SECURITIES AND EXCHANGE COMMISSION
                       Washington D.C.

                          FORM 10-Q

         Quarterly Report Under Section 13 or 15(d)
           Of the Securities Exchange Act of 1934


             For Quarter Ended December 31, 1999
               Commission File Number  0-7955


                     Mentor Corporation
   (Exact name of registrant as specified in its charter)


     Minnesota                             41-0950791
(State of Incorporation)      (I.R.S. Employer Identification No.)


201 Mentor Drive, Santa Barbara, California          93111
  (Address of Principal Executive Offices)        (Zip Code)


Registrant's Telephone Number:     (805) 879-6000


Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by section 13 or 15(d) of
the Securities Exchange Act of 1934 during the preceding 12
months or for such shorter period that the registrant was
required to file such reports and (2) has been subject to
such filing requirements for the past 90 days.

                    Yes x                No

The number of shares outstanding for each of the Issuer's
classes of common stock as of February 14, 2000 was:

       Common stock, $.10 par value 24,278,725 shares


                     Mentor Corporation
                            INDEX

Part I.  Financial Information

     Item 1.  Financial Statements (unaudited)

     Condensed Consolidated Statements of Financial
          Position -- December 31, 1999 and March 31, 1999

     Consolidated Statements of Income -- Three Months
          Ended December 31, 1999 and 1998

     Consolidated Statements of Income -- Six Months
          Ended December 31, 1999 and 1998

     Condensed Consolidated Statements of Cash Flows --
          Nine Months Ended December 31, 1999 and 1998

     Notes to Condensed Consolidated Financial Statements--
          December 31, 1999

     Item 2.  Management's Discussion and Analysis of
              Results of Operations and Financial Condition

Part II. Other Information

     Item 1.   Legal Proceedings

     Item 2.   Changes in Securities

     Item 3.   Defaults upon Senior Securities

     Item 4.   Submission of Matters to a Vote of Security
               Holders

     Item 5.   Other Information

     Item 6.   Exhibits and Reports on Form 8-K

List of Exhibits

     10(a)     Asset Purchase Agreement, dated as of August
               26, 1999 between Mentor Corporation and
               Xomed, Inc.


                     Mentor Corporation
   Condensed Consolidated Statements of Financial Position
            December 31, 1999 and March 31, 1999
                         (Unaudited)

                                           December 31,  March 31,
(dollars in thousands)                         1999         1999

ASSETS
Current assets:
  Cash and equivalents                      $    25,589  $   19,533
  Marketable securities                          52,825       2,088
  Accounts receivable, net                       38,809      37,431
  Inventories                                    34,114      30,552
  Deferred income taxes                           8,619       7,919
  Net assets of discontinued operations               -      36,818
  Prepaid Expenses and Other                      9,460       7,640
          Total current assets                  169,416     141,981

Property and equipment, net                      36,726      34,995
Intangible, net                                   2,290       2,342
  Goodwill, net                                   4,504       7,966
  Long term marketable securities and
    investments                                  13,048       8,356
  Other assets                                      328         371
                                                 56,896      54,030
Total assets                                $   226,312  $  196,011

See Notes to Condensed Consolidated Financial Statements


                     Mentor Corporation
   Condensed Consolidated Statements of Financial Position
            December 31, 1999 and March 31, 1999
                         (Unaudited)


                                      December 31,  March 31,
(dollars in thousands)                    1999         1999

LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
  Trade accounts payable                  $   5,622  $   5,726
  Accrued compensation                        4,647      7,049
  Income taxes payable                        7,602      3,770
  Dividends payable                             610        612
  Sales returns                               5,564      5,126
  Self-insured retention                      5,051      3,700
  Accrued royalties                           1,698      1,076
  Other accrued liabilities                  10,030      4,171
  Short-term bank borrowings                      -      4,000
          Total current liabilities          40,824     35,230

Long-term deferred taxes                      4,198      2,163

Shareholders' equity:
  Common stock, $.10 par value:
    Authorized 50,000,000 shares
    Issued and outstanding:
      24,331,725 shares at
        December 31,1999
      24,548,537 shares at
        March 31, 1999                        2,433      2,455
  Capital in excess of par value             16,875     21,502
  Cumulative translation adjustment          (2,118)    (1,141)
  Unrealized gain on investments              2,952        880
  Retained earnings                         161,148    134,922
                                            181,290    158,618
Total liabilities and shareholders'
  Equity                                 $  226,312  $ 196,011

See Notes to Condensed Consolidated Financial Statements


                     Mentor Corporation
              Consolidated Statements of Income
        Three Months Ended December 31, 1999 and 1998
                         (Unaudited)


(in thousands, except per share data)    1999       1998

Net sales                              $  60,587  $  51,655
Costs and expenses:
  Cost of sales                           23,143     21,011
  Selling, general and administrative     23,946     21,836
  Research and development                 3,902      3,747
                                       $  50,991  $  46,594

Operating income from continuing
  operations                               9,596      5,061
  Interest expense                            (3)      (156)
  Interest income                          1,017        253
  Other income (expense)                     131        108
Income from continuing operations
  before income taxes                     10,741      5,266
  Income taxes                             3,468      1,812
Income from continuing operations          7,273      3,454
Income from discontinued operations,
  net of tax                                 571     (8,652)
Net income                             $   7,844  $  (5,198)

Basic earnings per share:
  Continuing operations                $     .30  $     .14
  Discontinued operations                    .02  $    (.35)
    Basic earnings per share           $     .32  $    (.21)

Diluted earnings per share:
  Continuing operations                $     .29  $     .14
  Discontinued operations                    .02       (.35)
    Diluted earnings per share         $     .31  $    (.21)

See notes to consolidated financial statements


                     Mentor Corporation
              Consolidated Statements of Income
        Nine Months Ended December 31, 1999 and 1998
                         (Unaudited)


(in thousands, except per share data)
                                           1999        1998

Net sales                              $  178,733   $ 147,452
Costs and expenses:
  Cost of sales                            66,574      53,198
  Selling, general and administrative      72,371      60,112
  Research and development                 11,936      10,507
                                          150,881     123,817

Operating income from continuing
  Operations                               27,852      23,635
  Interest expense                            (32)       (182)
  Interest income                           1,999         921
  Other income (expense)                      (31)       (126)
Income from continuing operations
  before income taxes                      29,788      24,248
  Income taxes                              9,527       8,601
Income from continuing operations          20,261      15,647
Income from discontinued operations,
  net of tax                                7,797     (7,434)
Net income                             $   28,058   $   8,213

Basic earnings per share:
  Continuing operations                $      .83   $     .64
  Discontinued operations                     .32        (.31)
    Basic earnings per share           $     1.15   $     .33

Diluted earnings per share:
  Continuing operations                $      .81   $     .61
  Discontinued operations                     .31        (.29)
    Diluted earnings per share         $     1.12   $     .32

See notes to consolidated financial statements


                     Mentor Corporation
       Condensed Consolidated Statements of Cash Flows
        Nine Months Ended December 31, 1999 and 1998
                         (Unaudited)


(in thousands)                            1999       1998

Cash flows from continuing operating
  Activities                            $  24,714   $  12,670
Cash flows from discontinued
  operating activities                     (6,925)      2,176
Cash flows from operating activities       17,789      14,846

Cash flows from investing activities:

  Purchase of property, equipment,
    and intangibles                        (7,434)    (14,029)
  Other                                      (394)          -
Cash flows from continuing
  investing activities                     (7,828)    (14,029)
Cash flows from discontinued
  investing activities                     59,392        (784)
Cash flows from investing activities       51,564     (14,813)

Cash flows from financing activities:
  Exercise of stock options                 3,501       2,508
  Dividends paid                           (1,833)     (1,792)
  (Reduction) proceeds of debt             (4,000)      5,100
  Repurchase of common stock              (10,227)    (20,017)
                                          (12,559)    (14,201)

Increase (decrease) in cash, cash
  equivalents, and marketable
  securities                               56,794     (14,168)

Cash at beginning of period                21,620      27,937

Cash at end of period                   $  78,414   $  13,769

See notes to consolidated financial statements


                     Mentor Corporation
    Notes to Condensed Consolidated Financial Statements
                      December 31, 1999

Note A

The accompanying unaudited condensed consolidated financial
statements have been prepared in accordance with generally
accepted accounting principles for interim financial
information and with instructions to Form 10-Q and Article
10 of Regulation S-X.  Accordingly, they do not include all
of the information and footnotes required by generally
accepted accounting principles for complete financial
statements. In the opinion of management, all adjustments
(consisting of normal recurring accruals) considered
necessary for a fair presentation have been included.
Operating results for the three-month and nine-month period
ended December 31, 1999 are not necessarily indicative of
the results that may be expected for the year ended March
31, 2000.

The balance sheet at March 31, 1999 has been derived from
the audited financial statements at that date but does not
include all of the information and footnotes required by
generally accepted accounting principles for complete
financial statements.

For further information, refer to the consolidated financial
statements and footnotes thereto included in the Company's
annual report on Form 10-K for the year ended March 31,
1999.

Note B

Inventories at December 31, 1999 and March 31, 1999
consisted of:

(in thousands)            December 31,   March 31,
                              1999          1999

Raw materials             $   6,809      $  7,640
Work in process               6,819         6,563
Finished goods               20,486        16,349
                          $  34,114      $ 30,552

Note C

Other assets at December 31, 1999 include the Company's
equity investments in its manufacturing partners, Intracel
Corporation and North American Scientific, Inc. (NASI) and
shares of Paradigm Medical Industries, Inc. (Paradigm)
received in connection with the sale of assets included in
discontinued operations.  The Intracel Corporation
investment is valued at cost of $6 million.  In accordance
with Financial Accounting Standards Board (FASB) statement
115 "Accounting of Certain Equity Investments in Debt and
Equity Securities", the North American Scientific and
Paradigm investment are carried at fair market value of
approximately $3.4 million and $3.7 million respectively.
Unrealized gains, net of the related tax effect, are
accounted for as a separate component of shareholders'
equity.

Note D

The Company has adopted Statement of Financial Accounting
Standards No. 130 "Reporting Comprehensive Income" ("SFAS
130").  SFAS 130 establishes standards for reporting and
display of an alternative income measurement and its
components (revenue, expenses, gains and losses) in a full
set of general-purpose financial statements.  Total
comprehensive income includes net earnings, net unrealized
currency gains and losses on translation and net unrealized
gains and losses on securities.

The components of comprehensive income are listed below:

                           Three Months Ended  Nine Months Ended
                              December 31,       December 30,
(in thousands)               1999      1998      1999     1998

Net income                 $  7,844 $ (5,198)  $ 28,058  $ 8,213
Foreign currency
  Translation adjustment       (738)     806       (977)     515
Unrealized gains (losses)
  on investment
  activities                  1,538      400      2,072   (3,600)
Comprehensive income         $8,644 $ (3,992)   $29,153  $ 5,128

Note E

The Company has adopted Statement of Financial Accounting
Standards No. 131 "Disclosures about Segments of an
Enterprise and Related Information" ("SFAS 131").  SFAS 131
establishes standards under which companies report
information about operating segments in financial
statements.

The Company's operations are principally managed on a
functional basis and reported on a product or geographic
basis.  As a result there are four reportable segments:
Aesthetic and General Surgery, Surgical Urology, Clinical
and Consumer Healthcare products, and International.

The Aesthetic and General Surgery products segment consists
primarily of breast implants, tissue expanders and the
Company's Contour Genesis Ultrasonic equipment product line
along with equipment and disposables for traditional
liposuction.  The Surgical Urology segment includes
impotence implants, products for the treatment of urinary
incontinence, and products for the treatment of prostate
cancer.  The Clinical and Consumer Healthcare products
segment consists primarily of catheters and other products
for the management of urinary incontinence or retention.
The International segment includes the operations of the
Company's wholly owned international sales offices, which
cover most of the Company's Aesthetic and Surgical Urology
product lines, and a European manufacturing and distribution
facility which supplies Aesthetic surgery products to our
international sales offices and non-US distributors.
Segment revenues include domestic sales, sales to
independent foreign distributors and sales to the Company's
international sales offices.

Selected financial information for the Company's reportable
segments for the quarter ended December 31, 1999 and 1998
follows:
                              Three Months Ended    Nine Months Ended
                                 December 31,          December 31,
(in thousands)                  1999      1998       1999       1998
Revenues
Aesthetics and General
  Surgery                      $ 31 056  $ 25,070   $ 93,872   $ 78,368
Surgical Urology                 13,216    10,291     36,222     24,971
Clinical and Consumer
  Healthcare                     11,173    11,925     33,166     31,277
International                     9,335     9,532     29,086     27,307
  Total reportable segments      64,780    56,818    192,346    161,923
Elimination of inter-segment
  Revenues                       (4,193)   (5,163)   (13,613)   (14,471)
  Total consolidated
    Revenues                   $ 60,587   $51,655   $178,733   $147,452


                              Three Months Ended    Nine Months Ended
                                 December 31,          December 31,
(in thousands)                  1999      1998       1999       1998
Operating profit (loss) from
  continuing operations
Aesthetics and General
  Surgery                      $  7,264   $ 3,500   $ 29,987   $ 22,293
Surgical Urology                  2,427     1,938      7,140      6,502
Clinical and Consumer
  Healthcare                      2,215     2,697      7,392      8,017
International                     1,420     1,249      4,643      3,684
  Operating profit from
    continuing operations of
    reportable segments          13,326     9,384     49,162     40,496
Corporate operating loss         (3,730)   (4,323)   (21,310)   (16,861)
Interest expense                     (3)     (156)       (32)      (182)
Interest income                   1,017       253      1,999        921
Other income (loss)                 131       108        (31)      (126)
Income from continuing
  operations before taxes      $ 10,741   $ 5,266   $ 29,788   $ 24,248


                              December 31,   March 31,
                                  1999          1999
Identifiable assets
Aesthetics and General
  Surgery                       $    51,472    $  48,818
Surgical Urology                     21,358       23,175
Clinical and Consumer
  Healthcare                         25,791       28,354
International                        23,001       20,957
  Total reportable segments         121,622      121,304
Corporate and other                 106,237       37,889
Net assets of discontinued
  Operations                         (1,547)      36,818
Consolidated assets             $   226,312    $ 196,011


Note F

In May 1999, the Company announced that its Board of
Directors had decided to divest the ophthalmology business,
which accounted for approximately 16% of sales in fiscal
1999.  Consistent with the plan to dispose of its ophthalmic
business segment, the net assets and results of operations
of the ophthalmic segment of the business, comprised of the
intraocular lens products and ophthalmic equipment lines
have been classified as discontinued operations.

