Stanley provides a full range of financial advisory and securities services and in the past, has provided financial advisory and financing services to AMO and has received fees for the rendering of such services and also may provide such services to AMO in the future for which it would expect to receive fees. In addition, Morgan Stanley is a full service securities firm engaged in securities trading, investment management and brokerage services. In the ordinary course of its trading, brokerage, investment management and financing activities, Morgan Stanley or its affiliates may actively trade the equity and debt securities and senior loans of VISX and AMO for its own accounts or for the accounts of its customers and, accordingly, may at any time hold long or short positions in such securities or loans.

 

Pursuant to an engagement letter dated October 4, 2004, AMO has agreed to pay Morgan Stanley a transaction fee in connection with the Merger equal to 0.75% of the aggregate value of the transaction (which, on

 

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the basis of market data as of January 21, 2005, would have been $10.2 million), provided, however, that under no circumstances shall the transaction fee exceed $11.5 million. In addition, $2 million of the transaction fee was payable upon the announcement of the transaction, with the remaining portion of which is contingent upon the completion of the merger. AMO has also agreed to reimburse Morgan Stanley for its fees and expenses incurred in performing its services. Morgan Stanley also provided a loan commitment to AMO in connection with the merger, and AMO has agreed to pay Morgan Stanley fees equal to approximately $2 million in connection with such commitment and subsequent loan. In addition, AMO has agreed to indemnify Morgan Stanley and its affiliates, their respective directors, officers, agents and employees and each person, if any, controlling Morgan Stanley or any of its affiliates against certain liabilities and expenses, including certain liabilities under the federal securities laws, related to or arising out of Morgan Stanley’s engagement and any related transactions.

 

Morgan Stanley has also provided certain investment banking services to AMO over the past two years from the date of the opinion, including having acted as:

 

    Joint bookrunner with respect to the offering of AMO’s $350 million of 2.50% convertible senior subordinated notes due 2024 in June 2004;

 

    Joint bookrunner with respect to the offering of AMO’s $140 million of 3.5% convertible senior subordinated notes due 2023 in June 2003; and

 

    Participant in $100 million senior credit facility due 2007 in June 2003.

 

In connection with such transactions, Morgan Stanley received fees of approximately $4 million.

 

Opinion of VISX’s Financial Advisor

 

Goldman Sachs rendered its opinion to the VISX board of directors that, as of the date of the written fairness opinion and based upon and subject to the factors and assumptions set forth therein, the consideration to be received by holders of VISX common stock, taken in the aggregate, pursuant to the merger agreement is fair from a financial point of view to such holders.

 

The full text of the written opinion of Goldman Sachs, dated November 9, 2004, which sets forth assumptions made, procedures followed, matters considered and limitations on the review undertaken in connection with the opinion, is attached to this joint proxy statement/prospectus as Annex H. Goldman Sachs provided its opinion for the information and assistance of the VISX board of directors in connection with its consideration of the merger. The Goldman Sachs opinion is not a recommendation as to how any holder of VISX common stock should vote with respect to the merger.

 

In connection with rendering the opinion described above and performing its related financial analyses, Goldman Sachs reviewed, among other things:

 

    the merger agreement;

 

    annual reports to stockholders and Annual Reports on Form 10-K of VISX for the five years ended December 31, 2003;

 

    annual reports to stockholders and Annual Reports on Form 10-K of AMO for the two years ended December 31, 2003;

 

    certain interim reports to stockholders and Quarterly Reports on Form 10-Q of VISX and AMO;

 

    certain other communications from VISX and AMO to their respective stockholders; and

 

    certain internal financial analyses and forecasts for VISX prepared by VISX management; certain internal financial analyses and forecasts for AMO prepared by AMO management, as adjusted by VISX management; and certain cost savings and operating synergies projected to result from the merger prepared by the managements of VISX and AMO and subsequently adjusted by VISX management.

 

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Goldman Sachs also held discussions with members of the senior management of VISX and AMO regarding their assessment of the strategic rationale for, and the potential benefits of, the merger and the past and current business operations, financial condition, and future prospects of their respective companies. In addition, Goldman Sachs reviewed the reported price and trading activity for the VISX common stock and the AMO common stock, compared certain financial and stock market information for VISX and AMO with similar information for certain other companies the securities of which are publicly traded, reviewed the financial terms of certain recent business combinations in the medical device industry specifically and in other industries generally and performed such other studies and analyses, and considered such other factors, as it considered appropriate.

 

Goldman Sachs relied upon the accuracy and completeness of all of the financial, accounting, legal, tax and other information discussed with or reviewed by it and assumed such accuracy and completeness for purposes of rendering the opinion described above. As is typical in transactions of this nature, VISX management made adjustments to AMO’s revenue and expense projections, and also to selected capital expenditures and working capital estimates. These adjustments were made by VISX management in order to perform a conservative analysis of the proposed transaction, not because VISX management was in possession of any specific facts or information to warrant the adjustments. Goldman Sachs assumed with VISX’s consent that the internal financial analyses and forecasts for VISX prepared by VISX management, the internal financial analyses and forecasts for AMO prepared by AMO management as adjusted by VISX management and the cost savings and operating synergies projected to result from the merger prepared by the managements of VISX and AMO and subsequently adjusted by VISX management have been reasonably prepared on a basis reflecting the best currently available estimates and judgments of VISX. Goldman Sachs also assumed that all governmental, regulatory or other consents and approvals necessary for the consummation of the merger contemplated by the agreement will be obtained without any adverse effect on VISX or AMO or on the expected benefits of the merger in any way meaningful to Goldman Sachs’ analysis. In addition, Goldman Sachs did not make an independent evaluation or appraisal of the assets and liabilities (including any contingent, derivative or off-balance-sheet assets and liabilities) of VISX or AMO or any of their respective subsidiaries, nor was any evaluation or appraisal of the assets or liabilities of VISX or AMO or any of their respective subsidiaries furnished to Goldman Sachs. Goldman Sachs’ opinion does not address the underlying business decision of VISX to engage in the merger. In addition, Goldman Sachs did not express any opinion as to the prices at which shares of AMO common stock will trade at any time.

 

The following is a summary of the material financial analyses delivered by Goldman Sachs to the VISX board of directors in connection with rendering the opinion described above. The following summary, however, does not purport to be a complete description of the financial analyses performed by Goldman Sachs, nor does the order of analyses described represent relative importance or weight given to those analyses by Goldman Sachs. Some of the summaries of the financial analyses include information presented in tabular format. The tables must be read together with the full text of each summary and are alone not a complete description of Goldman Sachs’ financial analyses. Except as otherwise noted, the following quantitative information, to the extent that it is based on market data, is based on market data as it existed on or before November 8, 2004 and is not necessarily indicative of current market conditions.

 

Historical Stock Trading Analysis. Goldman Sachs reviewed the historical trading prices and volumes for the VISX common stock for the three-year period ended November 8, 2004. In addition, Goldman Sachs analyzed the consideration to be received by holders of VISX common stock pursuant to the merger agreement, calculated as of the close of business on November 8, 2004, in relation to the latest one month, two months, three months, six months, one year and three year average market price of the VISX common stock as of the close of business on November 8, 2004.

 

This analysis indicated that the price per share to be paid to VISX stockholders pursuant to the merger agreement represented:

 

    a premium of 56.8% based on the closing market price on November 8, 2004 of $16.91 per share;

 

    a premium of 45.9% based on the latest one month average market price of $18.18 per share;

 

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    a premium of 35.6% based on the latest two months average market price of $19.56 per share;

 

    a premium of 34.2% based on the latest three months average market price of $19.76 per share;

 

    a premium of 22.2% based on the latest six months average market price of $21.70 per share;

 

    a premium of 22.7% based on the latest one year average market price of $21.62 per share; and

 

    a premium of 62.5% based on the latest three year average market price of $16.32 per share.

 

Discounted Cash Flow Analysis. Goldman Sachs performed a discounted cash flow analysis on VISX using VISX management’s projections. Goldman Sachs calculated illustrative net present value indications of free cash flows for VISX for the years 2005 through 2009 using discount rates ranging from 11% to 13%. Goldman Sachs calculated illustrative value indications per share for VISX using illustrative terminal value indications in the year 2009 based on perpetuity growth rates ranging from 2% to 4%. These illustrative terminal value indications were then discounted to calculate illustrative present value indications using discount rates ranging from 11% to 13%. The various ranges for discount rates and perpetuity growth rates were chosen to reflect theoretical analyses of cost of capital. The following table presents the results of this analysis:

 

     Illustrative Per Share Value Indications

VISX

   $ 20.58-$29.87

 

Goldman Sachs also performed a discounted cash flow analysis on AMO using AMO management’s projections, as adjusted by VISX management. Goldman Sachs calculated illustrative net present value indications of free cash flows for AMO for the years 2005 through 2009 using discount rates ranging from 10% to 12%. Goldman Sachs calculated illustrative value indications per share for AMO using illustrative terminal value indications in the year 2009 based on perpetuity growth rates ranging from 2% to 4%. These illustrative terminal value indications were then discounted to calculate illustrative present value indications using discount rates ranging from 10% to 12%. The various ranges for discount rates and perpetuity growth rates were chosen to reflect theoretical analyses of cost of capital. The following table presents the results of this analysis:

 

     Illustrative Per Share Value Indications

AMO

   $ 34.90-$54.61

 

In addition, Goldman Sachs performed a discounted cash flow analysis on the combined company, with synergies using (a) VISX management’s projections, (b) AMO management’s projections, as adjusted by VISX’s management, and (c) VISX and AMO managements’ projected synergies, subsequently adjusted by VISX’s management. Goldman Sachs calculated illustrative net present value indications of free cash flows for the combined company for the years 2005 through 2009 using discount rates ranging from 10% to 12%. Goldman Sachs calculated illustrative value indications per share of the combined company using illustrative terminal value indications in the year 2009 based on perpetuity growth rates ranging from 2% to 4%. These illustrative terminal value indications were then discounted to calculate illustrative present value indications using discount rates ranging from 10% to 12%. The various ranges for discount rates and perpetuity growth rates were chosen to reflect theoretical analyses of cost of capital. The following table presents the results of this analysis:

 

     Illustrative Per Share Value Indications

The Combined Company

   $ 41.43-$66.11

 

Goldman Sachs also calculated the illustrative per share value to be received by VISX stockholders in the merger based on multiplying the illustrative per share values for the combined company resulting from the discounted cash flow analysis of the combined company with synergies by 0.552 and adding $3.50. This analysis resulted in a range of illustrative per share consideration equal to $26.37 - $39.99. Goldman Sachs then calculated the illustrative per share value to be received by VISX stockholders in the merger as a premium to the illustrative per share values for VISX resulting from the discounted cash flow analysis of VISX. This analysis resulted in a premium range equal to 28.1% - 33.9%.

 

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Goldman Sachs performed these various discounted cash flow analyses because such analyses—which are based on management’s estimates of future cash flows and the perceived riskiness of achieving such projections—result in illustrative per share equity values for AMO, VISX and the combined company, respectively.

 

Pro Forma Merger Analysis. Goldman Sachs prepared illustrative pro forma analyses with synergies of the potential financial impact of the merger on a GAAP basis using (a) earnings estimates for VISX prepared by its management, (b) earnings estimates for AMO prepared by its management, as adjusted by VISX management and (c) synergies estimates prepared by VISX and AMO managements, subsequently adjusted by VISX management. For each of the estimated years 2005 and 2006, Goldman Sachs compared the projected earnings per share of AMO common stock, on a stand-alone basis, to the projected earnings per share of the common stock of the combined companies. Based on such analyses, the proposed transaction would be dilutive to AMO stockholders on an earnings per share basis in the above scenarios in the years 2005 and 2006.