Summaries of the results of operations for discontinued
operations follows:
                              Three Months Ended    Nine Months Ended
                                 December 31,          December 31,
(in thousands)                  1999      1998       1999       1998
Revenues                       $    152  $ 10,838   $ 14,114   $ 28,780
Operating profit                   (735)  (12,922)       367    (12,021)
Gain on sale of lens assets       6,178         -     17,478          -
Income before income taxes        5,443   (12,918)    17,845    (12,004)
Income tax expense               (4,872)   (4,266)    10,048     (4,570)
Net income from discontinued
  Operations                   $    571  $ (8,652)     7,797     (7,434)

The assets and liabilities of discontinued operations as of
March 31, 1999 have been classified in the balance sheet as
net assets of discontinued operations. As of December 31,
1999 substantially all assets have been sold, and the
remaining contractual and accruals have been classified as
part of other current liabilities. The assets and
liabilities related to discontinued operations consist of
the following:

                                         December 31,  March 31,
(in thousands)                               1999         1999
Accounts receivable, net                  $       -   $   7,981
Inventory                                         -      17,687
Property, plant & equipment, net                  -       3,985
Intangibles and goodwill, net                     -      12,098
Other                                             2       4,525
  Total assets                                    2      46,276
Current liabilities                           1,549       6,377
Net assets (liabilities) of
discontinued operations                   $  (1,547)  $  39,899


During the quarter ended June 30, 1999, the Company
completed the sale of the assets of the intraocular lens
business, for cash consideration of $38.4 million. The
Company recorded a gain of $7.5 million, net of $3.8 million
in taxes.  On October 4, 1999 the Company completed the sale
of the remaining assets of the Ophthalmic equipment business
for cash consideration of $21 million. The Company recorded
an after tax a gain of approximately $1.1 million from this
transaction in the third quarter.

Note G

Earnings per Share

A reconciliation of weighted average shares outstanding,
used to calculate basic earnings per share, to weighted
average shares outstanding assuming dilution, used to
calculate diluted earnings per share, follows:

                            Three Months Ended  Nine Months Ended
                               December 31,        December 31,
                              1999      1998      1999      1998
Average outstanding shares:
  Basic                        24,357    24,195    24,419   24,618
Shares issuable through
  Options                         740       720       677      911
Average common shares
  Outstanding:  diluted        25,097    24,916    25,096   25,529

Shares issuable through options are determined using the
treasury stock method.


Note H

The Company's three quarterly interim reporting periods are
each approximately thirteen-week periods ending on the
Friday nearest the end of the third calendar month.  The
fiscal year end remains March 31.  To facilitate ease of
presentation, each interim period is shown as if it ended on
the last day of the appropriate calendar month.  The actual
dates on which each quarter ended are shown below:

                          Fiscal 2000          Fiscal 1999

First Quarter          July 2, 1999        June 26, 1998
Second Quarter         October 1, 1999     September 25, 1998
Third Quarter          December 31, 1999   January 1, 1999


                     Mentor Corporation
     Management's Discussion and Analysis of Results of
             Operations and Financial Condition

Except for the historical information contained herein, the
matters discussed in this Management's Discussion are
forward-looking statements, the accuracy of which is
necessarily subject to risks and uncertainties.  Actual
results may differ significantly from the discussion of such
matters in the forward-looking statements.  Potential risks
and uncertainties include, without limitation, those
mentioned in this report and, in particular, the factors
described under "Factors That May Affect Future Results of
Operations" in the Company's Annual Report on Form 10-K for
the fiscal year ended March 31, 1999.

In May 1999, the Company announced that its Board of
Directors decided to divest the ophthalmology business,
which accounted for approximately 16% of sales in fiscal
1999.  The Company completed the sale of the assets of the
intraocular lens portion of the ophthalmology business in
the first quarter.  In the third quarter, the Company
completed the sale of the remaining assets of the
Ophthalmology business, primarily the equipment product
lines, for cash consideration of $21 million.  As a result
of this divestiture, the Company accounts for the ophthalmic
business as a "Discontinued Operations" in accordance with
Generally Accepted Accounting Principles.  Accordingly, all
sales and expenses and other financial information of the
ophthalmic business are reported, on a net basis, as a
single line on the financials.  All prior period amounts
presented in this Form 10-Q have been restated to exclude
the results of the ophthalmic business as appropriate.

RESULTS OF OPERATIONS

Sales

Sales for the three months ended December 31, 1999 increased
17% to $60.6 million, compared to $51.7 million in the prior
year.  Growth was led by strong sales of Surgical Urology
products, increasing 28% compared to a year ago.  The growth
is primarily attributable to sales of brachytherapy seeds
for the treatment of prostate cancer, and the Suspend sling
for treating female urinary incontinence.  Sales of these
two products accounted for the majority of the increased
revenues for this business segment.

Sales of aesthetics and general surgery products increased
23% from the prior year.  The strong sales growth in this
segment is attributable, in part, to recently initiated
consumer-advertising programs and the recent re-introduction
of the Becker reconstruction implant.

Sales of Clinical and Consumer Healthcare products decreased
5% from the prior year.  The decrease is attributable to
stocking by wholesalers and others in advance of a price
increase that went into effect late in the second quarter
which, in turn, reduced third quarter demand.  For the nine
months ended December sales have increased 7% over the prior
year.

                             Sales by Principal Product Line
                 For the Three Months Ended   For the Nine Months Ended
                        December 31,                December 31,
                                    Percent                      Percent
                  1999      1998    Change     1999      1998    Change
Aesthetic &
 General Surgery
 Products        $34,955   $28,455    23%    $106,183   $88,927    19%
Surgical Urology
 Products         13,733    10,736    28%      37,481    25,965    44%
Clinical &
 Consumer
 Healthcare
 Products         11,899    12,464    (5%)     35,069    32,560     8%
                 $60,587   $51,655    17%    $178,733  $147,452    21%

Cost of Sales

For three months ended December 31, 1999, cost of sales
decreased to 38.2% from 40.7% for the comparable period last
year.  While a larger proportion of the product mix is being
supplied by Mentor's alliance partners, which have lower
profit margins than products produced by the Company, the
overall mix has improved as sales of Aesthetics products
increased substantially.  In addition, the cost of goods
sold for the quarter ended December 1998 included a
substantial amount of expense related to the re-validation
efforts at the Company's Texas facility.

Selling, General and Administrative Expenses

Selling, General and administrative expenses were 39.5% of
sales in the quarter compared to 42.3% in the previous year.
For the nine months ended December 31, 1999, Selling,
General and administrative expenses were essentially
unchanged from prior year levels at 40.5% of sales.  The
quarterly decrease to 39.5% was primarily due higher levels
of sales offset in part by the Company's direct consumer
advertising campaign that began in the first quarter.  The
purpose of the campaign is to educate women about breast
augmentation and reconstruction, and to stimulate interest
in looking at these products as an effective and affordable
surgical option.  The Company spent approximately $1.2
million on this campaign in the quarter ending December 31,
1999.  In addition, over the last year the Company has
increased its selling and marketing efforts to establish a
competitive position in the market for the treatment of
prostate cancer with brachytherapy. During the first quarter
of the current year the Company launched a new palladium
brachytherapy product, the PdGoldTM, to complement its
existing iodine IoGold product.

Research and Development

Research and development expenses were 6.4% of sales for the
quarter, compared to 7.3% for the prior year.  The decreased
percentage is the result of increased sales used in the
calculation, actual spending increased 4%.  During the
quarter the Company continued to spend funds on its
premarket approval applications ("PMAAs") for its saline
breast implants, silicone gel filled breast implants, and
penile implants.  The Company is committed to a variety of
preclinical and clinical studies in connection with these
products.

Regulatory and Compliance

In May 1998, the Company entered into a voluntary consent
decree with the FDA in relation to the Texas facility.  This
resulted from issues the FDA had concerning the Company's
validations of this facility. The agreement required the
Company to re-validate certain of the Company's
manufacturing processes, strengthen its continuous quality
improvement program, and to contract for an independent
audit on overall GMP compliance under a schedule agreed to
by the Company and the FDA.

Mentor believes that to date it has completed in a timely
fashion all the activities called for in the agreement.
Specifically, the Company has completed the re-validations
of the plant and has had a GMP expert consultant conduct the
first annual inspection.  The expert consultant reported
that the company was in substantial GMP compliance.

In November and December of 1999 the FDA conducted an
inspection of the Company's Texas facility.  The inspection
consisted of a comprehensive good manufacturing practices
("GMP") audit, a review of the Company's corrections of
observations from previous inspections and a review of other
conditions of the consent decree.  While some inspection
observations were issued, they were not related to issues
raised in previous inspections nor did they indicate any
issues of noncompliance with the terms of the consent
decree.  We believe the observations were not major in scope
and that the facility was found to be in substantial GMP
compliance.  Most of the observations were corrected during
the course of the audit or by December 31, 1999.  The
outstanding observations will be addressed in a very short
period of time.

Should the Company fail to comply with the conditions of the
consent decree, under its terms, the FDA is allowed to order
the Company to stop manufacturing or distributing breast
implants, order a recall or take other corrective actions.
The Company may also be subject to penalties of $10,000 per
day until the task is completed.

Our saline-filled breast implant has been marketed in the
U.S. based upon substantial equivalence to other saline-
filled breast implant products that were in commercial
distribution before the FDA was granted authority to
regulate implants under the "Medical Device Amendments of
1976"(the "Medical Device Act").  In June 1988 the FDA
issued regulations that classified mammary implants as Class
III implantable devices.  As a result of this
classification, each breast implant manufacturer is required
to submit a PMA application to the FDA.  These PMA
applications contain substantial data to demonstrate the
safety and efficacy of the products, materials and
processes.  On August 17, 1999, the FDA issued final
regulations known as a "call for a PMA application" for the
saline-filled breast implant products, ending this
"grandfather" status.  All manufacturers of saline-filled
breast implant products are required to obtain approval to
enter or remain on the market.

Pursuant to the call for PMA applications, all manufacturers
of saline-filled breast implant products now in commercial
distribution must have submitted a PMA application by
November 17, 1999.  Accordingly, the Company filed its
saline-filled breast implant PMA application with the FDA on
November 15,1999.  The FDA conducted its initial review and
accepted the Company's application.  The FDA will then
conduct a comprehensive review of the application.  An
advisory panel meeting has been scheduled for the first week
in March to provide further review and make a recommendation
on the Company's and other manufacturers' applications.  The
FDA is not bound to adopt the panel's recommendation
regarding this approval.  The FDA decision regarding
approval of the PMA application is expected in 2000.  While
the Company believes its filing is adequate to support the
approval of the submission, any filing with the FDA is
subject to uncertainty and there can be no assurances that
the FDA review process will not involve delays or that
clearances and approvals will be granted.  In addition, the
FDA ultimately could find our PMA application not
approvable, which would preclude commercial distribution of
this product.  If the FDA does not grant PMA application
approval on the saline filled breast implant it would have a
material adverse effect on the business, financial condition
and results of operations.

Interest and Other Income and Expense

Net interest income increased from $97 thousand last year to
$1.0 million this year, due to higher cash balances
generated by increased earnings and the proceeds of the sale
of the Ophthalmic business.  The net interest expense for
the comparable quarter in the prior year included interest
expense from borrowings on the line of credit to increased
stock repurchases.  The borrowings were repaid in the first
quarter.

Income Taxes

The effective rate of corporate income taxes was 32.3% for
the quarter, compared to 34.4% in the same period a year
ago.  The prior year rate reflects the effect of restatement
for discontinued operations, while the current year rate
reflects tax credits earned in prior years not previously
provided for.

Discontinued Operations

In May 1999, the Company announced its decision to divest
its ophthalmology business, which accounted for
approximately 16% of sales in fiscal 1999.  Consequently,
the Company accounts for the ophthalmic business as a
"Discontinued Operation" in accordance with Generally
Accepted Accounting Principles (GAAP).

For the quarter, the Company had a net income from
discontinued operations of $571 thousand, compared to a loss
of $8.7 million for the comparable quarter in the prior
year. The prior year restated results of discontinued
operations include the after-tax effect of a $14 million
reserve for discontinued operations of the Ophthalmic
business.  During the first quarter, the Company completed
the sale of the assets of the intraocular lens business,
recording a gain of $7.5 million, net of tax.  In the third
quarter the Company completed the sale of the remaining
assets of the Ophthalmic equipment business for cash
consideration of $21 million. The Company recorded an after-
tax gain of approximately $1.1 million from this
transaction.

Net Income From Continuing Operations

Diluted earnings per share from continuing operations was
$0.29 for the quarter, a per share increase of 104% over the
comparable quarter last year.  The increased earnings are
primarily the result of increased sales in the current year
and high levels of manufacturing expenses related to
validations of our Texas facility in the prior year.

LIQUIDITY AND CAPITAL RESOURCES

At December 31, 1999, the Company's working capital was
$126.2 million compared to $106.8 million at March 31, 1999.
The Company's working capital needs were provided from
operations.

The Company generated $24.7 million of cash from continuing
operations during the nine months ended December 31, 1999,
compared to $12.7 million the previous year.

The Company anticipates investing approximately $9 million
in facilities and capital equipment in fiscal 2000.  The
majority of the expenditures will be for facility upgrades
at the Company's facilities in Texas and Santa Barbara, as
well as for enhancing the Company's information technology
capabilities.

The Company has a line of credit for $25 million.  As a
result of the increased stock repurchases in fiscal 1999,
the Company had a balance of $4.0 million on its line of
credit at March 31, 1999. This amount was paid off during
the first quarter.