 

Goldman Sachs prepared illustrative pro forma analyses without synergies of the potential financial impact of the merger using (a) earnings estimates for VISX prepared by its management and (b) earnings estimates for AMO prepared by AMO management, as adjusted by VISX management. For each of the estimated years 2005 and 2006, Goldman Sachs compared the projected earnings per share of AMO common stock, on a stand-alone basis, to the projected earnings per share of the common stock of the combined companies. Based on such analyses, the proposed transaction would be dilutive to AMO’s stockholders on an earnings per share basis in the above scenarios in the years 2005 and 2006.

 

Goldman Sachs performed this pro forma merger analysis because such analysis—which is based on management’s estimates of future earnings of VISX and AMO, respectively, and the synergies expected to be realized from the transaction—results in a measure of how accretive or dilutive the transaction is expected to be to the earnings per share of AMO.

 

Contribution Analysis. Goldman Sachs reviewed estimated future operating and financial information including, among other things, sales, EBITDA, net income and pre-tax income for VISX, AMO and the combined entity resulting from the merger without synergies based on (a) VISX management’s financial forecasts and (b) AMO management’s financial forecasts, as adjusted by VISX management. Goldman Sachs calculated that the consideration to be paid in the merger for each share of VISX common stock of 0.552 shares of AMO common stock plus $3.50 would result in VISX’s stockholders owning approximately 41.5% of the outstanding common equity of the combined company following consummation of the merger. Goldman Sachs also calculated that the consideration to be paid in the merger for each share of VISX common stock of 0.552 shares of AMO common stock plus $3.50 resulted in an illustrative exchange ratio of 0.637 shares of AMO common stock for each share of VISX common stock based on the market value of AMO common stock on November 8, 2004. Based on this illustrative exchange ratio, Goldman Sachs further determined that VISX stockholders would own on an illustrative basis 45.0% of the outstanding common equity of the combined company following consummation of the merger. Goldman Sachs also analyzed the relative potential contribution of VISX to the combined company following consummation of the merger without synergies for the estimated years 2005 and 2006. The following table presents the results of this analysis:

 

     VISX Contribution To Combined Company

 
     Sales

    EBITDA

    Pre-Tax Income

    Net Income

 

2005E

   19.5 %   34.2 %   42.7 %   40.6 %

2006E

   20.4 %   35.2 %   43.1 %   40.2 %

 

Goldman Sachs performed the contribution analysis in order to permit a comparison of the implied percentage equity ownership of VISX’s and AMO’s stockholders, respectively, in the combined company to VISX’s and AMO’s respective estimated contributions to various estimated pro forma financial results for the combined company. Such a comparison is one measure of whether the stockholders of VISX and AMO, respectively, are receiving a fair share of the equity ownership of the combined company.

 

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Selected Companies Analysis. Goldman Sachs reviewed and compared certain financial information for VISX and AMO to corresponding financial information, ratios and public market multiples for the following publicly traded corporations in the Diversified Ophthalmology, Large Cap Diversified, and Contact Lens segments of the ophthalmology industry:

 

Diversified Ophthalmology

 

    Alcon Inc.

 

    Allergan Inc.

 

    AMO*

 

    Bausch & Lomb Inc.

 

Large Cap Diversified

 

    Johnson & Johnson

 

    Merck & Company Inc.

 

    Novartis

 

Contact Lens

 

    Cooper Companies Inc.**

 

    Ocular Sciences Inc.

 

Although none of the selected companies is directly comparable to VISX or AMO, the companies included were chosen because they are publicly traded companies with operations that for purposes of analysis may be considered similar to certain operations of VISX and AMO based on selected criteria including size, geographic presence, product offerings and growth potential.

 

Goldman Sachs also calculated and compared various financial multiples and ratios based on information it obtained from SEC filings and Institutional Brokers Estimate System, which is referred to as IBES, median estimates. The multiples and ratios of VISX were calculated using the VISX closing price on November 8, 2004 and were based on the most recent publicly available information and IBES estimates. The multiples and ratios for each of the selected companies were based on the most recent publicly available information and IBES estimates. With respect to the selected companies, Goldman Sachs calculated:

 

    levered market capitalization as a multiple of last twelve months, which is referred to as LTM, sales;

 

    levered market capitalization as a multiple of LTM EBITDA; and

 

    levered market capitalization as a multiple of LTM EBIT.

 

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* AMO pro forma for recapitalization and $450 million acquisition of Pfizer’s Surgical Ophthalmology Business.
** Cooper Companies Inc. announced on July 24, 2004 its intention to acquire Ocular Sciences Inc. for $1.2 billion. The transaction is still pending and the multiples are not pro forma for the transaction.


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The results of these analyses are summarized as follows:

 

     Diversified
Ophthalmology
Companies


    Large Cap
Diversified


    Contact Lens

    VISX

 

Levered Market Capitalization as a multiple of:


   Mean

    Median

    Mean

    Median

    Mean

    Median

   

LTM Sales

   3.9 x   3.9 x   3.5 x   3.7 x   4.7 x   4.7 x   4.4 x

LTM EBITDA

   16.7 x   18.2 x   10.6 x   11.8 x   18.1 x   18.1 x   9.9 x

LTM EBIT

   21.5 x   21.0 x   12.4 x   13.8 x   23.3 x   23.3 x   11.4 x

 

Goldman Sachs also calculated the selected companies’ LTM and estimated calendar years 2005 and 2006 price to earnings ratios and compared such ratios to the results for VISX. The following table presents the results of this analysis:

 

     Diversified
Ophthalmology
Companies


    Large Cap
Diversified


    Contact Lens

       

Price/Earnings Ratio:


   Mean

    Median

    Mean

    Median

    Mean

    Median

    VISX

 

LTM

   27.9 x   28.4 x   16.9 x   19.5 x   26.7 x   26.7 x   20.6 x

2005

   22.8 x   23.6 x   15.6 x   18.0 x   22.8 x   22.8 x   17.3 x

2006

   19.5 x   19.8 x   14.5 x   16.6 x   19.5 x   19.5 x   14.7 x

 

Goldman Sachs also considered LTM EBITDA margins and LTM EBIT margins, five-year EPS compounded annual growth rate, which is referred to as CAGR, and estimated calendar year 2005 price/earnings to five-year EPS CAGR provided by IBES.

 

The following table presents the results of this analysis:

 

     Diversified
Ophthalmology
Companies


    Large Cap
Diversified


    Contact Lens

       
     Mean

    Median

    Mean

    Median

    Mean

    Median

    VISX

 

LTM EBITDA Margin

   23.3 %   23.6 %   35.0 %   31.5 %   25.8 %   25.8 %   44.3 %

LTM EBIT Margin

   18.8 %   19.0 %   30.1 %   27.1 %   20.2 %   20.2 %   38.4 %

5 Year EPS CAGR

   17.3 %   17.4 %   9.2 %   12.0 %   14.8 %   14.8 %   20.0 %

2005E Price/Earnings/5-Year EPS CAGR

   1.3 x   1.3 x   2.1 x   1.5 x   1.6 x   1.6 x   0.9 x

 

Goldman Sachs also reviewed and compared certain financial information for VISX to corresponding financial information, ratios and public market multiples for the following publicly traded corporations in the high growth medical technology industry:

 

    Advanced Neuromodulation Systems Inc.

 

    Align Technology Inc.

 

    Given Imaging Limited

 

    Integra LifeSciences Holding

 

    Intuitive Surgical Inc.

 

    Kyphon Inc.

 

    Resmed Inc.

 

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    Respironics Inc.

 

    Varian Medical Systems Inc.

 

    Wright Medical Technology Inc.

 

Although none of the selected companies is directly comparable to VISX, the companies included were chosen because they are publicly traded companies with operations that for purposes of analysis may be considered similar to certain operations of VISX and AMO based on selected criteria including size, geographic presence, product offerings and growth potential.

 

Goldman Sachs also calculated and compared various financial multiples and ratios based on information it obtained from SEC filings and IBES median estimates. The multiples and ratios of VISX were calculated using the VISX closing price on November 8, 2004. The multiples and ratios of VISX were based on the most recent publicly available information and IBES estimates. The multiples and ratios for each of the selected companies were based on the most recent publicly available information and IBES estimates. With respect to the selected companies, Goldman Sachs calculated:

 

    levered market capitalization, which is the market value of common equity plus the book value of debt less cash, as a multiple of LTM sales;

 

    levered market capitalization as a multiple of LTM earnings before interest, taxes and depreciation and amortization, or EBITDA; and

 

    levered market capitalization as a multiple of LTM earnings before interest and taxes, or EBIT.

 

The results of these analyses are summarized as follows:

 

     Selected Companies

   VISX

Levered Market Capitalization as a multiple of:


   Range

   Median

   Mean

  

LTM Sales

   2.6x-15.3x    4.9x    6.0x    4.4x

LTM EBITDA

   11.5x-96.3x    20.7x    29.5x    9.9x

LTM EBIT

   15.6x-65.0x    22.7x    28.7x    11.4x

 

Goldman Sachs also calculated the selected companies’ LTM and estimated calendar years 2005 and 2006 price to earnings ratios and compared such ratios to the results for VISX. The following table presents the results of this analysis:

 

Price/Earnings Ratio:


   Selected Companies

   VISX

   Range

   Median

   Mean

  

LTM

   24.3x-466.2x    37.8x    85.8x    20.6x

2005E

   20.5x-57.0x    28.6x    31.2x    17.3x

2006E

   17.4x-29.1x    23.5x    22.9x    14.7x

 

Goldman Sachs also considered LTM EBIT margin, five-year earnings per share compound annual growth rate which is referred to as EPS CAGR and estimated calendar years 2005 and 2006 price/earnings to five-year EPS CAGR provided by IBES.

 

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The following table presents the results of this analysis:

 

     Selected Companies

   VISX

     Range

   Median

   Mean

  

LTM EBIT Margin

   (36.7)%-25.2%    18.6%    12.0%    38.4%

5-Year EPS CAGR

   18.0%-38.0%    25.0%    26.0%    20.0%

2005E Price/Earnings/5-Year EPS CAGR

   1.0x-1.4x    1.1x    1.2x    0.9x

2006E Price/Earnings/5-Year EPS CAGR

   0.7x-1.2x    0.9x    0.9x    0.7x

 

The preparation of a fairness opinion is a complex process and is not necessarily susceptible to partial analysis or summary description. Selecting portions of the analyses or of the summary set forth above, without considering the analyses as a whole, could create an incomplete view of the processes underlying Goldman Sachs’ opinion. In arriving at its fairness determination, Goldman Sachs considered the results of all of its analyses and did not attribute any particular weight to any factor or analysis considered by it. Rather, Goldman Sachs made its determination as to fairness on the basis of its experience and professional judgment after considering the results of all of its analyses. No company or transaction used in the above analyses as a comparison is directly comparable to VISX or AMO or the proposed merger.

 

Goldman Sachs prepared these analyses for purposes of Goldman Sachs’ providing its opinion to VISX’s board of directors as to the fairness from a financial point of view of the consideration to be received by holders of VISX common stock, taken in the aggregate, in the merger. These analyses do not purport to be appraisals nor do they necessarily reflect the prices at which businesses or securities actually may be sold. Any estimates contained in the analyses performed by Goldman Sachs are not necessarily indicative of actual values or future results, which may be significantly more or less favorable than those suggested by such analyses. Accordingly, such analyses and estimates are inherently subject to substantial uncertainty.

 

As described above, Goldman Sachs’ opinion to the VISX board of directors was one of many factors taken into consideration by the VISX board of directors in making its determination to approve the merger agreement. The foregoing summary does not purport to be a complete description of the analyses performed by Goldman Sachs in connection with the fairness opinion and is qualified in its entirety by reference to the written opinion of Goldman Sachs attached to this joint proxy statement/prospectus as Annex H.

 

Goldman Sachs and its affiliates, as part of their investment banking business, are continually engaged in performing financial analyses with respect to businesses and their securities in connection with mergers and acquisitions, negotiated underwritings, competitive biddings, secondary distributions of listed and unlisted securities, private placements and other transactions as well as for estate, corporate and other purposes. Goldman Sachs has acted as financial advisor to VISX in connection with, and has participated in certain of the negotiations leading to, the merger contemplated by the agreement. In addition, Goldman Sachs has provided certain investment banking services to VISX from time to time, including having acted as financial advisor to VISX with respect to an unsolicited proposal to acquire all of the VISX common stock in May 2001; and as sole bookrunning manager in connection with the acquisition of 6,000,000 shares of VISX common stock, of which 3,500,000 were purchased by VISX, in May 2003. Goldman Sachs also may provide investment banking services to VISX and AMO in the future. In connection with the above-described investment banking services Goldman Sachs has received, and may receive in the future, compensation.

 

Goldman Sachs is a full service securities firm engaged, either directly or through its affiliates, in securities trading, investment management, financial planning and benefits counseling, risk management, hedging, financing and brokerage activities for both companies and individuals. In the ordinary course of these activities, Goldman Sachs and its affiliates may provide such services to VISX, AMO and their respective affiliates, may actively trade the debt and equity securities of VISX and AMO (or related derivative securities) for their own account and for the accounts of their customers and may at any time hold long and short positions of such securities.

 

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The VISX board of directors selected Goldman Sachs as its financial advisor because it is an internationally recognized investment banking firm that has substantial experience in transactions similar to the merger. Pursuant to a letter agreement dated August 16, 2004, VISX engaged Goldman Sachs to act as its financial advisor in connection with the proposed merger. Pursuant to the terms of this engagement letter, VISX agreed to pay Goldman Sachs a transaction fee equal to the greater of $10 million or 0.75% of the aggregate consideration paid to VISX stockholders in the merger, which represents a fee of approximately $9.3 million calculated on the basis of market data as of January 21, 2005, all of which is payable upon consummation of the merger. In addition, VISX has agreed to reimburse Goldman Sachs for its expenses, including attorneys’ fees and disbursements, and to indemnify Goldman Sachs and related persons against various liabilities, including certain liabilities under the federal securities laws.

 

Material United States Federal Income Tax Consequences of the Merger

 

The following summary discusses the material United States federal income tax consequences of the merger applicable to a holder of shares of VISX common stock that receives cash and AMO common stock in the merger. This discussion is based upon the Internal Revenue Code, Treasury Regulations, judicial authorities, published positions of the Internal Revenue Service, which is referred to as the IRS, and other applicable authorities, all as currently in effect and all of which are subject to change or differing interpretations (possibly with retroactive effect). This discussion is limited to United States residents and citizens that hold their shares of VISX common stock as capital assets for United States federal income tax purposes (generally, assets held for investment). This discussion does not address all of the tax consequences that may be relevant to a particular VISX stockholder, including non-United States holders, or to a VISX stockholder that is subject to special treatment under United States federal income tax laws. No assurance can be given that the IRS would not assert, or that a court would not sustain, a position contrary to any of the tax consequences set forth below.

 

HOLDERS OF SHARES OF VISX COMMON STOCK ARE URGED TO CONSULT THEIR TAX ADVISORS AS TO THE UNITED STATES FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER, AS WELL AS THE EFFECTS OF STATE, LOCAL AND NON-UNITED STATES TAX LAWS.

 

Skadden, Arps, Slate, Meagher & Flom, LLP, counsel to AMO, and Wilson Sonsini Goodrich & Rosati, Professional Corporation, counsel to VISX, have each rendered opinions, attached to this Registration Statement as Exhibit 8.1 and Exhibit 8.2, respectively, based upon certain facts, representations and assumptions, that the merger will qualify as a reorganization under Section 368(a) of the Internal Revenue Code. In addition, the obligation of VISX to complete the merger is conditioned upon the receipt by VISX at closing of a tax opinion from Wilson Sonsini Goodrich & Rosati, Professional Corporation, (or from Skadden, Arps, Slate, Meagher & Flom LLP if Wilson Sonsini Goodrich & Rosati, Professional Corporation fails to give the opinion) to the effect that, on the basis of certain facts, representations and assumptions, the merger will constitute a reorganization for United States federal income tax purposes within the meaning of Section 368(a) of the Internal Revenue Code. The obligation of AMO to complete the merger is also conditioned upon the receipt by AMO at closing of a tax opinion from Skadden, Arps, Slate, Meagher & Flom LLP (or from Wilson Sonsini Goodrich & Rosati, Professional Corporation, if Skadden, Arps, Slate, Meagher & Flom LLP fails to give the opinion), to the effect that, on the basis of certain facts, representations and assumptions, the merger will constitute a reorganization for United States federal income tax purposes within the meaning of Section 368(a) of the Internal Revenue Code. Under certain circumstances, the merger agreement requires AMO and VISX to reduce the amount of the cash to be received by VISX stockholders in the merger to the minimum extent necessary, and increase the amount of stock to be received by VISX stockholders in the merger to the minimum extent necessary, to enable legal counsel to render their respective opinion or opinions, as the case may be, that the merger qualifies as a reorganization within the meaning of Section 368(a) of the Internal Revenue Code. The tax opinions are not binding on the IRS or any court and do not preclude the IRS from asserting, or a court from sustaining, a contrary conclusion. Moreover, no rulings have been or will be sought from the IRS concerning the tax consequences of the merger.

 

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Exchange of Shares of VISX Common Stock for Merger Consideration

 

A VISX stockholder that has shares of VISX common stock converted into merger consideration in the merger will recognize gain (but not loss) in an amount equal to the lesser of (1) the amount of cash received in the merger and (2) an amount equal to the excess, if any, of (a) the sum of the amount of cash received in the merger and the fair market value of the AMO common stock received in the merger over (b) the stockholder’s tax basis in its shares surrendered in exchange therefor. For this purpose, a VISX stockholder must calculate gain or loss separately for each identifiable block of shares exchanged by such stockholder, and a VISX stockholder cannot offset a loss recognized on one block of such shares against a gain recognized on another block of such shares. The gain recognized will be capital gain unless the receipt of cash by the stockholder has the effect of a distribution of a dividend, in which case such gain will be treated as ordinary dividend income to the extent of the stockholder’s ratable share of accumulated earnings and profits as calculated for United States federal income tax purposes. For purposes of determining whether the receipt of cash by the stockholder has the effect of a distribution of a dividend, a stockholder will be treated as if the stockholder first exchanged all of its shares solely for AMO common stock and then AMO immediately redeemed a portion of such stock for the cash that such stockholder actually received pursuant to the merger agreement. The IRS has indicated in rulings that any reduction in the interest of a minority stockholder that owns a small number of shares in a publicly and widely held corporation and that exercises no control over corporate affairs would result in capital gain (as opposed to dividend) treatment. In determining the interest of a stockholder in a corporation, certain constructive ownership rules must be taken into account. Any capital gain will be long-term if the stockholder’s holding period for its shares is more than one year.

 

Tax Basis for AMO Common Stock

 

A VISX stockholder will have an aggregate tax basis in AMO common stock received in the merger (other than a fractional share) equal to the stockholder’s aggregate tax basis in its shares surrendered pursuant to the merger, (1) reduced by (a) the portion of the stockholder’s tax basis in its shares surrendered in the merger that is allocable to a fractional share of AMO common stock for which cash is received and (b) the amount of cash received by the stockholder in the merger (other than cash received in lieu of a fractional share), and (2) increased by the amount of gain (including any portion of such gain that is treated as a dividend as described above), if any, recognized by the stockholder in the merger (but not by gain recognized upon the receipt of cash in lieu of a fractional share of AMO common stock).

 

Holding Period for AMO Common Stock

 

The holding period for AMO common stock received by a VISX stockholder in the merger will include the holding period of the shares surrendered in the merger.

 

Cash Received in Lieu of a Fractional Share of AMO Common Stock

 

If a VISX stockholder receives cash in lieu of a fractional share of AMO common stock in the merger, the stockholder will generally recognize capital gain or loss equal to the difference between the amount of cash received in lieu of the fractional share and the portion of the stockholder’s tax basis in its shares surrendered in the merger that is allocable to the fractional share. The capital gain or loss will be long-term if the stockholder’s holding period for the portion of the shares deemed exchanged for the fractional share is more than one year.

 

Treatment of the Entities

 

No gain or loss will be recognized by AMO or VISX as a result of the merger.

 

Cash Received by Dissenting Stockholders

 

An eligible VISX stockholder that perfects its appraisal rights should generally recognize capital gain or loss in an amount equal to the difference between the amount realized and the tax basis of such stockholder’s

 

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shares of VISX common stock. In addition, a portion of any proceeds received following the effective time of the merger may be characterized as interest, taxable as ordinary income, thus reducing the amount of such capital gain or increasing the amount of such capital loss (as the case may be). VISX stockholders are encouraged to consult their tax advisers as to the tax consequences of exercising appraisal rights.

 

Accounting Treatment

 

In accordance with accounting principles generally accepted in the United States, AMO will account for the merger as a business combination. Upon the completion of the merger, AMO will record the cash consideration, the market value of its common stock issued (based on an average of the closing prices of AMO common stock for a range of trading days from two days before and after November 9, 2004, the announcement date) in the merger, the fair value of VISX’s debt at the time of the merger, the fair value of AMO options issued in exchange for options to purchase shares of VISX common stock outstanding at the effective time of the merger and the amount of direct transaction costs associated with the merger, as the estimated purchase price of acquiring VISX. AMO will allocate the estimated purchase price to the tangible and identifiable intangible assets acquired and liabilities assumed based on their respective fair values at the effective time of the merger. Any excess of the estimated purchase price over the fair value of net assets acquired will be accounted for as goodwill.

 

In accordance with the Statement of Financial Accounting Standards No. 142, “Goodwill and Other Intangible Assets,” goodwill resulting from the business combination will not be amortized but instead will be tested for impairment at least annually (more frequently if certain indicators are present). In the event that AMO management determines that the value of goodwill has become impaired, the combined company will incur an accounting charge for the amount of impairment during the fiscal quarter in which the determination is made.