For the last several years, the Company has paid a quarterly
cash dividend of $.025 per share.  At the indicated rate of
$.10 per year, the aggregate annual dividend would equal
approximately $2.4 million.

The Company's Board of Directors has authorized an ongoing
stock repurchase program.  The objectives of the program are
to offset the issuance of stock options, provide liquidity
to the market and to generally enhance the Company's return
to shareholder's equity.  Repurchases are subject to market
conditions and cash availability.  In May 1999, the Board
increased the repurchase authorization by 4 million shares,
to a total of 4.6 million.  The Company has repurchased
approximately 650 thousand shares for consideration of $12
million during the fiscal year to date.

As discussed above, during the first quarter the Company
completed the sale of the assets of the intraocular lens
business, for cash consideration of $38.4 million.  In the
third quarter, the Company completed the sale of the
remaining assets of the ophthalmic equipment business for
cash consideration of $21 million.

The Company's principal source of liquidity at December 31,
1999 consisted of $58.7 million in cash and marketable
securities plus $25 million available under its line of
credit.

IMPACT OF YEAR 2000

The Company experienced no adverse effects related to the
Year 2000 Issue.

The total cost to the Company of the Year 2000 project is
estimated at $3.0 million and was funded through operating
cash flows.  This amount includes upgrading desktop systems
and office software to the latest release, which the Company
would do in the normal course of business.  The majority of
these costs related to new hardware and software, and were
capitalized.
PART II

Item 1.   Legal Proceedings

     In regards to the litigation reported in Item 3 of the
annual report on Form 10-K for the fiscal year ended March
31, 1999, there have been no material changes.

Item 2.   Changes in Securities

     No changes have been made in any registered securities.

Item 3.   Defaults Upon Senior Securities

     No event constituting a material default has occurred
respecting any senior security of the Registrant.

Item 4.   Submission of Matters to a Vote of Security Holders

     None

Item 5.   Other Information

     None

Item 6.   Exhibits and Reports on Form 8-K

     10(a)     Asset Purchase Agreement, dated as of August
               26, 1999 between Mentor Corporation and
               Xomed, Inc.

Pursuant to the requirement of the Securities Exchange Act
of 1934, the Registrant has duly caused this Report to be
signed on its behalf by the undersigned thereunto duly
authorized.

MENTOR CORPORATION
(Registrant)


DATE:     February 14, 2000        BY:  /s/ANTHONY R. GETTE
                                        Anthony R. Gette
                                        President and
                                        Chief Operating Officer


DATE:     February 14, 2000        BY:  /s/LOREN L. McFARLAND
                                        Loren L. McFarland
                                        Vice President of Finance
                                        Corporate Controller


Exhibit 10(a)

                  ASSET PURCHASE AGREEMENT

                         dated as of
                       August 26, 1999
                           between
                     Mentor Corporation
                             and
                         Xomed, Inc.



                      TABLE OF CONTENTS

                                                    Page No.

ARTICLE 1 - PURCHASE AND SALE OF ASSETS                    1

     Section 1.1                           Purchase and Sale     1

     Section 1.2                             Excluded Assets     5

     Section 1.3                                    Transfer     7

ARTICLE 2 - PURCHASE PRICE                                 7

     Section 2.1                              Purchase Price     7

     Section 2.2                         Accounts Receivable     8

     Section 2.3                  Assumption of Liabilities.     9

     Section 2.4                   Purchase Price Allocation     10

ARTICLE 3 - REPRESENTATIONS AND WARRANTIES OF THE
     SELLER AND THE SUBSIDIARIES                          11

     Section 3.1         Organization and Corporate Standing     11

     Section 3.2               Corporate Power and Authority     11

     Section 3.3                        Financial Statements     12

     Section 3.4       Absence of Certain Changes and Events     13

     Section 3.5                         No Violation of Law     13

     Section 3.6                                   Equipment     14

     Section 3.7                 Title to Assets/Sufficiency     14

     Section 3.8                                      Leases     15

     Section 3.9                                  Litigation     15

     Section 3.10                  Employees of the Business     16

     Section 3.11Collective Bargaining; Employment Contracts     16

     Section 3.12                              Labor Matters     16

     Section 3.13                                  Inventory     17

     Section 3.14                                    Permits     17

     Section 3.15                                  Contracts     18

     Section 3.16   Required Consents, Approvals and Filings     18

     Section 3.17                                No Conflict     19

     Section 3.18                      Intellectual Property     19

     Section 3.19                                      Taxes     20

     Section 3.20                        Accounts Receivable     20

     Section 3.21                             Trade Payables     20

     Section 3.22                    Undisclosed Liabilities     21

     Section 3.23                                   Warranty     21

     Section 3.24                           Year 2000 Status     21

     Section 3.25                                 Disclosure     21

     Section 3.26                                 Disclaimer     22

ARTICLE 4 - BUYER'S REPRESENTATIONS AND WARRANTIES        22

     Section 4.1                                Organization     22

     Section 4.2               Corporate Power and Authority     22

     Section 4.3    Required Consents, Approvals and Filings     23

     Section 4.4                                 No Conflict     23

     Section 4.5                                  Litigation     24

     Section 4.6                                   Financing     24

ARTICLE 5 - COVENANTS OF THE PARTIES                      24

     Section 5.1                  Operations Pending Closing     24

     Section 5.2                                      Access     26

     Section 5.3         Preparation of Supporting Documents     27

     Section 5.4Approvals of Third Parties; Satisfaction of Conditions to
               Closing                                    27

     Section 5.5              Hart-Scott-Rodino Notification     28

     Section 5.6                  Financial and Tax Services     29

     Section 5.7                              Transfer Taxes     29

     Section 5.8             Notice and Opportunity to Cure.     30

     Section 5.9                                   Inventory     31

ARTICLE 6 - COVENANTS AS TO EMPLOYEES                     32

     Section 6.1            Employees and Employee Benefits.     32

     Section 6.2                               Key Employees     33

ARTICLE 7 - CONDITIONS TO SELLER'S OBLIGATIONS            34

     Section 7.1Representations and Warranties True at Closing Date; Performance
               of Agreements                              34

     Section 7.2                                  Litigation     34

     Section 7.3                 Opinion of Counsel to Buyer     35

     Section 7.4             Required Governmental Approvals     35

     Section 7.5                    Other Necessary Consents     35

ARTICLE 8 - CONDITIONS TO BUYER'S OBLIGATIONS             35

     Section 8.1Representations and Warranties True at Closing Date; Performance
               of Agreements                              36

     Section 8.2                                  Litigation     36

     Section 8.3            Opinion of Counsel to the Seller     36

     Section 8.4             Required Governmental Approvals     36

     Section 8.5                    Other Necessary Consents     37

ARTICLE 9 - CLOSING                                       37

     Section 9.1                                     Closing     37

     Section 9.2                Termination Prior to Closing     38

     Section 9.3                  Termination of Obligations     39

ARTICLE 10 - INDEMNIFICATION                              39

     Section 10.1                    Seller Indemnification.     39

     Section 10.2                     Buyer Indemnification.     41

     Section 10.3                          Indemnity Claims.     42

     Section 10.4                                Deductible.     43

     Section 10.5                            Notice of Claim     44

     Section 10.6                                    Defense     44

     Section 10.7                    Limitation of Liability     46

     Section 10.8                 Exclusive Remedy; Release.     46

ARTICLE 11 - COVENANT NOT TO COMPETE                      47

ARTICLE 12 - MISCELLANEOUS                                47

     Section 12.1                                   Expenses     47

     Section 12.2                           Entire Agreement     47

     Section 12.3                                    Waivers     48

     Section 12.4Parties Bound by Agreement; Successors and Assigns   48

     Section 12.5                               Counterparts     49

     Section 12.6                                    Notices     49

     Section 12.7                                  Brokerage     50

     Section 12.8                              Governing Law     51

     Section 12.9                       Public Announcements     51

     Section 12.10              No Third-Party Beneficiaries     52

     Section 12.11                      Certain Definitions.     52

     Section 12.12                            Interpretation     52



SCHEDULES

1.1   Business
1.1(  Computer Software, Equipment and Databases
g)
1.2   Excluded Assets
2.2   Additional Assumed Liabilities
3.3   Financial Statements and Exceptions to Financial
      Statements
3.4   Certain Changes and Events
3.7   Exceptions to Title
3.8   Equipment Leases
3.9   Litigation
3.10  Key Employees
3.11  Agreements with Employees
3.12  Labor Matters
3.14  Permits and Registrations
3.15  Contracts
3.15  Contracts Included in Assets
(b)
3.15  Notice to Distributors and Independent Sales
(c)   Representatives
3.16  Seller Required Consents, Approvals and Filings
3.18  Intellectual Property
3.18  Intellectual Property Licensed back to Seller
(b)
3.19  Taxes
3.23  Warranties
4.3   Buyer Required Consents, Approvals and Filings
5.1   Operations Pending Closing
5.1(  Actions Prior to Closing
b)
6.2   Key Employees


DEFINITIONS
Term:                          First Defined in Section -

"Accounts Receivable"          Section 1.1(h)
"Adjusted Accounts             Section 2.2(a)
Receivable"
"Affiliate"                    Section 12.11(a)
"Agreement"                    First paragraph of Agreement
"Assets"                       Section 1.1
"Assumed Liabilities"          Section 2.3(a)
"Business"                     Section 1.1
"Business Employees"           Section 6.1(a)
"Buyer"                        First paragraph of Agreement
"Buyer Protected Parties"      Section 10.1(a)
"Buyer's Benefit Plans"        Section 6.1(b)
"Closing"                      Section 9.1
"Closing Date"                 Section 9.1
"Code"                         Section 2.4
"Collected Accounts            Section 2.2(b)
Receivable"
"Contracts"                    Section 1.1(d)
"Deductible"                   Section 10.4
"Effective Date"               First paragraph of Agreement
"Equipment"                    Section 1.1(e)
"Excluded Assets"              Section 1.2
"Excluded Liabilities"         Section 2.3(b)
"FTC"                          Section 5.5
"Financial Statements"         Section 3.3
"Hired Employees"              Section 6.1(a)
"HSR"                          Section 3.16
"Indemnified Party"            Section 10.5
"Indemnifying Party"           Section 10.5
"Intellectual Property"        Section 3.18
"Justice Department"           Section 5.5
"Key Employees"                Section 3.10
"knowledge"                    Section 12.11(b)
"Leases"                       Section 1.1(f)
"Losses"                       Section 10.1(a)
"Mark"                         Section 1.2(h)
"Material Adverse Effect"      Section 12.11(c)
"Mentor"                       Section 1.2(h)
"MOI"                          First paragraph of Agreement
"MMI"                          First paragraph of Agreement
"Permits"                      Section 1.1(c)
"Permitted Liens"              Section 3.7
"Phaco Product"                Section 1.1(j)
"Pre-Closing Date"             Section 2.1
"Purchase Price"               Section 2.1
"Purchase Price Allocation"    Section 2.4
"Registrations"                Section 1.1(b)
"Second Request"               Section 5.5
"Seller"                       First paragraph of Agreement
"Subsidiary"                   Second paragraph of Agreement
"Subsidiaries"                 Second paragraph of Agreement
"Seller Protected Parties"     Section 10.2
"Supply Agreement"             Section 1.1(j)
"Technical Information"        Section 1.1(k)
"Trade Payables"               Section 2.3(b)
"Transaction Agreements"       Section 3.2
"Transition Services           Section 5.3
Agreement"
"Wet-Field Intellectual        Section 1.1(j)
Property"

                    ASSET PURCHASE AGREEMENT



     THIS  ASSET PURCHASE AGREEMENT (this "Agreement"), made  and

entered  into as of this 26th day of August, 1999 (the "Effective

Date"), among Mentor Corporation, a Minnesota corporation, having

its  principal  place  of  business at 201  Mentor  Drive,  Santa

Barbara,  CA  93111 (the "Seller"), Mentor Ophthalmics,  Inc.,  a

Massachusetts  corporation  ("MOI"),  Mentor  Medical,  Inc.,   a

Delaware   corporation  ("MMI"),  and  Xomed,  Inc.,  a  Delaware

corporation,   having  its  principal  place   of   business   at

6743  Southpoint  Drive  N.,  Jacksonville,  Florida  32216  (the

"Buyer").

                           WITNESSETH:

     WHEREAS, the Seller is the sole shareholder of MOI  and  MMI

(each, a "Subsidiary" and, collectively, the "Subsidiaries"); and

     WHEREAS,  upon  and subject to the terms and  conditions  of

this Agreement, the Seller and the Subsidiaries desire to sell to

the  Buyer, and the Buyer desires to purchase from the Seller and

the  Subsidiaries,  certain assets  of  the  Seller  and  of  the

Subsidiaries used in the Mentor Ophthalmics business division.

     NOW, THEREFORE, in consideration of the mutual promises  and

covenants and the terms and conditions set forth herein and other

good  and valuable consideration, the receipt and sufficiency  of

which  are  hereby  acknowledged, the  parties  hereto  agree  as

follows:

- PURCHASE AND SALE OF ASSETS
Purchase and Sale
 .  Subject to the terms of this Agreement, at the Closing (as
defined in Section 9.1), the Seller and the Subsidiaries will
sell, convey, transfer, assign and deliver to the Buyer, and the
Buyer will purchase and accept from the Seller and the
Subsidiaries, all of the assets, properties and rights of every
kind, nature, character or description, whether tangible or
intangible, real, personal or mixed, wherever located, used or
held by the Seller and the Subsidiaries as of the Effective Date
in the ophthalmic product lines described on Schedule 1.1 (the
"Business"), including any additions to such assets, properties
and rights in the ordinary course of business between the date
hereof and the Closing, but specifically excluding (A) the
Excluded Assets (as defined in Section 1.2) and (B) any deletions
to such assets, properties and rights in the ordinary course of
business between the date hereof and the Closing in accordance
with this Agreement.  The assets, properties and rights being
sold and purchased pursuant to this Agreement are herein referred
to as the "Assets".  Subject to Section 1.2, the Assets include,
but are not limited to:
All originals (where originals exist, in the case of materials
used exclusively in the Business), and/or copies of records
(including copies of materials not used exclusively in the
Business, whether in hard copy or electronic format), operating
data and business files, including customer lists and files,
customer credit files, advertising materials and sales
literature, information relating to purchasing histories and
procedures, vendor files and financial records (including all
sales invoices and purchase order records and supporting
documents with respect to accounts receivable and accounts
payable) and other marketing information and records used
primarily in the Business, which are in the possession of the
Seller or a Subsidiary on the Closing Date (as defined in Section
9.1);
All governmental registrations, registration applications,
temporary registrations, experimental use permits, applications
and emergency use  exemptions used in the Business, including
those listed on Schedule 3.14 hereto (the "Registrations");
All governmental authorizations, licenses and permits used in the
Business, including those listed on Schedule 3.14 (collectively,
the "Permits");
All contracts, agreements and licenses (other than the Leases of
Equipment listed on Schedule 3.8) which are listed on Schedule
3.15(b), but excluding any such contracts that expire or are
terminated prior to Closing in accordance with this Agreement and
such contracts where the Seller or a Subsidiary, as the case may
be, is unable to obtain an assignment prior to the Closing (the
"Contracts");
All machinery, motor vehicles, tools, furniture, instruments,
laboratory equipment, research equipment, fixtures and personal
property used in connection with the Business (the "Equipment");
All leases of Equipment used in the Business, including those
listed on Schedule 3.8 (the "Leases");
Computer, data processing and telecommunications hardware,
software and systems, equipment and database items used
exclusively in connection with the Business, as set forth on
Schedule 1.1(g), except with respect to such items where the
Seller or a Subsidiary, as the case may be, is unable to obtain
an assignment;
All accounts receivable ("Accounts Receivable") of the Business
(excluding intercompany receivables, as described in Section
1.2(f)) as of the Closing;
All inventories of the Business, including finished goods and
products, field inventory, goods and products in process, and
materials and supplies on hand and in transit, as of the Closing;
All of the Seller's and the Subsidiaries' right, title and
interest in and to intellectual property (including patents,
unpatented know-how, copyrights, trade secrets, trade names,
service marks and trademarks), whether registered or not,
applications for the foregoing, and any and all other intangible
assets used in the Business, including, without limitation, those
set forth on Schedule 3.18.  The Buyer acknowledges that certain
intellectual property related to the Wet-Field Console is
incorporated into Seller's phacoemulsification product, the
Mentor SIStem (together with future generations of the
phacoemulsification product, the "Phaco Product"), which is
excluded from this transaction.  The Buyer therefore grants to
the Seller and the Subsidiaries, as of the Closing, an exclusive,
royalty-free, irrevocable, worldwide right and license to use the
Wet-Field Intellectual Property (as defined below) in connection
with their use, development, and manufacture of the Phaco
Product.  The term "Wet-Field Intellectual Property" shall mean
those intangible assets set forth on Schedule 3.18(b).  The
foregoing license shall be: (i) limited to use of the Wet-Field
Intellectual Property within the Phaco Product and not within any
other product or as a stand-alone product; and (ii) contingent on
the Seller purchasing all of its components for the Phaco Product
that relate to the Wet-Field Console from the Buyer, and the
Seller agrees (effective as of the Closing) to purchase all its
requirements for such components from the Buyer under a supply
agreement between the parties hereto to be executed as of the
Closing (the "Supply Agreement").  The Seller may assign such
license to a third party upon notice to the Buyer of the
assignee's name, address, telephone number and contact person.
In the event the Seller and/or a Subsidiary assigns such license
to use the Wet-Field Intellectual Property, the assignee of such
license is hereby granted a worldwide license for a period of six
months from the date of assignment  to use the name "Wet-Field"
in connection with the Phaco Product.  Such use shall be limited
to identifying, selling, marketing and distributing the existing
inventory of products transferred in connection with such
assignment and any related advertising and promotional materials.
Within six (6) months after the Closing Date, the Seller or its
assignee shall remove the name "Wet-Field" from the internal
software in the Phaco Product such that the name does not appear
on any screen display.
All of the Seller's technical information and data, including,
but not limited to, know-how, trade secrets, inventions,
formulas, processes, designs, drawings, technology, software
(including source codes), data bases, electronic data and
engineering files (including drawings and materials),
manufacturing and quality control procedures and records, product
composition data and specifications, packaging specifications,
material safety data sheets, customer specifications, product
standards, competitive samples and reports of analyses thereof,
lab notebooks, records of inventions, patent application drafts,
and research and development projects, materials, results and
records, wherever located, used in the Business ("Technical
Information");
All manufacturers', vendors' and suppliers' warranties, to the
extent assignable, relating to the Assets or the Business;
The goodwill of Seller relating to the Assets or the Business;
The following (800) telephone numbers used in the Business:
               (i)  (800) 992-7557 (Customer Service);

               (ii) (800) 645-9792 (Technical Support).

Excluded Assets
 .  Notwithstanding anything herein to the contrary, the Assets
shall not include the following (the "Excluded Assets"):
Cash;
Securities;
Bank deposits;
Assets, properties and rights of the Seller or a Subsidiary not
currently used primarily in the Business;
Any and all rights and assets, including without limitation
intellectual property rights, relating to the Polytef, Contour
Genesis, Urethrin, Phaco, and all other product lines other than
the Business;
Intercompany receivables (that is, amounts owing by the Seller to
a Subsidiary, by a Subsidiary to the Seller, or by one Subsidiary
to another Subsidiary);
Any and all real property and leases thereof; and
Material contracts set forth on Schedule 3.15, except for those
contracts listed on Schedule 3.15(b); and
All other assets, properties, trademarks and tradenames and
rights identified on Schedule 1.2, including without limitation,
all rights in and to use the name "Mentor."  Pursuant to this
Agreement, the Buyer will acquire for sale certain existing
inventory which display the "Mentor" mark.  The Buyer
acknowledges that the Seller and/or one or more of the
Subsidiaries is the exclusive owner of the "Mentor" trade name
and trademark (the "Mark").  The Buyer agrees to refrain from any
action which is in any way inconsistent with the Seller's
ownership of the Mark or which could damage Seller's interest in
the Mark or the Seller's reputation.  The Seller grants to the
Buyer as of the Closing a limited worldwide, royalty-free
license, (A) for a period not to exceed one year from the Closing
Date, to use the Mark in an informational sense only to identify
the existing inventory transferred under this Agreement and on
any related advertising and promotional materials and to refrain
from any use of the Mark in connection with any other products,
and (B) for a period not to exceed six months from the Closing
Date, to use the Mark to announce the Buyer's purchase of, and to
promote the Buyer's ownership of, the Business (subject to the
Seller's approval thereof pursuant to Section 12.9, which
approval shall not be unreasonably withheld or delayed).
Transfer
 .  The sale, conveyance, transfer, assignment and delivery of the

Assets  by the Seller and the Subsidiaries to the Buyer  will  be

effected by the delivery from the Seller and the Subsidiaries  to

the  Buyer  at  Closing  of  all  bills  of  sale,  endorsements,

assignments and transfers as required by the Agreement plus  such

other  instruments of transfer and conveyance in forms reasonably

satisfactory to the parties.

- PURCHASE PRICE
Purchase Price
 .   Subject to adjustment as provided in this Section 2.1 and  in

Section  2.2,  the  purchase  price  for  the  Assets  shall   be

Twenty-One Million Dollars ($21,000,000) (the "Purchase  Price").

The  Purchase  Price is payable by the Buyer  to  the  Seller  at

Closing in immediately available funds by wire transfer.  Two (2)

business  days prior to the Closing ("Pre-Closing Date"),  Seller

will provide to Buyer an aging report of Accounts Receivable  and

Trade Payables.  The Purchase Price will be reduced by one dollar

($1.00) at Closing for each dollar that Accounts Receivable as of

the Pre-Closing Date are less than 90% of the Accounts Receivable

as  indicated  on the March 31, 1999 balance sheet referenced  in

Schedule  3.3.   The Purchase Price will also be reduced  by  one

dollar ($1.00) at Closing for each dollar of Trade Payables  that

are forty-five or more days old as of the Pre-Closing Date.

Accounts Receivable
 .  There shall be a post-Closing adjustment to the Purchase Price

in accordance with this Section 2.2.

The amount of "Adjusted Accounts Receivable" shall be equal to
the amount of the Accounts Receivable, as shown on the aging
report thereof delivered pursuant to Section 2.1, less $350,000.
During the one year period following the Closing, the Buyer shall
use commercially reasonable efforts to collect the Accounts
Receivable.  Within 30 days following the first anniversary of
the Closing Date, the Buyer shall deliver to the Seller a
schedule of the Adjusted Accounts Receivable and the amounts
collected thereon during the one year period following the
Closing; the amount of the Adjusted Accounts Receivable collected
during such period is referred to as the "Collected Accounts
Receivables."  For the purpose of such schedule, amounts
collected during such period from a customer shall be applied to
the earliest amounts owing.  The Seller shall have the right to
audit such schedule, and the Buyer shall provide access to the
relevant books and records for that purpose.
If the amount of the Adjusted Accounts Receivable exceeds the
amount of the Collected Accounts Receivables, one-half of the
difference shall be paid by the Seller to the Buyer.  Such amount
shall be promptly paid by the Seller to the Buyer, in immediately
available funds by wire transfer, and shall constitute an
adjustment to the Purchase Price.
Assumption of Liabilities.
Except as specifically set forth in this Section 2.2, the Buyer
will not assume, and shall not be bound by, any obligations and
liabilities of the Seller or a Subsidiary of any kind or nature,
known or unknown, expressed, implied, contingent or otherwise
(the "Excluded Liabilities").  Without limiting the generality of
the foregoing and notwithstanding anything in this Agreement to
the contrary, Excluded Liabilities shall include, and Buyer shall
have no responsibility for, any liability arising from actual or
threatened litigation from Seller's contracts or relationships
with its independent sales representatives, exclusive
distributors or any other third parties worldwide, which are not
listed in Schedule 3.15(b).
At the Closing, the Buyer will assume and agree to pay, perform
and discharge, and to indemnify the Seller and the Subsidiaries
against and hold them harmless from, the following obligations
and liabilities, whether imposed by contract, by operation of
law, or otherwise, relating to the Assets or the Business
("Assumed Liabilities"): (i) all liabilities and obligations on
or after the Closing Date under the Contracts, Permits, and
Leases included in the Assets; (ii) all trade accounts payable
relating to the Business incurred in the ordinary course of
business ("Trade Payables"); (iii) all liabilities or obligations
to third parties for personal injury, property damage,
consequential damages, punitive damages or incidental damages
arising from any injury, event or damage as a result of any
product or good of the Business manufactured on or after the
Closing Date; (iv) all obligations associated with customer
orders received by the Seller or a Subsidiary that remain
unfulfilled, and any purchase orders issued by the Seller or a
Subsidiary that remain open, on and as of the Closing Date,
provided that such customer orders or purchase orders were issued
or accepted in the ordinary course of business consistent with
past practices; (v) the obligations with respect to the Hired
Employees in accordance with Article 6 of this Agreement;
(vi) all deferred warranty obligations with respect to products
and goods of the Business; (vii) all obligations to service
products and goods of the Business; (viii) all obligations and
liabilities, of any nature or kind, known or unknown, fixed,
accrued, absolute or contingent, related to or based upon the
ownership or operation of the Business or the Assets on or after
the Closing Date; and (ix) the obligations or liabilities set
forth on Schedule 2.2.
Purchase Price Allocation
 .   The  Purchase Price shall be allocated by the Buyer  and  the

Seller  in accordance with the Internal Revenue Code of 1986,  as

amended (the "Code"), including the requirements of Section  1060

of the Code, and the Treasury Regulations promulgated thereunder.

Such allocation (the "Purchase Price Allocation") shall apply  to

Assets  used in connection with the Business as conducted in  the

United  States  as  well as Assets used in  connection  with  the

Business  as conducted outside the United States.  The Buyer  and

the  Seller  shall  negotiate  in good  faith  to  determine  the

Purchase  Price Allocation within 90 days following  the  Closing

Date,  and  shall  execute  a written document  evidencing  their

agreement as to the Purchase Price Allocation.  In the event that

the  parties  are  unable  to reach an agreement  concerning  the

Purchase Price Allocation prior to the expiration of said 90  day

period,  the  parties  shall  submit  the  matter  to  a   public

accounting  firm with a nationally recognized tax,  auditing  and

appraisal expertise selected jointly by the Seller and the Buyer.

The  determination of the Purchase Price Allocation by such  firm

shall  be  binding on the parties for all tax reporting purposes.

The  cost  of employing any such firm shall be borne one-half  by

the  Seller and one-half by the Buyer.  The Buyer and the  Seller

agree  to  each  prepare  (and timely  file)  identical  Internal

Revenue  Service  Forms 8594 (Asset Acquisition  Statement  Under

Section  1060) based on the agreed Purchase Price Allocation  and

any  supplemental Forms 8594 that are required  in  case  of  any

subsequent adjustments to the Purchase Price.

- REPRESENTATIONS AND WARRANTIES OF THE SELLER AND THE
SUBSIDIARIES
     The  Seller  and  each  of  the Subsidiaries  represent  and

warrant to the Buyer as of the date hereof as follows:

Organization and Corporate Standing
 .   The  Seller is a corporation duly organized, validly existing

and in good standing under the laws of the State of Minnesota and

has  all requisite corporate power and authority to carry on  and

conduct  the portion of the Business it conducts and  to  own  or

lease  the Assets it now owns or leases and to convey the  Assets

it  now  owns.   Each of the Subsidiaries is a  corporation  duly

organized, validly existing and in good standing under  the  laws

of  the  jurisdiction  in  which it  is  organized  and  has  all

requisite  corporate power and authority to carry on and  conduct

the  portion of the Business it now conducts and to own or  lease

the  Assets it now owns or leases and to convey the Assets it now

owns.   The Seller and each Subsidiary is duly qualified  and  in

good  standing in every jurisdiction in which the conduct of  the

Business  by it or the ownership of the Assets by it requires  it

to  be  so qualified, and the absence of such qualification would

have a Material Adverse Effect.