 

Regulatory Matters

 

The merger is subject to review by the Antitrust Division and the FTC under the HSR Act, and by foreign governmental authorities under the antitrust laws of various other jurisdictions where AMO and VISX conduct business. Under the HSR Act, AMO and VISX are required to make pre-merger notification filings and must await the expiration of statutory waiting periods prior to completing the merger. AMO and VISX have made the requisite pre-merger notification filings with the Antitrust Division and the FTC, and the applicable waiting period has expired. AMO and VISX have filed the requisite notification of the merger with the Administrative Council for Economic Defense in Brazil and with the Fair Trade Commission in Taiwan. On January 17, 2005, the Federal Trade Commission in Taiwan decided to waive its jurisdiction over the merger. The completion of the merger is also conditioned upon the expiration or termination of all necessary antitrust waiting periods and receipt of all necessary antitrust clearances, consents and approvals. All applicable waiting periods have expired and AMO and VISX have obtained the governmental or regulatory approvals required to complete the merger.

 

Under the terms of the merger agreement, AMO is not required to sell, dispose of or hold separately any assets or businesses or interests in any assets or businesses of AMO, VISX or their respective affiliates, or make any other change in any portion of the businesses of VISX or AMO or incur any limitation on the conduct of the business of VISX or AMO in order to obtain any clearances, consents or approvals in connection with the merger. Either AMO or VISX may refuse to complete the merger if any such restrictions or conditions are required by governmental authorities as a condition to approving the merger. No additional stockholder approval is expected to be required for any decision by AMO or VISX, after the special meeting of AMO’s stockholders and the special meeting of VISX’s stockholders, to agree to any terms and conditions necessary to resolve any regulatory objections to the merger.

 

In addition, during or after the statutory waiting periods and clearance of the merger, and even after completion of the merger, either the Antitrust Division, the FTC, or other United States or foreign governmental authorities could challenge or seek to block the merger under the antitrust laws, as it deems necessary or desirable in the public interest. Moreover, in some jurisdictions, a competitor, customer or other third party could

 

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initiate a private action under the antitrust laws challenging or seeking to enjoin the merger, before or after it is completed. AMO and VISX cannot be sure that a challenge to the merger will not be made or that, if a challenge is made, AMO and VISX will prevail.

 

Dissenters’ or Appraisal Rights

 

Holders of shares of VISX common stock who do not vote in favor of approval and adoption of the merger agreement and approval of the merger and who properly demand appraisal of their shares will be entitled to appraisal rights in connection with the merger under Section 262 of the DGCL. Under the DGCL, holders of shares of AMO common stock are not entitled to appraisal rights in connection with the merger.

 

The following discussion is not a complete statement of the law pertaining to appraisal rights under the DGCL and is qualified in its entirety by the full text of Section 262 which is attached to this joint proxy statement/prospectus as Annex F. The following summary does not constitute any legal or other advice nor does it constitute a recommendation that stockholders exercise their appraisal rights under Section 262. All references in Section 262 and in this summary to a “stockholder” are to the record holder of the shares of VISX common stock as to which appraisal rights are asserted. A person having a beneficial interest in shares of VISX common stock held of record in the name of another person, such as a broker, fiduciary, depositary or other nominee, must act promptly to cause the record holder to follow the steps summarized below properly and in a timely manner to perfect appraisal rights.

 

Under Section 262, persons who hold shares of VISX common stock who do not vote in favor of approval and adoption of the merger agreement and approval of the merger and who otherwise follow the procedures set forth in Section 262 will be entitled to have their shares appraised by the Delaware Court of Chancery and to receive payment in cash of the “fair value” of the shares, exclusive of any element of value arising from the accomplishment or expectation of the merger, together with a fair rate of interest, if any, as determined by the court.

 

Notice of Appraisal Rights. Under Section 262, where a merger is to be submitted for approval at a meeting of a corporation’s stockholders, as in the case of approval and adoption of the merger agreement and approval of the merger by VISX’s stockholders, the corporation, not less than 20 days prior to the meeting, must notify each of its stockholders entitled to appraisal rights that appraisal rights are available and include in the notice a copy of Section 262. This joint proxy statement/prospectus shall constitute the notice, and the full text of Section 262 is attached to this joint proxy statement/prospectus as Annex F. Any holder of VISX common stock who wishes to exercise appraisal rights, or who wishes to preserve such holder’s right to do so, should review the following discussion and Annex F carefully because failure to timely and properly comply with the procedures specified will result in the loss of appraisal rights. Moreover, because of the complexity of the procedures for exercising the right to seek appraisal of shares of common stock, VISX believes that if a VISX stockholder considers exercising such rights, such stockholder should seek the advice of legal counsel.

 

Filing Written Demand. Any VISX stockholder wishing to exercise appraisal rights must deliver to VISX, before the vote on approval and adoption of the merger agreement and approval of the merger at the VISX special meeting, a written demand for the appraisal of the stockholder’s shares, and that stockholder must not vote in favor of approval and adoption of the merger agreement and approval of the merger. A holder of shares of VISX common stock wishing to exercise appraisal rights must hold of record the shares on the date the written demand for appraisal is made and must continue to hold the shares of record through completion of the merger, since appraisal rights will be lost if the shares are transferred prior to completion of the merger. The holder must not vote in favor of approval and adoption of the merger agreement and approval of the merger. A proxy which is signed and submitted but does not contain voting instructions will, unless revoked, be voted in favor of approval and adoption of the merger agreement and approval of the merger, and it will constitute a waiver of the stockholder’s right of appraisal and will nullify any previously delivered written demand for appraisal. Therefore, a stockholder who votes by proxy and who wishes to exercise appraisal rights must vote against approval and

 

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adoption of the merger agreement and approval of the merger or abstain from voting on the merger agreement and the merger. Neither voting against approval and adoption of the merger agreement and approval of the merger (in person or by proxy), nor abstaining from voting or failing to vote on the proposal to approve and adopt the merger agreement and approval of the merger will in and of itself constitute a written demand for appraisal satisfying the requirements of Section 262. The written demand for appraisal must be in addition to and separate from any proxy or vote. The demand must reasonably inform VISX of the identity of the holder as well as the intention of the holder to demand an appraisal of the “fair value” of the shares held by the holder. A stockholder’s failure to make the written demand prior to the taking of the vote on approval and adoption of the merger agreement and approval of the merger at the VISX special meeting will constitute a waiver of appraisal rights.

 

Only a holder of record of shares of VISX common stock is entitled to assert appraisal rights for the shares registered in that holder’s name. A demand for appraisal in respect of shares of VISX common stock should be executed by or on behalf of the holder of record, fully and correctly, as the holder’s name appears on the holder’s stock certificates, should specify the holder’s name and mailing address and the number of shares registered in the holder’s name and must state that the person intends thereby to demand appraisal of the holder’s shares in connection with the merger. If the shares are owned of record in a fiduciary capacity, such as by a trustee, guardian or custodian, execution of the demand should be made in that capacity, and if the shares are owned of record by more than one person, as in a joint tenancy and tenancy in common, the demand should be executed by or on behalf of all joint owners. An authorized agent, including an agent for two or more joint owners, may execute a single demand for appraisal on behalf of a holder of record; however, the agent must identify the record owner or owners and expressly disclose that, in executing the demand, the agent is acting as agent for the record owner or owners. If the shares are held in “street name” by a broker, bank or nominee, the broker, bank or nominee may exercise appraisal rights with respect to the shares held for one or more beneficial owners while not exercising the rights with respect to the shares held for other beneficial owners; in such case, however, the written demand should set forth the number of shares as to which appraisal is sought, and where no number of shares is expressly mentioned, the demand will be presumed to cover all shares of VISX common stock held in the name of the record owner. Stockholders who hold their shares in brokerage accounts or other nominee forms and who wish to exercise appraisal rights are urged to consult with their brokers to determine the appropriate procedures for the making of a demand for appraisal by such a nominee.

 

All written demands for appraisal pursuant to Section 262 should be sent or delivered to VISX, Incorporated, 3400 Central Expressway, Santa Clara, CA 95051, Attention: Secretary. The method of delivery of the written demand for appraisal to the address above is the option and risk of the stockholder.

 

Withdrawal of Demand. Any holder of VISX common stock may withdraw his, her or its demand for appraisal and accept the consideration offered pursuant to the merger agreement by delivering to the surviving corporation a written withdrawal of the demand for appraisal. However, any such attempt to withdraw the demand made more than 60 days after the effective date of the merger will require written approval of the surviving corporation. No appraisal proceeding in the Delaware Court of Chancery will be dismissed without the approval of the Delaware Court of Chancery, and such approval may be conditioned upon such terms as the Court deems just. If the surviving corporation does not approve a request to withdraw a demand for appraisal when that approval is required, or if the Delaware Court of Chancery does not approve the dismissal of an appraisal proceeding, the VISX stockholder will be entitled to receive only the appraised value determined in any such appraisal proceeding, which value could be less than, equal to or more than the consideration being offered pursuant to the merger agreement.

 

Notice by the Surviving Corporation. Within ten days after completion of the merger, the surviving corporation must notify each holder of VISX common stock who has made a written demand for appraisal pursuant to Section 262, and who has not voted in favor of approval and adoption of the merger agreement and approval of the merger, that the merger has become effective.

 

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Filing a Petition for Appraisal. Within 120 days after completion of the merger, but not thereafter, the surviving corporation or any holder of VISX common stock who has complied with Section 262 and is entitled to appraisal rights may file a petition in the Delaware Court of Chancery demanding a determination of the fair value of the shares held by all dissenting holders. The surviving corporation is under no obligation to and has no present intention to file such a petition and holders should not assume that the surviving corporation will file a petition. Accordingly, it is the obligation of the holders of VISX common stock to initiate all necessary action to perfect their appraisal rights in respect of shares of VISX common stock within the time prescribed in Section 262. Within 120 days after completion of the merger, any holder of VISX common stock who has complied with the requirements for exercise of appraisal rights will be entitled, upon written request, to receive from the surviving corporation a statement setting forth the aggregate number of shares not voted in favor of approval and adoption of the merger agreement and approval of the merger and with respect to which demands for appraisal have been received and the aggregate number of holders of such shares. The statement must be mailed within ten days after a written request therefore has been received by the surviving corporation or within ten days after the expiration of the period for delivery of demands for appraisal, whichever is later.

 

Under the merger agreement, VISX has agreed to provide AMO notice of any demands for appraisal received by it. AMO will have the right to participate in and direct all negotiations and proceedings with respect to demands for appraisal under Section 262 of the DGCL. VISX will not voluntarily make any payments with respect to, or settle or offer to settle, any demand for appraisal without the prior written consent of AMO. If a petition for an appraisal is timely filed by a holder of shares of VISX common stock and a copy thereof is served upon the surviving corporation, the surviving corporation will then be obligated within 20 days to file with the Delaware Register in Chancery a duly verified list containing the names and addresses of all stockholders who have demanded an appraisal of their shares and with whom agreements as to the value of their shares have not been reached. After notice to the stockholders as required by the court, the Delaware Court of Chancery is empowered to conduct a hearing on the petition to determine those stockholders who have complied with Section 262 and who have become entitled to appraisal rights thereunder. The Delaware Court of Chancery may require the stockholders who demanded payment for their shares to submit their stock certificates to the Register in Chancery for notation thereon of the pendency of the appraisal proceeding; and if any stockholder fails to comply with the direction, the Court of Chancery may dismiss the proceedings as to the stockholder.