Corporate Power and Authority
 .   The  Seller  and  each Subsidiary has the  right,  power  and

capacity to execute, deliver and perform this Agreement  and  all

the documents and instruments referred to herein and contemplated

hereby  to which it is a party together with all other agreements

to   be   signed   or  delivered  at  Closing  (the  "Transaction

Agreements")  and to consummate the transactions contemplated  by

this  Agreement.  The execution, delivery and performance of this

Agreement and the Transaction Agreements, and the consummation of

the  transactions contemplated hereby and thereby, have been duly

and  validly authorized by all necessary corporate action on  the

part  of  the Seller.  This Agreement has been, and each  of  the

Transaction Agreements to which it is a party after execution and

delivery thereof at the Closing will have been, duly and  validly

executed and delivered by the Seller and/or the Subsidiaries,  as

the  case  may  be, and constitute the legal, valid  and  binding

obligation of the Seller and/or the Subsidiaries, as the case may

be, enforceable in accordance with its terms.

Financial Statements
 .  Schedule 3.3 includes the following: (i) the unaudited balance

sheet of the Business as of March 31, 1999, and (ii) gross margin

summaries  for  the  year ended March 31, 1999  and  the  3-month

period   ended   July  2,  1999  (collectively   the   "Financial

Statements").  In addition, Schedule 3.3 will be supplemented  as

soon  as  practicable  following  the  Effective  Date  with  the

unaudited balance sheet of the Business as of July 2, 1999, which

shall be one of the Financial Statements.  Except as set forth on

Schedule  3.3,  the Financial Statements (i) have  been  prepared

from,  and  are  consistent with, the books and  records  of  the

Business,  and  (ii)  in all material respects  are  correct  and

complete,  and  fairly  present the  financial  position  of  the

Business as of the dates thereof, and results of operations  from

the   Business  for  the  periods  described  therein;  provided,

however,  that  in  each case, the Financial  Statements  do  not

include  provision of corporate services to the Business  by  the

Seller,  including,  without limitation,  expenses  for  clinical

programs   and   submissions  to   the   U.S.   Food   and   Drug

Administration,   marketing  services,   accounting   and   other

corporate  services  performed by the Seller  on  behalf  of  the

Business;  and  further  provided that the  Financial  Statements

reflect  the  Seller's good faith effort to separate  the  Assets

from  other  assets, properties and rights of  the  Seller  or  a

Subsidiary not currently used primarily in the Business.

Absence of Certain Changes and Events
 .   Except  (i) to the extent arising out of or relating  to  the

transactions contemplated by this Agreement, (ii) for matters set

forth on any Schedule to this Agreement, or (iii) as set forth on

Schedule 3.4, since July 2, 1999:

The Business has not suffered any material damage or destruction
to the Assets (either individually or in the aggregate);
No event has occurred with respect to the Assets or the Business
that has had a Material Adverse Effect other than as contemplated
by this Agreement;
There has been no sale, transfer or other disposition of any
material Assets, except for inventory in the ordinary course of
business and other tangible personal property retired or replaced
in the ordinary course of business;
There have been no material contracts or commitments relating to
the Business or the Assets, except purchase orders in the
ordinary course of business;
There has been no creation of any material mortgage, lien,
security interest, pledge or other encumbrances on the Assets,
except for Permitted Liens; and
The Business has not incurred or discharged any material
obligation or liability, except in the ordinary course of
business;
No Violation of Law
 .   Since  December  31, 1998, the Seller has  not  received  any

written notice alleging the Seller or a Subsidiary is in material

violation  of  any  applicable  local,  state  or  federal   law,

ordinance, regulation, order, injunction or decree, or any  other

requirement  of  any governmental body, agency  or  authority  or

court binding on it, relating to the Assets or the Business which

violation would have a Material Adverse Effect.  To the knowledge

of  the Seller, the Seller and the Subsidiaries have operated the

Business in material compliance with all applicable local,  state

and  federal  laws,  ordinances, regulations  and  orders,  where

failure to do so would have a Material Adverse Effect.

Equipment
 .   A  listing of Equipment will be provided by the Seller to the

Buyer as of the Closing Date, and will be true and correct in all

material  respects as of the date of such listing.   To  Seller's

knowledge,  the Equipment which is material to the  operation  of

the  Business,  as such Equipment is used by the Seller  and  the

Subsidiaries in the operation of the Business, is in good working

order and condition and repair.

Title to Assets/Sufficiency
 .   The Seller or a Subsidiary has good title to all Assets, free

and  clear  of all liens and encumbrances, or has a license  with

the  right  to  use the Assets for the benefit of  the  Business,

except  (i) as set forth on Schedule 3.7, or (ii) (A)  liens  for

taxes  not  yet  due and payable; (B) carriers',  warehousemen's,

mechanics',  material  men's, repairmen's  or  other  like  liens

arising in the ordinary course of business, payment for which  is

not  yet  due or which is being contested in good faith; and  (C)

deposits   to  secure  the  performance  of  utilities,   leases,

statutory  obligations  and surety and  appeal  bonds  and  other

obligations of a like nature incurred in the ordinary  course  of

business  (collectively, "Permitted Liens").  The Assets  include

all  material assets and rights necessary for the conduct of  the

Business  as  now conducted, except (A) as set forth on  Schedule

3.7,  and (B) for assets not held at a Business location  or  not

used  by the Seller or a Subsidiary primarily for the benefit  of

the  Business, such as administrative services used by the Seller

or  a  Subsidiary  in providing administrative  services  to  the

Business  (such  as  payroll, electronic mail and  certain  other

information  services) and corporate services used in  connection

with  the  Business (such as research and development activities,

Seller's quality system, and marketing).

Leases
 .  Except for real property leases, Schedule 3.8 lists all Leases

(including  any  capital  leases) and lease-purchases  and  other

arrangements, in each case with payments aggregating  $25,000  or

more  per  year,  pursuant to which the Seller  or  a  Subsidiary

leases  any  Assets from third parties.  Except as set  forth  on

Schedule 3.8, (i) each Lease is in full force and effect and  has

not  been  modified or amended, and (ii) there are  no  disputes,

oral  agreements  or forbearance programs in  effect  as  to  any

Lease.   To  the Seller's knowledge, there has not  occurred  any

default,  or  any event with notice or lapse of  time,  or  both,

would become a default under any Lease.

Litigation
 .   Schedule 3.9 sets forth all litigation, suits, indictments or

informations, or proceedings or arbitrations pending, or  to  the

knowledge   of   the  Seller,  threatened,  before   any   court,

arbitration tribunal, or judicial, governmental or administrative

agency,  relating to the Business or the Assets,  in  each  case,

that  is pending, or, to the knowledge of the Seller, threatened,

as  of the date hereof that would have a Material Adverse Effect.

Further,  except  as  set forth in Schedule  3.9,  there  are  no

material   judgments,   orders,  writs,   injunctions,   decrees,

indictments  or  informations,  grand  jury  subpoenas  or  civil

investigative  demands,  or  awards  against  the  Seller  or   a

Subsidiary relating to the Business or the Assets that would have

a  Material  Adverse  Effect.  There is no  suit,  investigation,

action or other proceeding pending, or to the Seller's knowledge,

threatened before any court, arbitration, tribunal, or  judicial,

governmental or administrative agency, against the  Seller  or  a

Subsidiary  which  would have a Material Adverse  Effect  on  the

ability  of the Seller or a Subsidiary to perform its obligations

hereunder  or  which  seeks to prevent the  consummation  of  the

transactions contemplated herein.

Employees of the Business
 .   Seller  has  provided to Buyer a schedule setting  forth  the

names,  positions, and current compensation of all  employees  of

the  Seller and Subsidiaries who are assigned exclusively to  the

Business as of the Effective Date.

Collective Bargaining; Employment Contracts
 .    There  are  no  labor  contracts  or  collective  bargaining

agreements covering any of the Business  Employees (as defined in

Section  6.1)  and  no collective bargaining agreement  or  union

contract  is  currently  being negotiated  by  the  Seller  or  a

Subsidiary.   None of the Business Employees are  represented  by

any  union  or  labor  organization.   Except  as  set  forth  in

Schedule  3.15  or  Schedule 3.11, neither  the  Seller  nor  any

Subsidiary, in connection with the operation of the Business,  is

bound by or subject to any written employment agreements.

Labor Matters
 .  Neither the Seller nor any Subsidiary has received any written

notice  alleging any material violation of any applicable  local,

state  or  federal law, ordinance, regulation, order, injunction,

or  decree,  or  any other requirement of any governmental  body,

agency or authority or court respecting employment and employment

practices  relating  to  the Business,  and  the  Seller  has  no

knowledge of any such material violation.  Except as set forth in

Schedule  3.12,  (i)  neither the Seller nor any  Subsidiary  has

received any written notification that any of the Employees  have

any   material   claim  against  the  Seller  or  a   Subsidiary,

(ii)  neither the Seller nor any Subsidiary has received  written

notice  of  any  material  charge of, or  action  or  proceedings

relating  to unfair labor practices by the Seller or a Subsidiary

in  connection with the Business pending or threatened before the

National  Labor Relations Board, the Equal Employment Opportunity

Commission,  or  the  United  States  Department  of  Labor,  and

(iii)  to  the  knowledge  of  the  Seller,  there  is  no  labor

organizing effort related to the Business, or any strike or other

labor   trouble  actually  pending  or  threatened  against   the

Business.

Inventory
 .   A  listing of inventory will be provided by the Seller to the

Buyer as of the Closing Date, and will be true and correct in all

material respects as of the date of such listing.  Each  item  of

inventory  identified  in  the  aforementioned  list   has   been

manufactured,  packaged  and  labeled  in  accordance  with  Good

Manufacturing Practices and all other applicable requirements  of

the United States Food and Drug Administration.  To the knowledge

of  Seller,  the  inventory,  taken as  a  whole  (but  excluding

inventory  being serviced by the Seller's technical services  and

repair department), is free from significant defects in materials

and workmanship.

Permits
 .   The  Permits  disclosed on Schedule  3.14  are  all  material

Permits  or  other  authorizations  of  governmental  authorities

necessary  or  required for the production  of  products  of  the

Business  or  for  the  conduct  of  the  Business  as  currently

conducted.   There  is  no action pending,  or  to  the  Seller's

knowledge,  threatened,  seeking  the  revocation,  cancellation,

suspension or adverse modification of any material Permit.

Contracts
 .   Schedule  3.15  sets forth a list of all material  contracts,

agreements and licenses (other than Leases) used in the Business.

Except as set forth on Schedule 3.15, each such Contract is valid

and  in  full  force and effect and is enforceable in  accordance

with its respective terms.  Except as set forth on Schedule 3.16,

no  consent,  approval or authorization of  any  third  party  is

required for the assignment of each Contract to the Buyer.  There

are no material disputes, oral agreements or forbearance programs

in  effect  as  to the Contracts and there has not  occurred  any

material  default  by  the  Seller or a  Subsidiary  or,  to  the

Seller's  knowledge,  any  other party  of  any  such  Contracts.

Seller  will  provide notice to its distributors and  independent

sales   representatives  under  the  agreements  set   forth   in

subsections B and F of Schedule 3.15, respectively, that  it  has

discontinued  the  manufacture and sale of the  products  in  the

Business;  such  notice shall be substantially in  the  form  set

forth on Schedule 3.15(c).

Required Consents, Approvals and Filings
 .   Except  as set forth in Schedule 3.16, no consent or approval

is  required by virtue of the execution hereof by the  Seller  or

the  consummation of any of the transactions contemplated  herein

by the Seller to avoid the violation or breach of, or the default

under,  or  the  creation of a lien or other encumbrance  on  the

Assets pursuant to the terms of any regulation, order, decree  or

award  of  any  court  or governmental agency  or  any  Lease  or

Contract  to  which the Seller or a Subsidiary is a party  or  to

which  the Business or the Assets is subject.  Except for filings

under  the Hart-Scott-Rodino Antitrust Improvements Act of  1976,

as  amended ("HSR"), and as set forth on Schedule 3.16, there are

no  filings  or similar procedures required with respect  to  any

governmental  body  in connection with the  consummation  of  the

transactions contemplated hereby.

No Conflict
 .  Subject to obtaining the consents and approvals and making the

filings described in Section 3.16, the execution and delivery  of

this  Agreement  by  the  Seller, and  the  consummation  of  the

transactions contemplated herein by the Seller will not (with  or

without  the giving of notice or the lapse of time or both):  (i)

violate  or  conflict with any of the provisions of  any  charter

document  or bylaw of the Seller; or (ii) violate, conflict  with

or  result  in a breach or default under or cause termination  of

any  term  or  condition  of any mortgage,  indenture,  contract,

license,  permit,  instrument, or other  agreement,  document  or

instrument to which the Seller or a Subsidiary is a party  or  by

which  the  Seller, a Subsidiary or the Assets may be  bound,  or

(iii)  violate any provision of law or any valid and  enforceable

court  order,  judgment,  decree or ruling  of  any  governmental

authority, to which the Seller or a Subsidiary is a party  or  by

which  it or its properties may be bound, or (iv) result  in  the

creation or imposition of any lien or other encumbrance upon  any

Asset,  except  as to clauses (i) through (iv)  above,  any  such

matters that would not (A) involve or affect the Business or  the

Assets,  or  (B)  prevent  or  delay  the  consummation  of   the

transactions contemplated herein.

Intellectual Property
 .  Schedule 3.18 sets forth a list of all material trademarks and

patents   and  describes  the  material  copyrights   and   other

intellectual  property  used  primarily  in  the  Business   (the

"Intellectual Property").  Except as set forth on Schedule  3.18,

the  Seller or a Subsidiary owns or is licensed under a  Contract

to   use   all  the  Intellectual  Property  and  the   Technical

Information,  free and clear of any liens or other  encumbrances.

Unless otherwise noted on Schedule 3.18, none of the Intellectual

Property, or Seller's ownership or use thereof, is subject to any

pending or, to the knowledge of the Seller, threatened challenge.

Except  as  noted on Schedule 3.18, Seller is not  aware  of  any

circumstances  indicating  that  any  person  is  or   has   been

infringing  on any rights in the Intellectual Property.   To  the

Seller's  knowledge, neither (i) the use by  the  Seller  or  any

Subsidiary  of  the Intellectual Property, nor (ii)  the  making,

using,  selling, offering to sell, importing or exporting of  the

products  of  the Business, infringes or otherwise  violates  the

rights of any other party.

Taxes
 .  Except as set forth in Schedule 3.19, (i) all material tax and

informational  returns  and related information  required  to  be

filed by or on behalf of the Seller or any Subsidiary relating to

the  Assets  or the Business prior to the date hereof  have  been

prepared  and  filed in accordance with applicable law,  and  all

taxes, interest, penalties, assessments and deficiencies relating

to  the  Assets or the Business that have become due pursuant  to

such  returns or any assessments or otherwise have been  paid  in

full;  (ii) all such returns are true and correct in all material

respects,  and  there  is  no  unresolved  claim  concerning  any

federal,  state, local or foreign tax liability;  and  (iii)  all

monies  required to be withheld by the Seller or  any  Subsidiary

from  the  employees  of  the Business have  been  collected  and

withheld, and either paid to the appropriate governmental  agency

or will be paid by the Seller on or before their due date.

Accounts Receivable
 .   The Accounts Receivable shown on the books and records of the

Business and to be transferred to Buyer at the Closing constitute

valid  obligations of customers generated in the ordinary  course

of the Business.

Trade Payables
 .   The  Trade  Payables shown on the books and  records  of  the

Business  and  to  be assumed by Buyer at the Closing  constitute

valid  obligations  generated  in  the  ordinary  course  of  the

Business  and  are  due and payable as shown  on  the  books  and

records of the Business.

Undisclosed Liabilities
 .   Other  than  as disclosed in this Agreement or the  Financial

Statements,  to  the  Seller's knowledge there  are  no  material

liabilities associated with the Business or the Assets.

Warranty
 .   Attached as Schedule 3.23 is a listing of all warranty  terms

and all extended warranty agreements with respect to products and

goods  of the Business, which liability is to be assumed  at  the

Closing by Buyer pursuant to Section 2.3(vi) of this Agreement.

Year 2000 Status
 .  Products of the Business currently manufactured do not rely on

real-time clocks to function.  Certain ultrasound products of the

Business  currently  manufactured  contain  date  mechanisms  for

reference  purposes  only.   Such  products:  (i)  will   provide

accurate  date output denoting the year with either two  or  four

digits;  (ii) will recognize 2000 as a leap year; and (iii)  will

function  accurately and without interruption before, during  and

after  January  1, 2000 without any adverse change in  operations

associated with the advent of the new century.

Disclosure
 .  No representation or warranty by the Seller in this Agreement,

nor any statement, document, certificate or schedule furnished or

to  be furnished by the Seller or a Subsidiary in connection with

the transactions contemplated by this Agreement, shall, as of the

date  furnished  to the Buyer and as of the Closing  Date  (other

than  changes  in the ordinary course of business  prior  to  the

Closing Date), contain any untrue statement of a material fact or

omit  a  material fact necessary to make the statements contained

therein not misleading.

Disclaimer
 .   EXCEPT AS SET FORTH IN THIS ARTICLE 3, (A) THE SELLER AND THE

SUBSIDIARIES  MAKE  NO  REPRESENTATION OR  WARRANTY,  EXPRESS  OR

IMPLIED,  RELATING  TO  THE  ASSETS OR THE  BUSINESS,  INCLUDING,

WITHOUT  LIMITATION, ANY REPRESENTATION OR WARRANTY AS TO  VALUE,

MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE OR FOR ORDINARY

PURPOSES, OR ANY OTHER MATTER; AND (B) THE ASSETS AND BUSINESS OF

THE  SELLER AND THE SUBSIDIARIES BEING TRANSFERRED TO  THE  BUYER

ARE CONVEYED ON AN "AS IS, WHERE IS" BASIS AS OF THE CLOSING, AND

THE BUYER SHALL RELY UPON ITS OWN EXAMINATION THEREOF.

- BUYER'S REPRESENTATIONS AND WARRANTIES
     The  Buyer represents and warrants to the Seller as  of  the

date hereof as follows:

Organization
 .  Buyer is a corporation duly organized, validly existing and in

good standing under the laws of the State of Delaware.  The Buyer

has  all requisite corporate power and authority to carry on  and

conduct  its  business as it is now being conducted,  to  own  or

lease its assets and properties and is duly qualified and in good

standing  in  every  jurisdiction in which  the  conduct  of  its

business  or  ownership  of  its assets  requires  it  to  be  so

qualified.

Corporate Power and Authority
 .   The  Buyer  has  the right, power  and capacity  to  execute,

deliver and perform this Agreement and the Transaction Agreements

and   to   consummate  the  transactions  contemplated  by   this

Agreement.   The  execution, delivery  and  performance  of  this

Agreement,  and the consummation of the transactions contemplated

hereby,  have  been duly and validly authorized by all  necessary

corporate  action on the part of the Buyer.  This  Agreement  has

been, and each of the Transaction Agreements after execution  and

delivery thereof at the Closing will have been, duly and  validly

executed  and delivered by the Buyer and constitute  the  Buyer's

legal,  valid  and binding obligation, enforceable in  accordance

with its terms.

Required Consents, Approvals and Filings
 .  Except as set forth on Schedule 4.3, no consent or approval is

required  by virtue of the execution hereof by the Buyer  or  the

consummation  of any of the transactions contemplated  herein  by

the  Buyer  to avoid the violation or breach of, or  the  default

under,  or the creation of a lien or other encumbrance on  assets

of  the  Buyer  pursuant to the terms of any  regulation,  order,

decree or award of any court or governmental agency or any lease,

agreement,  contract,  mortgage,  note,  license,  or  any  other

instrument to which the Buyer is a party or to which it or any of

its  property  is  subject.  Except for  filings  under  HSR  and

applicable  securities laws, and as set forth  on  Schedule  4.3,

there  are no filings or similar procedures required with respect

to  any governmental body in connection with the consummation  of

the transactions contemplated hereby.

No Conflict
 .   Subject to obtaining the consent and approvals and making the

filings  described in Section 4.3, the execution and delivery  of

this  Agreement  by  the  Buyer,  and  the  consummation  of  the

transactions contemplated herein by the Buyer will not,  with  or

without  the giving of notice or the lapse of time, or both,  (i)

violate  or  conflict with any of the provisions of  any  charter

document  or bylaw of the Buyer, (ii) violate, conflict  with  or

result  in  breach or default under or cause termination  of  any

term  or condition of any mortgage, indenture, contract, license,

permit, instrument, or other agreement, document or instrument to

which  the Buyer is a party or by which the Buyer or any  of  its

properties may be bound, or (iii) violate any provision of law or

any  valid  and  enforceable court order,  judgment,  decree,  or

ruling  of any governmental authority, to which Buyer is a  party

or  by which Buyer or its properties may be bound, and except  as

to  clause  (i) through (iii) above, any such matters that  would

not   prevent  or  delay  the  consummation  of  the  transaction

contemplated herein.

Litigation
 .   There  is  no suit, investigation, action or other proceeding

pending,  or  to  the  Buyer's knowledge, threatened  before  any

court,   arbitration  tribunal,  or  judicial,  governmental   or

administrative  agency,  against the Buyer  which  would  have  a

Material  Adverse Effect on the ability of the Buyer  to  perform

its   obligations  hereunder  or  which  seeks  to  prevent   the

consummation of the transactions contemplated herein.

Financing
 .    The   Buyer  will  have  available  at  Closing   sufficient

immediately  available  funds to enable  the  Buyer  to  pay  the

Purchase  Price  to the Seller and to effect the consummation  of

the transactions described herein.

- COVENANTS OF THE PARTIES
Operations Pending Closing
 .   The Seller hereby agrees that, except as set forth in Section

3.4  or in Section 6.2 or on Schedule 5.1 or as consented  to  in

writing  by  the  Buyer  (such consent  not  to  be  unreasonably

withheld  or  delayed), pending the Closing, the Seller  and  the

Subsidiaries  shall  operate  and conduct  the  Business  in  the

ordinary course and consistent with past practices of the  Seller

and the Subsidiaries.  Pursuant thereto and not in limitation  of

the foregoing:

The Seller and the Subsidiaries will maintain, in all material
respects, the Assets in their present state of repair (ordinary
wear and tear excepted), and will use commercially reasonable
efforts to preserve the good will of its business and
relationships with customers and suppliers with whom it has
business relations.  Notwithstanding the foregoing, the
resignation or termination of any sales representative or the
election by a customer or supplier to curtail or cease business
relations with the Business, shall not be deemed a breach of, or
failure to comply with, this Section 5.1(a), provided that Seller
has used commercially reasonable efforts to retain such
representative, customer or supplier.
Except as set forth on Schedule 5.1(b), or without the written
consent of the Buyer (such consent not to be unreasonably
withheld or delayed), or as otherwise contemplated by this
Agreement, the Seller and the Subsidiaries will not take any of
the following actions between the Effective Date and the Closing
Date:
   Sell, transfer or otherwise dispose of any material Assets,
except for inventory in the ordinary course of business and other
 tangible personal property retired or replaced in the ordinary
                       course of business;
 Enter into any material contract or commitment relating to the
 Business or the Assets, except purchase orders in the ordinary
                       course of business;
Create any material mortgage, lien, security interest, pledge or
other encumbrances, on the Assets, except for Permitted Liens; or
Cause the Business to incur or discharge any material obligation
    or liability, except in the ordinary course of business.
Access
 .   The  Buyer shall be afforded a period of fifteen  (15)  days,

commencing  on the Effective Date, to continue its due  diligence

investigation   in  order  to  confirm  the   accuracy   of   the

representations and warranties contained in Article 3 hereof, and

upon  discovery  of any such inaccuracy, shall  have  the  rights

provided  in Section 9.2(c) hereof.  During the period  from  the

Effective  Date  to the Closing Date, the Seller will,  and  will

cause  the  Subsidiaries  to, (i) provide  the  Buyer  with  such

information as the Buyer may from time to time reasonably request

with  respect to the Assets and the Business and the transactions

contemplated by this Agreement, and (ii) provide the Buyer,  upon

reasonable  notice and during regular business hours,  access  to

the  books, records, offices, counsel, accountants and  employees

of  the Business and those of the Seller and the Subsidiaries  as

such  relate to the Business, as the Buyer may from time to  time

reasonably  request.   Any access will be  conducted  in  such  a

manner so as not to interfere unreasonably with the operation  of

the  business  of  the  Seller  and  the  Subsidiaries,  and  any

representative  of  the Buyer shall, at all times  while  in  the

facilities  of the Seller or a Subsidiary, be accompanied  by  an

employee(s) or representative(s) of the Seller.  The Seller shall

also  have the right to require, prior to entry onto any  of  the

facilities of the Seller or a Subsidiary by contractors acting on

behalf  of  the  Buyer, that the Buyer provide  the  Seller  with

evidence  of  the  contractor's  insurance  in  form  and  amount

reasonably  satisfactory  to the Seller,  including  contractor's

insurance  that names the Seller as an insured.  At the  Seller's

request,  the  Buyer shall furnish to the Seller at  the  Buyer's

expense  a  copy of all information obtained by the  Buyer  as  a

result of any such access by contractors acting on behalf of  the

Buyer.  The Buyer shall inform its representatives and agents  of

the Confidentiality Agreement, dated on or about June 24, 1999 by

and  between  the Seller and Xomed Surgical Products,  Inc.,  and

shall cause said representatives to abide by such Confidentiality

Agreement  and  the  Seller's  rules  and  regulations  regarding

safety, security and operations.  The Buyer shall and hereby does

indemnify, defend and hold harmless the Seller Protected  Parties

(as  defined in Section 10.2) from and against any and all Losses

(as defined in Section 10.1) that may arise in connection with or

as  a result of the Buyer's access to the Business, and the Buyer

further  agrees  to  be responsible for and bear  all  costs  and

expenses of damage directly related to any of the Buyer's  access

to the Business.

Preparation of Supporting Documents
 .   In  addition to such actions as the parties may otherwise  be

required to take under this Agreement or applicable law in  order

to  consummate  this Agreement and the transactions  contemplated

hereby  and by the Transaction Agreements, the parties will  take

such  action, furnish such information, and prepare, or cooperate

in   preparing,   and  execute  and  deliver  such  certificates,

agreements (including a Transition Services Agreement between the

parties  hereto  of even date herewith (the "Transition  Services

Agreement"))  and  other  instruments  as  the  other  party  may

reasonably  request from time to time, before, at  or  after  the

Closing, with respect to compliance with obligations of the Buyer

or  the  Seller in connection with the transactions  contemplated

hereby  or  by  the  Transaction Agreements (including,  but  not

limited to, vesting title to the Assets more fully in the Buyer).

Approvals of Third Parties; Satisfaction of Conditions to Closing
 .  The Seller and the Buyer will use their reasonable, good faith

efforts,  and  will  cooperate with one another,  to  secure  all

necessary consents, approvals, authorizations and exemptions from

governmental agencies and other third parties, including, without

limitation, all consents and approvals required by Sections  7.4,

7.5,  8.4  and  8.5.  In the event that any required  consent  or

approval is not obtained prior to the Closing, the Seller and the

Buyer will use their reasonable good faith efforts to obtain such

consent  or  approval as promptly as possible after the  Closing,

and until such consent or approval is obtained, to cooperate with

each  other  in  reasonable arrangements (such as subcontracting,

sublicensing or subleasing) designed to achieve the  purposes  of

this  Agreement.  The Seller will use its reasonable, good  faith

efforts to obtain the satisfaction of the conditions specified in

Article 8.  The Buyer will use its reasonable, good faith efforts

to obtain the satisfaction of the conditions specified in Article

7.