 

Determination of Fair Value. After determining the holders of VISX common stock entitled to appraisal, the Delaware Court of Chancery will appraise the “fair value” of their shares, exclusive of any element of value arising from the accomplishment or expectation of the merger, together with a fair rate of interest, if any, to be paid upon the amount determined to be the fair value. In determining fair value and, if applicable, a fair rate of interest, the Court of Chancery of Delaware will take into account all relevant factors. In Weinberger v. UOP, Inc., the Supreme Court of Delaware discussed the factors that could be considered in determining fair value in an appraisal proceeding, stating that “proof of value by any techniques or methods that are generally considered acceptable in the financial community and otherwise admissible in court” should be considered, and that “fair price obviously requires consideration of all relevant factors involving the value of a company.” The Delaware Supreme Court stated that, in making this determination of fair value, the court must consider market value, asset value, dividends, earnings prospects, the nature of the enterprise and any other facts that could be ascertained as of the date of the merger that throw any light on future prospects of the merged corporation. Section 262 provides that fair value is to be “exclusive of any element of value arising from the accomplishment or expectation of the merger.” In Cede & Co. v. Technicolor, Inc., the Delaware Supreme Court stated that this exclusion is a “narrow exclusion [that] does not encompass known elements of value,” but which rather applies only to the speculative elements of value arising from such accomplishment or expectation. In Weinberger, the Supreme Court of Delaware also stated that “elements of future value, including the nature of the enterprise, which are known or susceptible of proof as of the date of the merger and not the product of speculation, may be considered.”

 

Stockholders considering seeking appraisal should be aware that the fair value of their shares as so determined could be more than, the same as or less than the merger consideration they would receive pursuant to the merger (0.552 shares of AMO common stock and $3.50 for each share of VISX common stock, and cash in

 

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lieu of any fractional shares) if they did not seek appraisal of their shares, and that an investment banking opinion as to fairness from a financial point of view is not necessarily an opinion as to fair value under Section 262. Although VISX believes that the merger consideration is fair, no representation is made as to the outcome of the appraisal of fair value as determined by the Delaware Court of Chancery, and stockholders should recognize that such an appraisal could result in a determination of a value higher or lower than, or the same as, the merger consideration. Neither VISX nor AMO anticipate offering more than the applicable merger consideration to any VISX stockholder exercising appraisal rights, and reserve the right to assert, in any appraisal proceeding, that for purposes of Section 262, the “fair value” of a share of VISX common stock is less than the applicable merger consideration, and that the methods which are generally considered acceptable in the financial community and otherwise admissible in court should be considered in the appraisal proceedings. In addition, Delaware courts have decided that the statutory appraisal remedy, depending on factual circumstances, may or may not be a dissenter’s exclusive remedy. The Delaware Court of Chancery will also determine the amount of interest, if any, to be paid upon the amounts to be received by persons whose shares of VISX common stock have been appraised. If a petition for appraisal is not timely filed, then the right to an appraisal will cease. The costs of the action may be determined by the Court and taxed upon the parties as the Court deems equitable under the circumstances. The Court may also order that all or a portion of the expenses incurred by a stockholder in connection with an appraisal, including, without limitation, reasonable attorneys’ fees and the fees and expenses of experts utilized in the appraisal proceeding, be charged pro rata against the value of all the shares entitled to be appraised.

 

If any stockholder who demands appraisal of shares of VISX common stock under Section 262 fails to perfect, or successfully withdraws or loses, his or her right to appraisal, the stockholder’s shares of VISX common stock will be deemed to have been converted upon completion of the merger into the right to receive the merger consideration under the merger agreement (0.552 shares of AMO common stock and $3.50, without interest for each share of VISX common stock owned by such stockholder (and cash in lieu of any fractional shares)). A stockholder will fail to perfect, or effectively lose or withdraw, the holder’s right to appraisal if no petition for appraisal is filed within 120 days after completion of the merger or if the stockholder delivers to the surviving corporation a written withdrawal of the holder’s demand for appraisal and an acceptance of the merger, in accordance with Section 262.

 

From and after completion of the merger, no dissenting stockholder shall have any rights of a VISX stockholder with respect to that holder’s shares for any purpose, except to receive payment of fair value and to receive payment of dividends or other distributions on the holder’s shares of VISX common stock, if any, payable to VISX stockholders of record as of a time prior to completion of the merger; provided, however, that if a dissenting stockholder delivers to the surviving company a written withdrawal of the demand for an appraisal within 60 days after completion of the merger or subsequently with the written approval of the surviving company, or, if no petition for appraisal is filed within 120 days after completion of the merger, then the right of that dissenting stockholder to an appraisal will cease and the dissenting stockholder will be entitled to receive only the merger consideration. Once a petition for appraisal is filed with the Delaware court, the appraisal proceeding may not be dismissed as to any VISX stockholder without the approval of the court.

 

Failure to comply strictly with all of the procedures set forth in Section 262 of the DGCL will result in the loss of a stockholder’s statutory appraisal rights. Consequently, any stockholder wishing to exercise appraisal rights is urged to consult legal counsel before attempting to exercise those rights.

 

Listing of AMO Common Stock and Delisting and Deregistration of VISX Common Stock after the Merger

 

Application will be made to have the shares of AMO common stock issued in the merger approved for listing on the NYSE. If the merger is completed, VISX common stock will be delisted from the NYSE and deregistered under the Exchange Act, and VISX will no longer file periodic reports with the SEC.

 

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Restrictions on Sales of Shares of AMO Common Stock Received in the Merger

 

The shares of AMO common stock to be issued in connection with the merger will be registered under the Securities Act of 1933 and will be freely transferable, except for shares of AMO common stock issued to any person who is deemed to be an “affiliate” of VISX prior to the merger. Persons who may be deemed to be “affiliates” of VISX prior to the merger include individuals or entities that control, are controlled by, or are under common control of VISX prior to the merger, and may include officers and directors, as well as principal stockholders of VISX prior to the merger.

 

Persons who may be deemed to be affiliates of VISX prior to the merger may not sell any of the shares of AMO common stock received by them in connection with the merger except pursuant to:

 

    an effective registration statement under the Securities Act of 1933 covering the resale of those shares;

 

    an exemption under paragraph (d) of Rule 145 under the Securities Act of 1933; or

 

    any other applicable exemption under the Securities Act of 1933.

 

Interests of Executive Officers and Directors of VISX in the Merger

 

In considering the recommendation of the VISX board of directors that VISX stockholders vote in favor of approval and adoption of the merger agreement and the merger contemplated by the merger agreement, VISX stockholders should be aware that some VISX executive officers and directors may have interests in the merger that may be different from, or in addition to, their interests as stockholders of VISX.

 

These interests relate to or arise from, among other things:

 

    the continued indemnification of, and provision of directors’ and officers’ insurance coverage to, current directors and officers of VISX following the merger;

 

    the appointment of Elizabeth H. Dávila, currently the Chairman and Chief Executive Officer of VISX, to the AMO board of directors upon completion of the merger;

 

    the potential receipt of severance payments by executive officers; and

 

    the accelerated vesting of officers’ and directors’ outstanding stock options and phantom units of VISX common stock, and the payments of cash and AMO common stock for shares of VISX common stock issued upon exercise of the officers’ and directors’ outstanding stock options.

 

Indemnification; Directors’ and Officers’ Insurance

 

AMO agreed that, for a period of six years following completion of the merger, the indemnification obligations set forth in VISX’s certificate of incorporation and bylaws and any VISX indemnification agreements will survive. To do so, AMO will cause the certificate of incorporation and bylaws of the surviving corporation of the merger to reflect provisions at least as favorable as the indemnification and exculpation provisions contained in VISX’s current certificate of incorporation and bylaws and, for a period of six years following completion of the merger, AMO will not amend, repeal or otherwise modify the certificate of incorporation or bylaws in any manner that would adversely affect the indemnification rights of any individual who on or prior to completion of the merger was protected under indemnification provisions in any of these VISX documents.

 

In addition, for a period of six years from the completion of the merger, AMO will cause VISX’s existing policy of directors’ and officers’ and fiduciary liability insurance (coverage limits of which were increased on November 4, 2004 by $15 million) to be maintained, subject to certain limitations. Alternatively, subject to certain limitations, prior to the completion of the merger, VISX is also permitted to purchase a six-year “tail” prepaid policy on its current policy of directors’ and officers’ and fiduciary liability insurance and, if VISX elects to do so, AMO will maintain the policy in full force and effect.

 

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AMO Board of Directors after the Merger

 

Under the merger agreement, AMO has agreed to take all action necessary so that upon completion of the merger, one current director of VISX will be appointed as a Class II director of AMO to serve a two-year term. The parties have agreed that Elizabeth H. Dávila will serve as the new AMO board member. Under existing AMO compensation policies, Ms. Dávila would become entitled to receive the compensation paid by AMO to its non-employee directors (other than the lead director) currently consisting of (i) an annual retainer of $24,000 per year, plus meeting fees and pay for days spent on affairs of the combined company, and (ii) annual equity grants.

 

Executive Officer Severance Payments and Stock Option Acceleration

 

All outstanding options to purchase VISX common stock, including options held by executive officers, will become fully vested and exercisable upon completion of the merger. The terms of the equity incentive plans and agreements pursuant to which such options were granted provide for the acceleration of vesting in connection with a change of control of VISX and existed before the beginning of merger discussions with AMO. At the effective time of the merger, each outstanding option to purchase VISX common stock held by an executive officer of VISX that has an exercise price equal to or less than $26.93 will be assumed by AMO. For more information, see “The Merger Agreement—Treatment of VISX Stock Options, Deferred Phantom Stock and ESPP” beginning on page 93.

 

In addition, VISX has from time to time entered into change of control severance agreements with each of its executive officers. The earliest of these agreements were entered into on May 12, 1999 between VISX and Derek A. Bertocci and Elizabeth H. Dávila. Over time, VISX has amended and restated the forms of its change of control severance agreements and, currently, each of the executive officers is subject to an agreement with substantially similar terms and conditions that provide each executive officer with certain severance payments if he or she is terminated without “cause,” as defined below, or terminates due to an “involuntary termination,” as defined below, at any time within the 24-month period following a change of control, which includes the completion of the merger. These benefits include payment of a lump sum amount equal to (i) three times the executive’s annual base salary and target bonus, (ii) three times the amount that would have been contributed by VISX on behalf of the executive to its 401(k) plan during the three-year period immediately following the termination date, and (iii) a pro rata bonus for the year in which the termination occurs. In addition, for the three-year period, the executive will receive continuation of life, disability, accident and health insurance benefits at VISX’s expense plus continuation of perquisites for the same applicable period and outplacement services for such period or, if earlier, upon the first acceptance of a new employment offer. If an executive who is at the vice president level or above is subject to the excise tax imposed by Section 280G of the Internal Revenue Code, VISX will provide that executive with a full gross-up payment. The agreements are binding on any successor to VISX.

 

The following is a list of all executive officers who are parties to change of control severance agreements with VISX and the dates on which the executive officers first entered into these agreements: Derek A. Bertocci, May 12, 1999; Elizabeth H. Dávila, May 12, 1999, Donald L. Fagen, February 1, 2001; Carol F. H. Harner, Ph.D., May 12, 1999, Theresa A. Johnson, October 22, 2003; Catherine E. Murphy, September 24, 2001; Douglas H. Post, May 12, 1999; John F. Runkel, Jr., January 29, 2001; Alan F. Russell, Ph.D., June 12, 2001; and Joaquin V. Wolff, January 1, 2001. None of these agreements were modified in anticipation of, or in connection with, the merger. Currently, only Ms. Dávila, Mr. Runkel and Mr. Wolff are expected to receive their respective severance benefits immediately after the transaction is consummated. The parties have not made determinations with respect to the employment following the merger of other VISX executive officers with change of control severance agreements. Accordingly, additional severance payments may be made in the event these executive officers are not retained by AMO, or are subsequently terminated without cause.