Hart-Scott-Rodino Notification
 .  The Seller and the Buyer will each promptly prepare and file a

notification  with  the  United States  Justice  Department  (the

"Justice  Department")  and  the Federal  Trade  Commission  (the

"FTC")  as  required  by  HSR.  The Seller  and  the  Buyer  will

cooperate  with each other in connection with the preparation  of

such notification, including sharing information concerning sales

and  ownership  and such other information as may  be  needed  to

complete  such  notification,  and  providing  a  copy  of   such

notification  to the other prior to filing.  Each of  the  Seller

and  the  Buyer will keep confidential all information about  the

other  obtained  in  connection  with  the  preparation  of  such

notification.  The Buyer and the Seller will cooperate to respond

to  all inquiries and requests for further information associated

with  the HSR filing.  A party receiving a Request for Additional

Information and Documentary Material ("Second Request") from  the

Justice  Department and/or the FTC shall notify the  other  party

and  respond thereto as soon as reasonably possible  and  in  any

event  within  seventy-five (75) days of receipt of  such  Second

Request.   The Seller and the Buyer will each bear all  of  their

own  expenses (including attorneys fees) in complying  with  this

Section.

Financial and Tax Services
 .   It  is  recognized  that  one or more  party  may  need  tax,

financial  or other data after the Closing Date with  respect  to

the Business covering fiscal periods prior to the Closing Date in

order  to  facilitate  the  preparation  of  tax  returns  or  in

connection  with  any  audit, investigation, litigation,  amended

return,   claim  for  refund  or  any  proceeding  in  connection

therewith  or  to  comply with the rules and regulations  of  the

Internal  Revenue Service, the Securities and Exchange Commission

or  any  other governmental organization or agency.  The  parties

will  render reasonable cooperation and will afford access during

normal  business hours to all books, records, data and  personnel

concerning use and ownership of the Assets and the operation  and

conduct  of  the Business with respect to periods  prior  to  and

including  the  Closing Date to each other  and  their  auditors,

accountants, counsel or other authorized representatives for such

purpose.   The  parties will also each execute such documents  as

the  other  may reasonably request in order to file any  required

reports  or tax returns and provide the other with prompt written

notice upon receipt of any written claim, notice of deficiency or

proposed  or  actual assessment pertaining to the Business  which

could   affect  the  tax  liability  of  the  other.   The  party

requesting  assistance  from  the  other  party  will  bear   all

reasonable  out-of-pocket  costs and expenses  incurred  by  such

assisting party (excluding salaries or wages of its employees).

Transfer Taxes
 .   All  sales  or transfer taxes, including but not limited  to,

document recording fees, real property transfer taxes, sales  and

excise   taxes,  arising  out  of  or  in  connection  with   the

consummation  of  the transactions contemplated herein  shall  be

paid  by the Buyer.  The Buyer shall furnish the Seller with  any

necessary certificates of tax exemption.

Notice and Opportunity to Cure.
If between the Effective Date and the Closing Date either party
becomes aware that any of the Seller's representation(s) or
warranty(ies) are or will be untrue or inaccurate ("Inaccuracy"),
such party will promptly notify the other.  In any such case,
even if such Inaccuracy would be likely to have a Material
Adverse Effect, the Seller can elect to take any of the following
actions, in which case the Buyer shall be obligated to close the
transaction contemplated hereby if all other conditions to
Closing in Article 8 have been satisfied:
    prior to Closing, the Seller can cure such Inaccuracy by
 correcting such Inaccuracy without any potential Loss, risk or
                  adverse effect to the Buyer;
 if the Inaccuracy can be cured (without any remaining potential
 risk or adverse effect to the Buyer) by the Seller's assumption
 of, and indemnification for, any Losses resulting from any such
    Inaccuracy, the Seller can agree to the unconditional and
unlimited assumption of liability for, and indemnification of the
                  Buyer for, any such Loss; or
if the Inaccuracy cannot be cured by the Seller prior to Closing
with commercially reasonable efforts, then the Seller can present
to the Buyer a reasonable plan to cure such Inaccuracy after the
 Closing (without any remaining potential risk or adverse effect
to the Buyer), including the Seller's agreement to carry out such
      plan within a reasonable time frame, and the Seller's
unconditional and unlimited indemnification of the Buyer for any
      potential Losses resulting from any such Inaccuracy.
     If  the  Seller satisfies all conditions in any  of  clauses

     (1), (2) or (3) above, then the appropriate Schedule(s) will

     be  updated and the Inaccuracy shall be deemed corrected for

     the  all  purposes  of  this  Agreement  (including  without

     limitation  Section  10.1 hereof); provided,  however,  that

     except  as  contemplated hereby and by Section 3.10  hereof,

     the Seller shall not otherwise have any right to update such

     Schedules.   The  parties acknowledge  and  agree  that  the

     Seller's  indemnity provided in this Section 5.8 is  without

     regard to the provisions of Article 10 hereof.

If the parties discover an Inaccuracy between the Effective Date
and the Closing Date, but such Inaccuracy would not be likely to
have a Material Adverse Effect, then the parties acknowledge and
agree that the condition in Section 8.1 of this Agreement will
nevertheless be satisfied insofar as Section 8.1 relates to the
required degree of accuracy of the representations and warranties
as of the Closing Date and after the Closing the Buyer may not
assert an indemnification claim against Seller under Article 10
hereof in respect of such Inaccuracy.
Inventory
 .   Following the Closing, all inventory included in  the  Assets

will  be  handled, packaged, labeled and distributed by Buyer  in

accordance  with  Good  Manufacturing  Practices  and  all  other

applicable  requirements  of  the United  States  Food  and  Drug

Administration.

- COVENANTS AS TO EMPLOYEES
Employees and Employee Benefits.
The Buyer may offer employment, effective as of the Closing Date,
to persons who are employees of the Seller or a Subsidiary and
who are assigned exclusively to the Business immediately prior to
the Closing Date (the "Business Employees").  The Seller shall
provide the Business Employees with reasonable paid time off to
enable them to interview or otherwise meet with the Buyer
(including at Buyer's Jacksonville, Florida headquarters); the
Buyer shall be responsible for reimbursing the Business Employees
for reasonable travel expenses incurred in connection therewith.
The Buyer shall notify the Seller in writing at least one week
prior to the Closing Date as to which Business Employees, if any,
offers of employment shall be made.  Business Employees who
accept the Buyer's offer of employment are herein referred to as
the "Hired Employees."  The Buyer shall cause the Hired Employees
to be eligible, as of the Closing Date,  to participate in
employee medical, dental, life, retirement and other pension and
welfare benefit plans of the Buyer and its Affiliates that
provide benefits that are no less favorable than those provided
to other employees of the Buyer and its Affiliates holding
similar positions; provided, however, that the group health plan
coverage provided by the Buyer and its Affiliates to the Hired
Employees shall be such that the Seller's group health plan shall
not be required to offer continuation coverage to the Hired
Employees or their dependents under Part 6 of Title I of ERISA or
Section 4980B of the Code.
The Buyer shall cause the Buyer's and its Affiliates' employee
benefit plans, programs and policies ("Buyer's Benefit Plans") to
treat service and employment of Hired Employees with the Seller,
the Subsidiaries, their Affiliates and any predecessor employers
prior to the Closing Date as service and employment with the
Buyer for all purposes (other than for benefit accrual purposes
under any defined benefit pension plans) under Buyer's Benefit
Plans.
The Hired Employees and their beneficiaries shall not be required
for calendar year 1999 to satisfy any deductible, employee co-
payment, out-of pocket maximum or similar requirements under the
Buyer's Benefit Plans that provide medical, dental and other
welfare benefits to the extent of amounts previously credited for
such purposes under the Seller's Plans that provide medical,
dental, and other welfare benefits, and any waiting periods, pre-
existing condition exclusions and requirements to show evidence
of good health contained in such Buyer Benefit Plans shall be
waived with respect to the Hired Employees and their dependents.
The Seller and the Buyer shall take such further action (before,
on or after the Closing Date), if any, as may be necessary or
convenient to implement the intent of the Seller's and the
Buyer's agreement with respect to employee benefits as set forth
in this Section 6.1.
Key Employees
 .   Attached  as Schedule 6.2 is a listing of key employees  (the

"Key  Employees") that Buyer has identified as essential  to  the

effective  running of the Business.  Seller agrees that  it  will

use  its best efforts to retain the services of the Key Employees

and  will  make  their  services  available  to  Buyer  from  the

Effective  Date  through  the  Closing  Date  and  thereafter  in

accordance with the Transition Services Agreement.  Seller  shall

be  deemed to have satisfied the foregoing obligation if  it  (i)

fulfills  the  terms  of  the retention  packages  which  it  has

previously  offered  to  the  Key  Employees  until  Closing  and

thereafter  in accordance with the Transition Services Agreement,

and  (ii)  does  not  terminate or decrease the  compensation  or

benefits of Key Employees except, in each case, for good cause.

- CONDITIONS TO SELLER'S OBLIGATIONS
     Each  of  the  obligations of the Seller to  consummate  the

transactions   contemplated  hereby  will  be  subject   to   the

satisfaction (or written waiver by the Seller) at or prior to the

Closing Date of each of the following conditions.

Representations and Warranties True at Closing Date; Performance
of Agreements
 .   Except  for changes as may be contemplated by this Agreement,

each of the representations and warranties of the Buyer contained

in this Agreement must be true in all material respects on and as

of the Closing Date with the same force and effect as though made

on  and as of such date unless the representation and warranty is

made  as  of a specified date and except to the extent  that  the

failure of such representations and warranties to be true  as  of

the  Closing  Date would not, in the aggregate, have  a  material

adverse  effect on the Seller; the Buyer must have performed  and

complied  in  all  material  respects  with  the  covenants   and

agreements set forth herein to be performed or complied  with  by

it  on  or  before  the  Closing Date,  including  execution  and

delivery  of the Transaction Agreements; and the Buyer must  have

delivered to the Seller a certificate dated the Closing Date  and

signed by its duly authorized officer to all such effects.

Litigation
 .  No suit, investigation, action or other proceeding is pending,

or  overtly  threatened,  against the  Buyer  or  the  Seller,  a

Subsidiary  or their Affiliates before any court or  governmental

agency  which  has  resulted, or in  the  reasonable  opinion  of

counsel  for the Seller is likely to result, in the restraint  or

prohibition  of the consummation of the transactions contemplated

hereby  or  in  a  Material Adverse Effect on the  Business,  the

Assets, the Seller or a Subsidiary.

Opinion of Counsel to Buyer
 .   The  Seller shall have received from counsel to the Buyer  an

opinion, dated the Closing Date, reasonably satisfactory in  form

and substance to the Seller.

Required Governmental Approvals
 .    All  governmental  authorizations,  consents  and  approvals

necessary   for  the  valid  consummation  of  the   transactions

contemplated hereby, the absence of which would have  a  Material

Adverse Effect, must have been obtained and must be in full force

and  effect.  All applicable governmental pre-acquisition filing,

information furnishing and waiting period requirements, including

expiration of all applicable waiting periods pursuant to HSR, the

absence of which would have a Material Adverse Effect, must  have

been  met  or  such  compliance must  have  been  waived  by  the

governmental authority having authority to grant such waivers.

Other Necessary Consents
 .   The  parties  must have obtained all consents  and  approvals

listed  on  Schedule 3.16 and Schedule 4.3, or, if  any  required

consent or approval has not been obtained, the parties must  have

agreed  to  an  alternative arrangement as  contemplated  by  the

second sentence of Section 5.4.

- CONDITIONS TO BUYER'S OBLIGATIONS
     Each  of  the  obligations of the Buyer  to  consummate  the

transactions  contemplated hereby is subject to the  satisfaction

(or  written waiver by the Buyer) at or prior to the Closing Date

of each of the following conditions.

Representations and Warranties True at Closing Date; Performance
of Agreements
 .   Except  for changes as may be contemplated by this Agreement,

each   of  the  representations  and  warranties  of  the  Seller

contained in this Agreement must be true in all material respects

on  and as of the Closing Date with the same force and effect  as

though made on and as of such date, unless the representation  or

warranty  is  made as of a specified date; the Seller  must  have

performed  and  complied  in  all  material  respects  with   the

respective  covenants  and agreements  set  forth  herein  to  be

performed  or complied with by it on or before the Closing  Date,

including  execution and delivery of the Transaction  Agreements;

and  the  Seller must have delivered to the Buyer  a  certificate

dated  the Closing Date and signed by its duly authorized officer

to all such effects.

Litigation
 .  No suit, investigation, action or other proceeding is pending,

or  overtly  threatened,  against the  Buyer  or  the  Seller,  a

Subsidiary  or their Affiliates before any court or  governmental

agency  which  has  resulted, or in  the  reasonable  opinion  of

counsel  for the Buyer is likely to result, in restraint  or  the

prohibition  of the consummation of the transactions contemplated

hereby  or  in  a  Material Adverse Effect on the  Business,  the

Assets or the Buyer.

Opinion of Counsel to the Seller
 .  The Buyer shall have received from Chief Counsel of the Seller

an  opinion,  dated the Closing Date, reasonably satisfactory  in

form and substance to the Buyer.

Required Governmental Approvals
 .    All  governmental  authorizations,  consents  and  approvals

necessary   for  the  valid  consummation  of  the   transactions

contemplated hereby must have been obtained and must be  in  full

force  and  effect.  All applicable governmental  pre-acquisition

filing,  information furnishing and waiting period  requirements,

including  expiration of all applicable waiting periods  pursuant

to  HSR,  must  have been met or such compliance must  have  been

waived  by the governmental authority having authority  to  grant

such waivers.

Other Necessary Consents
 .   The  parties  must have obtained all consents  and  approvals

listed  on Schedule 3.16  and Schedule 4.3, the absence of  which

would  have  a Material Adverse Effect, or, if any such  required

consent or approval has not been obtained, the parties must  have

agreed  to  an  alternative arrangement as  contemplated  by  the

second sentence of Section 5.4.

- CLOSING
Closing
 .   The  closing  of  the transactions contemplated  hereby  (the

"'Closing")  will take place at 9:00 a.m.  Pacific  Time  on  the

"Closing  Date,"  at  the   offices  of  the  Seller  located  at

201 Mentor Drive, Santa Barbara, CA 93111, or at such other place

as  may  be  mutually agreeable.  Subject to  Section  10.5,  and

subject  to  satisfaction  or waiver of  the  conditions  to  the

Seller's and the Buyer's obligations set forth in Articles 7  and

8,  respectively,  the Closing Date will  be  the  later  of  (i)

October  1,  1999, or (ii) on the second business  day  following

expiration of all applicable waiting periods pursuant to HSR,  or

such  other  date  as  the parties may mutually  agree.   At  the

Closing,  the  parties hereto will duly execute and  deliver  all

documents and instruments required to be delivered, and the Buyer

will  make all payments to the Seller required to be paid at  the

Closing as provided in this Agreement.