 

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The following table identifies, for each VISX executive officer as of November 4, 2004, the estimated total severance payment to which he or she would be entitled (including 280G gross-ups) if he or she were to be terminated without cause or were to resign pursuant to an involuntary termination at any time within the 24-month period following completion of the merger, the aggregate number of shares of his or her outstanding vested and unvested VISX stock options, the aggregate number of shares subject to his or her outstanding unvested VISX stock options that will become fully vested and exercisable immediately prior to completion of the merger, the weighted average exercise price of his or her collective vested and unvested VISX stock options and the value of all options.

 

Name and Title


   Total
Severance
Payment


   Aggregate
Shares
Subject to
Outstanding
Options


    Aggregate
Shares
Subject to
Unvested
Options


   Weighted
Average
Exercise
Price of
All
Options


   Value of All
Options*


Elizabeth H. Dávila

Chairman of the Board and Chief Executive Officer

   $ 2,662,878.06    1,900,108     466,668    $ 17.26    $ 18,318,889.07

Douglas H. Post

President and Chief Operating Officer

   $ 2,874,855.15    471,959     232,713    $ 18.97    $ 3,723,547.93

John F. Runkel, Jr.

Senior Vice President of Business Development and General Counsel

   $ 2,092,245.39    128,000 **   108,126    $ 16.41    $ 1,294,692.27

Derek A. Bertocci

Senior Vice President and Chief Financial Officer

   $ 1,911,805.45    335,821     103,128    $ 17.90    $ 2,895,083.50

Carol F.H. Harner

Senior Vice President, Research and Development

   $ 1,266,107.66    205,681     84,752    $ 21.01    $ 1,317,430.52

Donald L. Fagen

Vice President, Global Sales

   $ 1,011,263.83    104,500     68,751    $ 15.09    $ 1,194,677.50

Alan F. Russell

Vice President of Regulatory & Clinical Affairs

   $ 1,575,251.77    142,500     71,877    $ 16.67    $ 1,403,988.75

Joaquin V. Wolff

Vice President, Global Marketing

   $ 990,867.12    98,440     44,898    $ 16.16    $ 1,060,263.31

Catherine E. Murphy

Vice President, Human Resources

   $ 1,476,537.52    103,000     71,251    $ 14.43    $ 1,245,076.25

Theresa A. Johnson

Vice President, Operations

   $ 1,507,972.92    132,000     62,459    $ 21.83    $ 971,885.84

* Illustrates the economic value of all options held by each executive officer assuming the acceleration of all such options in the merger and the exercise of all options with exercise prices below $26.52, or in-the-money options, immediately upon completion of the merger. Calculated for each executive officer by multiplying the shares subject to in-the-money options by the difference between the value of the merger consideration as of November 9, 2004 ($26.52) and the exercise price of such in-the-money options.
** Includes options exercisable for 35,000 shares issued to Mr. Runkel on August 19, 2004 in connection with his promotion to senior vice president of business development.

 

As used in the agreements between VISX and its executive officers described above, the term “cause” means (i) the willful and continued failure by the executive to substantially perform the executive’s duties with VISX (other than any such failure resulting from the executive’s incapacity due to physical or mental illness) after a written demand for substantial performance is delivered to the executive by the VISX board of directors, which demand specifically identifies the manner in which the VISX board of directors believes that the executive has not substantially performed the executive’s duties, or (ii) the willful engaging by the executive in conduct which is demonstrably and materially injurious to VISX or its subsidiaries, monetarily or otherwise. For purposes of clauses (i) and (ii) of this definition, (x) no act, or failure to act, on the executive’s part shall be deemed “willful” unless done, or omitted to be done, by the executive not in good faith and without reasonable belief that the executive’s act, or failure to act, was in the best interest of VISX and (y) in the event of a dispute concerning the application of this provision, no claim by VISX that cause exists shall be given effect unless VISX establishes to the VISX board of directors by clear and convincing evidence that cause exists.

 

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As used in the agreements between VISX and its executive officers described above, the term “involuntary termination” means (i) without the executive’s express written consent, a significant reduction of the executive’s duties, position or responsibilities relative to the executive’s duties, position or responsibilities in effect immediately prior to the reduction, or the removal of the executive from such position, duties and responsibilities, unless the executive is provided with comparable duties, position and responsibilities; (ii) without the executive’s express written consent, a substantial reduction of the facilities and perquisites (including office space and location) available to the executive immediately prior to such reduction; (iii) a reduction by VISX of the executive’s base salary as in effect immediately prior to the reduction; (iv) a material reduction by VISX in the kind or level of employee benefits to which the executive is entitled immediately prior to the reduction with the result that the executive’s overall benefits package is significantly reduced; provided, however, that a reduction of the executive’s benefits to a level greater than or equal to those available to similarly situated employees of VISX and employees of any entity in control of VISX shall not constitute an involuntary termination; (v) without the executive’s express written consent, the relocation of the executive to a facility or a location more than thirty five (35) miles from his or her location immediately prior to the change of control; (vi) any termination of the executive by VISX which is not effected for cause; or (vii) the failure of VISX to obtain the assumption of the agreements by any successors contemplated in Section 6 of the agreements.

 

Non-Employee Director Stock Option Acceleration and Phantom Units

 

All outstanding options to purchase VISX common stock and phantom units of VISX common stock held by non-employee directors will become fully vested and exercisable upon completion of the merger. The terms of the equity incentive plans and agreements pursuant to which such options and phantom stock units were granted provide for the acceleration of vesting in connection with a change of control of VISX and existed before the beginning of merger discussions with AMO. The VISX board of directors made clarifying amendments to the VISX 1995 Director Option and Stock Deferral Plan, but these amendments did not have any effect on the amount that directors of VISX would receive for their options and phantom units in the merger. This plan provides that directors who meet the qualifying retirement provision in the plan will be able to exercise each of their options with an exercise price equal to or less than $26.93 within the lesser of (a) a period of five years from the date of their termination from the VISX board of directors or (b) the original ten-year term of the option. Qualifying retirement means a non-employee director’s termination from the VISX board of directors, including pursuant to the director’s death or disability, if such termination follows (x) five full terms of board membership and attainment of age 62 or greater, or (y) ten full terms of board membership.

 

Non-employee members of the VISX board of directors are eligible to participate in the stock deferral portion of the 1995 Director Option and Stock Deferral Plan, which allows non-employee directors to defer all or a portion of their annual cash retainer in exchange for phantom units of VISX common stock. Amounts deferred by a non-employee director are held in an unfunded account that is hypothetically invested in VISX common stock with cash equal to the value of VISX common stock representing one phantom unit. Deferrals are paid by VISX (or its successor) in shares of VISX common stock upon a non-employee director’s termination or retirement in accordance with the elections specified in a non-employee director’s deferral election. Distribution alternatives include: a single lump sum payment; 10 quarterly installments; 20 quarterly installments; 30 quarterly installments or 40 quarterly installments; provided, that, in the event a non-employee director has less than $25,000 credited to his or her deferral account as of the date of retirement or termination, 100% of his or her deferral account will be distributed in a single lump-sum distribution; provided, further, VISX can terminate the deferral arrangement at any time and all benefits will be paid pursuant to the applicable non-employee director’s election. After the completion of the merger, each non-employee director’s deferral account will represent an unfunded account that is hypothetically invested in AMO common stock pursuant to the adjustment mechanism set forth in the merger agreement. For more information, see “The Merger Agreement—Treatment of VISX Stock Options, Deferred Phantom Stock and ESPP” beginning on page 93.

 

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The following table identifies, for each non-employee director, as of November 4, 2004, the aggregate number of shares subject to his or her outstanding vested and unvested VISX stock options, the aggregate number of shares subject to his or her outstanding unvested VISX stock options that will become fully vested and exercisable upon completion of the merger, the weighted average exercise price of his or her collective vested and unvested VISX stock options, the aggregate shares subject to his or her outstanding phantom units of VISX common stock and the aggregate shares subject to his or her unvested phantom units of VISX common stock that will become fully vested prior to completion of the merger and the value of all options.

Name


   Aggregate
Shares
Subject to
Outstanding
Options*


   Aggregate
Shares
Subject to
Unvested
Options


   Weighted
Average
Exercise
Price of
All
Options


   Value of All
Options**


   Phantom
Units


   Unvested
Phantom
Units


Laureen De Buono

   50,000    27,188    $ 12.25    $ 713,600.00    1,537    328

Glendon E. French

   54,000    3,000    $ 23.51    $ 423,777.50    880    —  

John W. Galiardo

   104,612    3,986    $ 16.89    $ 1,269,116.36    —      —  

Jay T. Holmes

   123,000    3,000    $ 26.35    $ 1,067,815.00    3,074    656

Gary S. Petersmeyer

   39,043    13,125    $ 16.67    $ 384,481.47    1,537    328

Richard B. Sayford

   60,000    3,000    $ 21.73    $ 548,585.00    880    —  

* Each aggregate share amount includes an option grant exercisable for 10,000 shares (11,972 solely in the case of Mr. Galiardo). These grants were made on May 13, 2004 in connection with the planned annual increase for members of the VISX board of directors.
** Illustrates the economic value of all options held by each non-employee director assuming the acceleration of all such options in the merger and the exercise of all options with exercise prices below $26.52, or in-the-money options, immediately upon completion of the merger. Calculated for each non-employee director by multiplying the shares subject to in-the-money options by the difference between the value of the merger consideration as of November 9, 2004 ($26.52) and the exercise price of such in-the-money options.

 

Legal Proceedings Regarding the Merger

 

On or about November 12, 2004, two putative class action lawsuits were filed in the Superior Court of the State of California, County of Santa Clara, against VISX and the VISX board of directors. The cases are captioned William Kinchy vs. VISX, Incorporated, et al., Case No. 104CV030447 and Douglas Shearer vs. VISX, Incorporated, et al., Case No. 104CV030452. The complaints allege that, among other things, the VISX board of directors breached their fiduciary duties of loyalty and due care by approving the merger agreement and the merger contemplated by the merger agreement without undertaking sufficient efforts to obtain the best offer possible for stockholders. The complaints further allege that the consideration to be paid in the merger is unfair and inadequate, and that VISX’s board of directors breached their fiduciary duties of care, loyalty and candor to VISX’s public stockholders in connection with the merger. The complaints seek an injunction prohibiting VISX from consummating the merger and rights of rescission against the merger and any of the terms of the merger agreement, as well as attorneys’ fees and costs. While it is not feasible to predict or determine with certainty the final outcome of these lawsuits, we believe these lawsuits are without merit, and are not likely to give rise to any liability that would materially affect VISX’s financial condition or results of operations. VISX intends to contest the lawsuits vigorously.

 

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THE MERGER AGREEMENT

 

The following summary describes the material provisions of the merger agreement. The provisions of the merger agreement are complicated and not easily summarized. This summary may not contain all of the information about the merger agreement that is important to you. The merger agreement is attached to this joint proxy statement/prospectus as Annex A and is incorporated by reference into this joint proxy statement/prospectus, and we encourage you to read it carefully in its entirety for a more complete understanding of the merger agreement.

 

The Merger

 

The merger agreement provides for the merger of Vault Merger Corporation, a newly formed, wholly owned subsidiary of AMO, with VISX. VISX will survive the merger as a wholly owned subsidiary of AMO.

 

Closing and Effective Time of the Merger

 

We will complete the merger when all of the conditions to completion of the merger contained in the merger agreement, which are described in the section entitled “Conditions to Obligations to Complete the Merger” beginning on page 105, are satisfied or waived, including approval by the AMO stockholders of the issuance of shares of AMO common stock in the merger and approval and adoption of the merger agreement and approval of the merger contemplated by the merger agreement by the VISX stockholders. The merger will become effective upon the filing of a certificate of merger with the Secretary of State of the State of Delaware.

 

We are working to complete the merger as quickly as possible. Because completion of the merger is subject to certain conditions that are beyond our control, we cannot predict the exact timing, although absent any unanticipated delay, we expect to close the merger during the first quarter of 2005.

 

Treatment of Securities

 

Upon completion of the merger, each share of VISX common stock (including, with respect to each share of VISX common stock, the associated rights described in the section entitled “Comparison of Stockholder Rights and Corporate Governance Matters” beginning on page 125) outstanding immediately prior to the effective time of the merger will be canceled and extinguished and automatically converted into the right to receive 0.552 of a share of AMO common stock and $3.50 in cash, without interest, subject to the ability of AMO and VISX to obtain an opinion of legal counsel that the merger will qualify as a “reorganization” within the meaning of Section 368(a) of the Internal Revenue Code. For more information, see “Alternative Merger Consideration” beginning on page 95. Upon completion of the merger, AMO also will assume outstanding options to purchase VISX common stock with an exercise price equal to or less than $26.93 per share and phantom stock units under the 1995 Director Option and Stock Deferral Plan. For more information see “Treatment of VISX Stock Options, Deferred Phantom Stock and ESPP” beginning on page 93.

 

The exchange ratio in the merger (i.e., 0.552 of a share of AMO common stock for each share of VISX common stock) will be adjusted to reflect the effect of any stock split, reverse stock split, reclassification, stock dividend (including any dividend or distribution of securities convertible into AMO common stock or VISX common stock), reorganization, recapitalization, consolidation, exchange or other like change with respect to AMO common stock or VISX common stock occurring or having a record date after the date of the merger agreement and prior to the effective time of the merger.

 

Each share of VISX common stock, together with each associated right, held by VISX or owned by AMO or any of their direct or indirect wholly owned subsidiaries immediately prior to the merger will be automatically canceled and retired and cease to exist, and none of VISX, AMO or any of their direct or indirect subsidiaries will receive any securities of AMO or other consideration in exchange for those shares.

 

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Based on the exchange ratio and the number of shares of VISX common stock outstanding as of the record date, a total of approximately              shares of AMO common stock will be issued and a total of approximately $              of cash merger consideration will be distributed in connection with the merger to holders of VISX common stock. In addition, a total of approximately              shares of AMO common stock will be reserved for issuance upon the exercise of options to purchase VISX common stock assumed by AMO in connection with the merger. As more fully described below under “Treatment of VISX Stock Options, Deferred Phantom Stock and ESPP,” however, the exact number of shares of AMO common stock to be reserved for issuance upon exercise of the assumed options will not be known until the completion of the merger.

 

After the merger, AMO stockholders will continue to own their existing shares of AMO common stock. Accordingly, AMO stockholders will hold the same number of shares of AMO common stock that they held immediately prior to the merger. However, because AMO will be issuing new shares of AMO common stock to VISX stockholders in the merger, each outstanding share of AMO common stock immediately prior to the merger will represent a smaller percentage of the total number of shares of AMO common stock outstanding after the merger. Based on the number of shares of AMO and VISX common stock outstanding on November 9, 2004, we expect that AMO stockholders before the merger will hold approximately 58.5% of the fully diluted shares of AMO common stock immediately after the merger.

 

Fractional Shares

 

AMO will not issue any fractional shares of common stock in connection with the merger. Instead, each holder of VISX common stock who would otherwise be entitled to receive a fraction of a share of AMO common stock will receive cash, without interest, in an amount equal to the fraction multiplied by the last reported sales price of AMO common stock (determined after aggregating all of the VISX common stock held by each such holder and multiplying such shares by the stock exchange ratio) at the end of regular trading hours on the closing date of the merger, as reported on the NYSE.

 

Treatment of VISX Stock Options, Deferred Phantom Stock and ESPP

 

When the merger is completed, AMO will assume outstanding options to purchase shares of VISX common stock with an exercise price equal to or less than $26.93 per share and convert them into options to purchase shares of AMO common stock. AMO will convert each assumed VISX option into an option to purchase that number of shares of AMO common stock equal to the number of shares of VISX common stock subject to the VISX option immediately prior to the merger, multiplied by the sum of (x) 0.552 and (y) the number obtained from dividing (i) $3.50 by (ii) the last reported sales price of AMO common stock at the end of regular trading hours on the NYSE on the date of the merger, rounded down to the nearest whole share. The exercise price per share for each assumed VISX option will be equal to (x) the exercise price per share of the VISX option multiplied by the total number of shares of VISX common stock that are issuable upon the exercise of each assumed option immediately prior to the merger, divided by (y) the total number of shares of AMO common stock issuable upon the exercise of each assumed option, rounded up to the nearest whole cent. Each assumed option will be subject to all other terms and conditions set forth in the applicable documents evidencing each VISX option immediately prior to the effective time of the merger. As of the record date, options for approximately              shares of VISX common stock were outstanding in the aggregate under various VISX stock option plans.

 

All VISX options with an exercise price in excess of $26.93 will not be assumed by AMO and will be cancelled immediately prior to the merger. AMO will give the holders of each cancelled option at least a 15-day (or 30-day, with respect to options granted under the VISX 1995 Director Option and Stock Deferral Plan) period prior to closing of the merger in which the cancelled options will be deemed fully vested and exercisable. During this 15-day or 30-day period, holders of cancelled options may exercise their cancelled options. Any shares of VISX common stock issued upon exercise of these cancelled options during the foregoing 15-day or 30-day period will be treated as issued and outstanding shares of VISX common stock eligible to receive the merger

 

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consideration (i.e., 0.552 of a share of AMO common stock and $3.50 in cash per share of VISX common stock). At the time of the merger, all cancelled options that have not been exercised during the 15-day or 30-day period will be cancelled without any payment to the option holders.

 

AMO will also assume outstanding VISX phantom stock units under the 1995 Director Option and Stock Deferral Plan. Each assumed phantom stock unit will be converted into a deferred account under the 1995 Director Option and Stock Deferral Plan with respect to phantom stock units of AMO common stock equal to the number of phantom stock units held in a participant’s deferred account immediately prior to the merger, multiplied by the sum of (x) 0.552 and (y) the number obtained from dividing (i) $3.50 by (ii) the last reported sales price of AMO common stock at the end of regular trading hours on the NYSE on the date of the merger, rounded down to the nearest whole share. Each assumed phantom stock unit will be subject to all other terms and conditions set forth in the applicable documents evidencing each VISX phantom stock unit immediately prior to the effective time of the merger. As of the record date, VISX phantom stock units relating to an aggregate of approximately              shares of VISX were outstanding under the 1995 Director Option and Stock Deferral Plan. For more information, see “The Merger—Non-Employee Director Stock Option Acceleration and Phantom Units” beginning on page 90.

 

AMO has agreed to file, within five business days after completion of the merger, a registration statement on Form S-8 with the Securities and Exchange Commission covering shares of AMO common stock issuable in connection with the assumed options and phantom stock units. AMO will take such further actions as may be reasonably necessary to include under such registration statement shares of AMO common stock subject to assumed options and phantom stock units held by VISX non-employee directors eligible immediately prior to the completion of the merger pursuant to the VISX 1995 Director Option and Stock Deferred Plan. As a result, all shares of AMO common stock issuable upon the exercise of assumed options and phantom stock units will be freely transferable as long as the registration statement remains effective.

 

Prior to the effective time of the merger, the VISX employee stock purchase plan will be terminated and all outstanding purchase rights will be automatically exercised. At the effective time of the merger, all shares of VISX common stock issued pursuant to the exercise of these rights will be cancelled and converted into the right to receive shares of AMO common stock and cash merger consideration.

 

Exchange Fund; Exchange of Stock Certificates

 

Upon completion of the merger, AMO will establish an exchange fund with Mellon Investor Services, the exchange agent for the merger, to hold the stock and cash merger consideration to be paid to VISX stockholders (other than holders demanding appraisal of their shares of VISX common stock) in connection with the merger. The exchange fund will consist of stock certificates representing shares of AMO common stock, cash, including cash to be issued in lieu of fractional shares of AMO common stock, and, if required pursuant to the merger agreement, any dividends or other distributions on AMO common stock with a record date occurring after the completion of the merger.

 

Promptly following completion of the merger, Mellon Investor Services will mail to each record holder of VISX common stock a letter of transmittal and instructions for surrendering the record holder’s stock certificates in exchange for the cash merger consideration and a certificate representing the shares of AMO common stock issuable to each such holder pursuant to the merger. Only those holders of VISX common stock who properly surrender their VISX stock certificates in accordance with the exchange agent’s instructions will receive (1) a certificate representing the shares of AMO common stock issuable to each such holder pursuant to the merger, (2) the cash merger consideration, (3) cash in lieu of any fractional share of AMO common stock issuable to any such holders, and (4) dividends or other distributions, if any, to which they are entitled under the terms of the merger agreement. The surrendered certificates representing VISX common stock will be canceled. After the effective time of the merger, each certificate representing shares of VISX common stock that has not been surrendered will represent only the right to receive the cash merger consideration, shares of AMO common stock issuable pursuant to the merger and cash in lieu of any fractional share of AMO common stock to which the holder of any such certificate is entitled. VISX stockholders who hold their shares in book entry will receive instructions for

 

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the exchange of their shares for the merger consideration included in the transmittal forms sent to them by the exchange agent. Following the completion of the merger, VISX will not register any transfers of VISX common stock on its stock transfer books.

 

Holders of VISX common stock should not send in their VISX stock certificates until they receive a letter of transmittal from Mellon Investor Services with instructions for the surrender of VISX stock certificates.

 

Distributions with Respect to Unexchanged Shares

 

Holders of VISX common stock are not entitled to receive any dividends or other distributions on AMO common stock until the merger is completed. After the merger is completed, holders of VISX common stock will be entitled to dividends and other distributions declared or made after completion of the merger with respect to the number of whole shares of AMO common stock which they are entitled to receive upon exchange of their VISX common stock. These holders will not be entitled to receive these dividends or distributions, however, until they surrender their VISX common stock to the exchange agent in accordance with the exchange agent instructions.

 

Termination of Exchange Fund; No Liability

 

At any time following the first anniversary of the completion of the merger, AMO will be entitled to the return of all cash and shares of AMO common stock held in the exchange fund. Thereafter, VISX stockholders may look only to AMO for any merger consideration and any cash payment relating to any dividends or distributions to which they may be entitled upon surrender of their certificates representing shares of VISX common stock.

 

Neither AMO, Vault Merger Corporation nor VISX will be liable to any holder of VISX common stock or AMO common stock, as the case may be, for any shares (or any related dividends or distributions) delivered to a public official under any applicable abandoned property, escheat or similar law following the passage of time specified therein.

 

Lost, Stolen and Destroyed Certificates

 

AMO will issue only (1) AMO common stock, (2) the cash merger consideration, (3) cash in lieu of a fractional share and (4) any dividends or distributions that may be applicable in a name other than the name in which a surrendered VISX stock certificate is registered if the person requesting the exchange presents to the exchange agent all documents required to show and effect the unrecorded transfer of ownership and to show that the requesting person paid any applicable stock transfer taxes. If a VISX stock certificate is lost, stolen or destroyed, the holder of the certificate may need to deliver an affidavit and an indemnity bond prior to receiving any merger consideration.

 

Alternative Merger Consideration

 

AMO and VISX intend that the merger will qualify as a “reorganization” within the meaning of Section 368(a) of the Internal Revenue Code. AMO and VISX each will use their respective reasonable best efforts in order for AMO to obtain from Skadden, Arps, Slate, Meagher & Flom LLP, and for VISX to obtain from Wilson Sonsini Goodrich & Rosati, Professional Corporation, an opinion that the merger will qualify as a “reorganization” within the meaning of Section 368(a) of the Internal Revenue Code. In order for counsel to render such opinions, the value of the stock merger consideration must equal 80% or more of the value of the aggregate consideration paid to VISX stockholders in the merger. Because the number of shares of AMO common stock to be issued in the merger is determined pursuant to a fixed exchange ratio (i.e., 0.552 shares of AMO common stock for each share of issued and outstanding VISX common stock), the aggregate value of the AMO common stock to be issued to VISX stockholders cannot be determined until the closing of the merger. If, at the anticipated time of closing, the trading price of AMO common stock has declined such that, based upon the

 

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negotiated exchange ratio the value of the stock merger consideration equals less than 80% of the value of the aggregate merger consideration, the merger will no longer qualify as a “reorganization,” and counsel for AMO and VISX will not be able to render their opinions. Therefore, if the trading price of AMO common stock so declines, then under the agreement, the cash merger consideration shall be decreased to the minimum extent necessary and the stock merger consideration shall be increased to the minimum extent necessary, to meet the test described above and enable counsel to render their opinions that the merger will qualify as a “reorganization” within the meaning of Section 368(a) of the Internal Revenue Code. In the event of any such adjustment, the number of shares of AMO common stock and amount of cash received by a VISX stockholder may change, but the overall economic value of the merger consideration issuable and payable for each share of VISX common stock in the merger as of the closing date will still be calculated based on the trading price of AMO common stock at the closing and therefore will remain the same. In this situation AMO would be required to issue a greater number of shares of common stock to VISX stockholders, as a result of which VISX stockholders as a whole will hold a larger percentage of the fully diluted AMO common stock immediately after giving effect to the merger.

 

Based upon the number of shares of VISX common stock outstanding on November 8, 2004, as long as the trading price of AMO common stock on the closing date is at least approximately $25.37, then the merger consideration received in exchange for each share of VISX common stock will be 0.552 shares of AMO common stock and $3.50. If the trading price of AMO common stock falls below approximately $25.37 an adjustment to the mix of cash and stock merger consideration would be required. We currently estimate that if the trading price of AMO common stock falls below approximately $17.75, then the right of AMO or VISX to terminate the merger agreement would be triggered. See “The Merger Agreement—Termination; Break-Up Fees and Expenses” beginning on page 107.

 

Assuming, for illustrative purposes only, no VISX stockholders exercise their appraisal rights and assuming that no cash is to be paid in lieu of fractional shares, the following chart illustrates the approximate adjusted number of shares of AMO common stock and cash that would be exchanged for each share of VISX common stock at the lowest price of AMO common stock on the closing date prior to which an adjustment would be required and at various intervals below such price:

 

AMO
Trading
Price
at Closing


 

Number (and Value) of Shares

of AMO Common Stock

to be Issued Per Share

of VISX Common Stock


 

Amount of Cash

to be Paid Per Share

of VISX Common Stock


 

Aggregate Economic Value

of AMO Common Stock

and Cash Per Share


  Before
Adjustment


  After
Adjustment


  Before
Adjustment


  After
Adjustment


  Before
Adjustment


  After
Adjustment


$25.37   0.552 ($14.00)   N/A   $3.50   N/A   $17.50   N/A
$25.00   0.552 ($13.80)   0.554 ($13.85)   $3.50   $3.45   $17.30   $17.30
$22.50   0.552 ($12.42)   0.567 ($12.75)   $3.50   $3.17   $15.92   $15.92
$20.00   0.552 ($11.04)   0.582 ($11.64)   $3.50   $2.90   $14.54   $14.54
$17.50   0.552 ($9.66)   0.602 ($10.53)   $3.50   $2.63   $13.16   $13.16

 

AMO and VISX will not know whether any such adjustment is necessary until immediately prior to the completion of the merger because any determination regarding the tax qualification of the merger as a “reorganization” cannot be made until the date upon which AMO and VISX intend to complete the merger. As a result, at the time of the AMO special meeting and the VISX special meeting, neither VISX stockholders nor AMO stockholders will know the exact number of shares of AMO common stock to be issued and cash to be paid in the merger for each share of VISX common stock, the percentage of AMO’s fully diluted common stock that VISX stockholders as a whole will hold after giving effect to the merger, or the total amount of cash that AMO will pay to VISX stockholders in the merger.

 

Representations and Warranties

 

The merger agreement contains general representations and warranties made by each of AMO and Vault Merger Corporation on the one hand, and VISX on the other, regarding aspects of their respective businesses,

 

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financial condition and structure, as well as other facts pertinent to the merger. These representations and warranties are subject to materiality, knowledge and other similar qualifications in many respects, expire at the effective time of the merger and relate to the following subject matters:

 

    corporate organization, qualifications to do business, corporate standing and corporate power;

 

    absence of any breach of each party’s certificate of incorporation and bylaws and the certificates of incorporation, bylaws and similar organizational documents of its subsidiaries;

 

    capitalization;

 

    corporate authorization, including board approval, to enter into and carry out the obligations contained in the merger agreement;

 

    enforceability of the merger agreement;

 

    the vote of stockholders required to complete the merger;

 

    governmental and regulatory approvals required in connection with the merger;

 

    absence of any conflict or violation of the corporate charter and bylaws and the charter, bylaws and similar organizational documents of subsidiaries, any applicable legal requirements, or any agreements with third parties, as a result of entering into and carrying out the obligations contained in the merger agreement;

 

    absence of any rights of first refusal or acquisition or pre-emptive rights with respect to capital stock or other assets or properties arising or resulting from entering into and carrying out the obligations contained in the merger agreement;

 

    compliance with applicable laws, and possession and compliance with all permits required for the operation of business;

 

    SEC filings and the financial statements contained in those filings;

 

    controls and procedures for required disclosures of financial and non-financial information to the SEC;

 

    absence of certain changes or events between the date of the last audited balance sheet and November 9, 2004;

 

    absence of undisclosed liabilities;

 

    litigation;

 

    material contracts and the absence of breaches of material contracts;

 

    employee benefit plans and labor relations;

 

    real property matters;

 

    taxes;

 

    environmental matters;

 

    intellectual property;

 

    FDA compliance;

 

    brokers used in connection with the merger;

 

    applicability of Delaware and California anti-takeover statutes to the merger;

 

    insurance;

 

    stockholder rights plans; and

 

    opinions of financial advisors.

 

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The merger agreement also contains additional representations and warranties of AMO relating to the sufficiency of its funds to both complete the merger and maintain working capital and liquidity reasonably needed for its business following the merger and the absence of any conflict, breach or event of default under any outstanding debt as a result of entering into and carrying out the obligations contained in the merger agreement.

 

Conduct of Business before Completion of the Merger

 

Under the merger agreement, each of AMO and VISX has agreed that, until the earlier of the completion of the merger or termination of the merger agreement, or unless the other party consents in writing, it will carry on its business in the ordinary course consistent with past practices and in material compliance with applicable law, and will use commercially reasonable efforts to:

 

    preserve intact its present business organization;

 

    keep available the services of its current officers, employees and consultants; and

 

    preserve its relationships with customers, suppliers, distributors and others with which it has significant business relations.

 

Under the merger agreement, each of AMO and VISX has also agreed that, until the earlier of the completion of the merger or termination of the merger agreement, or unless the other party consents in writing, it will not (and will not permit its subsidiaries to):

 

    modify or amend its charter and bylaws or the charter, bylaws or similar organizational documents of its subsidiaries;

 

    issue, sell, transfer, authorize or encumber its capital stock, or securities convertible into its capital stock, other than issuances of common stock upon the exercise of employee stock options or other stock based awards existing prior to the date of the merger agreement or permitted under the merger agreement;

 

    sell, lease, license, mortgage or otherwise encumber or dispose of its assets other than (1) sales by AMO of assets with a value that does not exceed $20 million in the aggregate, (2) sales by VISX of assets with a value that does not exceed $1 million in the aggregate and (3) sales, leases or licenses of material proprietary products in the ordinary course of business consistent with past practice;

 

    declare or pay dividends or make any other distributions;

 

    effect any stock splits, recapitalizations and similar transactions;

 

    purchase, redeem or acquire its capital stock or the capital stock of its subsidiaries, other than repurchases of unvested shares held by individuals terminating employment or service with it or its subsidiaries;

 

    acquire other entities or equity interests in other entities, other than acquisitions by AMO with a value that does not exceed $200 million in the aggregate and that would not have a material adverse impact on AMO’s credit rating, would not require approval of AMO’s stockholders and would not delay completion of the merger;

 

    incur any indebtedness for borrowed money, guarantee any obligations, or make any loans, advances, capital contributions or investments other than in the ordinary course of business consistent with past practice, and, other than for AMO (1) to finance the merger and (2) other additional indebtedness that does not exceed $200 million in the aggregate and that would not have a material adverse impact on AMO’s credit rating;

 

    adopt or implement any new stockholder rights plan;

 

    change accounting policies and procedures except as required by United States generally accepted accounting principles or other applicable law;

 

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    make any tax election inconsistent with past practice and take (or fail to take) certain other actions with regard to tax liabilities and obligations;

 

    adopt any plan of complete or partial liquidation, dissolution, recapitalization or reorganization, other than with respect to the merger or as provided in the merger agreement;

 

    enter into any oral or written agreement with respect to any of the foregoing matters; or

 

    take any action that would make any of its representations and warranties contained in the merger agreement inaccurate such that the closing conditions of the other party would not be satisfied or that would prevent it from performing (or cause it not to perform) its obligations contained in the merger agreement.

 

In addition, under the terms of the merger agreement, VISX has agreed not to:

 

    amend any of its existing material agreements or entering into any agreement which it or its subsidiaries is a bound and which either:

 

    has a term of more than one year from the date of the merger agreement hereof and (1) cannot be unilaterally terminated by it without material penalty upon thirty (30) days prior notice, and (2) involves the payment or receipt of money in excess of $500,000 per year,

 

    involves the payment or receipt of money in excess of $1 million per year, or

 

    contains covenants limiting the freedom of it or any of its subsidiaries to sell any products or services of or to any other person, engage in any line of business or compete with any person or operate at any location;

 

    terminate cancel or waive any right under any of its existing material agreements other than in the ordinary course of business and consistent with past practice;

 

    authorize any capital expenditures or purchase of fixed assets exceeding $500,000 individually or $1.5 million in the aggregate;

 

    modify or amend standard product warranty terms or any other existing warranty obligations in a materially adverse manner, other than extensions or warranties in the ordinary course of business;

 

    except as required by law or certain existing contracts:

 

    increase the compensation of, or making any severance or termination benefits to, any director, officer or employee,

 

    pay any discretionary bonuses to any of its