Termination Prior to Closing
 .  Notwithstanding the foregoing, the parties will be relieved of

the obligation to consummate the Closing and purchase or sell the

Assets:

By the mutual written consent of the Buyer and the Seller;
By the Seller in writing, without liability, if the Buyer
(i) fails to perform in any material respect its agreements
contained herein required to be performed by it on or prior to
the Closing Date, or (ii) materially breaches any of its
representations, warranties or covenants contained herein, which
failure or breach is not cured, to the reasonable satisfaction of
the Seller, within twenty (20) days after the Seller has notified
in writing the Buyer of such failure or breach and of its intent
to terminate this Agreement pursuant to this subparagraph;
By the Buyer in writing, without liability, if the Seller
(i) fails to perform in any material respect its agreements
contained herein required to be performed on or prior to the
Closing Date, or (ii) materially breaches any of its
representations, warranties or covenants contained herein, which
failure or breach is not cured, to the reasonable satisfaction of
the Buyer, within twenty (20) days after the Buyer has notified
in writing the Seller of such failure or breach and of its intent
to terminate this Agreement pursuant to this subparagraph;
By either the Seller or the Buyer in writing, without liability,
if there is issued any order, writ, injunction or decree of any
court or governmental or regulatory agency binding on the Buyer
or the Seller or a Subsidiary which prohibits or restrains the
Buyer or the Seller from consummating the transactions
contemplated hereby; provided that the Buyer and the Seller have
used their reasonable, good faith efforts to have any such order,
writ, injunction or decree lifted and the same has not been
lifted within sixty (60) days after entry, by any such court or
governmental or regulatory agency;
By either the Seller or the Buyer in writing, without liability,
if for any reason the Closing has not occurred by October 29,
1999 other than as a result of the breach of this Agreement by
the party attempting to terminate this Agreement; provided,
however, that in the event that a Second Request is received by a
party, such deadline of October 29, 1999 shall be extended by the
number of days (not to exceed seventy-five (75)) elapsed between
the receipt of the Second Request and the submission of the
party's response thereto.
Termination of Obligations
 .   Termination  of this Agreement pursuant to Section  9.2  will

terminate  all obligations of the parties hereunder,  except  for

the  obligations  under Article 10 (Indemnity Claims),  and  this

Section,  and  Sections 5.2 (Indemnification and  Confidentiality

Obligations  Regarding Access), 12.1 (Expenses), 12.7 (Brokerage)

and   12.9  (Public  Announcements);  provided  that  termination

pursuant  to subparagraphs (b), (c), or (e) of Section  9.2  will

not relieve a defaulting or breaching party from any liability to

the other party hereto.

- INDEMNIFICATION
Seller Indemnification.
Except as otherwise provided in this Article 10, and in
Sections 2.2, 5.8 and 12.7, the Seller and each Subsidiary will
indemnify and reimburse the Buyer for any and all claims, losses,
liabilities, damages, penalties, fines, costs and expenses
(including reasonable attorneys' fees and court costs)
(collectively, "Losses") incurred by the Buyer and its Affiliates
and their successors or assigns, and their respective directors,
officers, employees, consultants and agents (the "Buyer Protected
Parties"), to the extent such Losses are a result of or arise out
of:
   any material breach or inaccuracy of any representation or
   warranty of the Seller or any Subsidiary set forth in this
    Agreement or in any Transaction Agreement (other than the
Transition Services Agreement or the Supply Agreement), including
  any failure by the Seller to satisfy the condition to Closing
  regarding the Seller's representations and warranties (as set
  forth in Section 8.1) and the corresponding breach of Section
                              5.4;
  any material breach of, or noncompliance by the Seller or any
    Subsidiary with, any covenant or agreement of the Seller
   contained in this Agreement or in any Transaction Agreement
   (other than the Transition Services Agreement or the Supply
                           Agreement);
        the Excluded Assets or the Excluded Liabilities;
 any liabilities or obligations for which the Seller has assumed
            responsibility under Article 6 hereof, or
federal, state and foreign sales, use, franchise, income or other
 taxes (including interest and penalties) assessed or levied at
 any time on the Business for periods prior to the Closing Date;
          provided,  however, that, in each case, the Seller  has

          no  obligation  to  indemnify the Buyer  for  any  Loss

          arising  from, with respect to, or resulting  from  any

          matters  or  information disclosed in  writing  to  the

          Buyer  prior to the Closing, whether in this Agreement,

          the  Schedules  to  this Agreement or  otherwise  in  a

          writing  that is acknowledged by an authorized  officer

          of Buyer.

Notwithstanding anything in the foregoing to the contrary,
subject to Section 10.3(b) (Time to Assert Claims) and Section
10.4 (Deductible), the Seller's obligation for indemnity under
Section 10.1(a)(1) or Section 10.1(a)(2) (with respect to
covenants or agreements of Seller under Section 5.1(a) and
Article 6 only) shall be only up to a maximum aggregate liability
for the Seller and the Subsidiaries equal to fifteen percent
(15%) of the Purchase Price; provided, however, that this
limitation shall not apply to claims for indemnity arising out of
Seller's knowing or willful misrepresentations; and further
provided that this limitation shall not apply to claims for
indemnity arising out of any material breach or inaccuracy of any
representation or warranty by the Seller or the Subsidiaries
under Section 3.2 or the first sentence of Section 3.7 (the
indemnity obligation with respect to both of such Sections being
limited to the Purchase Price).
Buyer Indemnification.
Except as otherwise provided in this Article 10 and Sections 2.2,
5.2 and 12.7, the Buyer will indemnify and reimburse the Seller
for any and all Losses incurred by the Seller, a Subsidiary and
their Affiliates and their successors or assigns, and their
respective directors, officers, employees, consultants and agents
(the "Seller Protected Parties"), to the extent such Losses are a
result of or arise out of:
   any material breach or inaccuracy of any representation or
   warranty of the Buyer set forth in this Agreement or in any
    Transaction Agreement (other than the Transition Services
Agreement or the Supply Agreement), including any failure by the
 Buyer to satisfy the condition to Closing regarding the Buyer's
representations and warranties (as set forth in Section 7.1) and
            the corresponding breach of Section 5.4;
 any material breach of, or noncompliance by the Buyer with, any
covenant or agreement of the Buyer contained in this Agreement or
in any Transaction Agreement (other than the Transition Services
               Agreement or the Supply Agreement);
                    the Assumed Liabilities;
 the ownership or operation of the Business or the Assets on or
                     after the Closing Date.
Notwithstanding anything in the foregoing to the contrary,
subject to Section 10.3(b) (Time to Assert Claims) and Section
10.4 (Deductible), the Buyer's obligation for indemnity under
Section 10.2(a)(1) shall be only up to a maximum aggregate
liability for the Buyer equal to fifteen percent (15%) of the
Purchase Price; provided, however, that this limitation shall not
apply to claims for indemnity arising out of (i) any material
breach or inaccuracy of any representation or warranty of the
Buyer under Sections 4.2 or 4.6 (the indemnity obligation with
respect thereto being limited to the Purchase Price), or (ii)
Buyer's knowing or willful misrepresentations.
Indemnity Claims.
Survival.  The representations, warranties, covenants and
agreements contained herein, except for covenants and agreements
to be performed by the parties prior to the Closing, will not be
extinguished by the Closing but will survive the Closing, subject
to the limitations set forth in subsection (b) below with respect
to the time periods within which claims for indemnity must be
asserted.  The covenants and agreements to be performed by the
parties prior to the Closing shall expire at the Closing.
Time to Assert Claims.  All claims for indemnification under
Section 10.1(a) which are not extinguished by or at the Closing
in accordance with Section 10.3(a) must be asserted no later than
eighteen (18) months after the Closing Date, except for (i)
claims described in clause (5) of Section 10.1(a), which must be
asserted prior to the expiration of the applicable statute of
limitations, or (ii) claims by employees, distributors and sales
representatives of the Seller or the Subsidiaries, which must be
asserted prior to the expiration of the applicable statute of
limitations or five (5) years after the Closing Date, whichever
is earlier.  All claims for indemnification under clauses (1) and
(2) of Section 10.2(a) which are not extinguished by or at the
Closing in accordance with Section 10.3(a) must be asserted no
later than eighteen (18) months after the Closing Date.
Deductible.
The Buyer Protected Parties may make no claim against the Seller
for indemnification pursuant to Section 10.1(a) unless and until
the aggregate amount of such claims exceeds $10,000 (the
"Deductible"), in which event the Buyer Protected Parties may
claim indemnification for the amount of such claims in excess of
the Deductible; provided, however, that the Deductible for claims
arising under Section 10.1(a)(1) or Section 10.1(a)(2) (with
respect to covenants or agreements of Seller under Section 5.1(a)
and Article 6 only) shall be $100,000.  This Section 10.4 shall
not apply to claims for material breach of the representations
and warranties provided under Section 3.19 (taxes).
The Seller Protected Parties may make no claim against the Buyer
for indemnification pursuant to Section 10.2(a) unless and until
the aggregate amount of such claims exceeds $10,000 (the
"Deductible"), in which event the Seller Protected Parties may
claim indemnification for the amount of such claims in excess of
the Deductible; provided, however, that the Deductible for claims
arising under Section 10.2(a)(1) shall be $100,000.
Notice of Claim
 .   The  Buyer Protected Party or the Seller Protected Party,  as

the  case may be (the "Indemnified Party"), will notify the party

against whom indemnification under this Agreement is sought  (the

"Indemnifying   Party"),   in   writing,   of   any   claim   for

indemnification, specifying in reasonable detail  the  nature  of

the  Loss,  and,  if  known, the amount, or an  estimate  of  the

amount,  of  the  liability arising therefrom.   The  Indemnified

Party's  failure  or  delay in providing such  notice  shall  not

relieve  the  Indemnifying  Party of  its  obligations  hereunder

unless  (and then only to the extent that) such failure or  delay

prejudiced the Indemnifying Party's ability to defend such claim.

The Indemnified Party will provide to the Indemnifying Party,  as

promptly   as   practicable  thereafter,  such  information   and

documentation as may be reasonably requested by the  Indemnifying

Party  to support and verify the claim asserted, so long as  such

disclosure would not violate the attorney-client privilege of the

Indemnified Party.

Defense
 .   If  the facts pertaining to a Loss arise out of the claim  of

any  third party, or if there is any claim against a third  party

(other  than a Buyer Protected Party or a Seller Protected Party)

available  by  virtue  of  the circumstances  of  the  Loss,  the

Indemnifying  Party shall assume the defense or  the  prosecution

thereof  by  prompt  written  notice to  the  Indemnified  Party,

including  the  employment  of counsel  or  accountants,  at  the

Indemnifying Party's cost and expense.  If the Indemnifying Party

does not assume the defense or prosecution of a claim as provided

above   within  thirty  days  after  notice  thereof   from   any

Indemnified Party (or within such shorter period, if any, as  may

be  necessary to avoid default judgment or other prejudice to the

Indemnified Party), the Indemnified Party may retain counsel  and

defend  or prosecute such claim at the Indemnifying Party's  cost

and expense.  The Indemnified Party will have the right to employ

counsel separate from counsel employed by the Indemnifying  Party

in  any such action and to participate therein, but the fees  and

expenses of such counsel employed by Indemnified Party will be at

its  expense.  The Indemnifying Party will not be liable for  any

settlement  of any such claim effected without its prior  written

consent,  which will not be unreasonably withheld; provided  that

if  the  Indemnifying  Party  does  not  assume  the  defense  or

prosecution of a claim as provided above within thirty days after

notice thereof from any Indemnified Party (or within such shorter

period, if any, as may be necessary to avoid default judgment  or

other  prejudice to the Indemnified Party), the Indemnified Party

may  settle such claim without the Indemnifying Party's  consent.

The  Indemnifying  Party will not agree to a  settlement  of  any

claim  which  provides for any relief other than the  payment  of

monetary  damages  or  which could have a  material  precedential

impact  or effect on the business or financial condition  of  any

Indemnified  Party without the Indemnified Party's prior  written

consent.   Whether or not the Indemnifying Party  chooses  to  so

defend  or prosecute such claim, the Indemnifying Party  and  the

Indemnified  Party will cooperate in the defense  or  prosecution

thereof and will furnish such records, information and testimony,

and  attend  such  conferences, discovery proceedings,  hearings,

trials  and appeals, as may be reasonably requested in connection

therewith.   The  Indemnifying Party will be  subrogated  to  all

rights  and  remedies of' any Indemnified Party,  except  to  the

extent they apply against another Indemnified Party.

Limitation of Liability
 .   In  calculating  any amount of damages  to  be  paid  by  the

Indemnifying Party pursuant to this Agreement, the amount of such

damages  will  be reduced by all reimbursements  credited  to  or

received by the Indemnified Party, relating to such damages,  and

will  be  net  of any tax benefits and insurance proceeds  (after

giving  effect to any premium increases or deductibles)  received

by  the  Indemnified Party with respect to the matter  for  which

indemnification is claimed.

Exclusive Remedy; Release.
The indemnification provided pursuant to this Agreement shall be
the sole and exclusive remedy hereto for any Losses as a result
of, with respect to or arising out of the breach of this
Agreement, or any of the transactions or other agreements or
instruments contemplated or entered into in connection herewith
(including, but not limited to, all Exhibits attached or
referenced herein); provided, however, that such indemnification
shall not be the sole and exclusive remedy, and shall in no way
limit the rights of the parties for fraud or willful breach or
misconduct.
Except as specifically provided in this Article 10 and Sections
2.2, 5.2, 5.8 and 12.7, neither party nor its Affiliates or
representatives shall be liable to the other party for, and
(except as so provided each party) hereby releases and discharges
the other party and its Affiliates and representatives from, any
and all Losses incurred as a result of, with respect to or
arising out of the ownership or operation of the Assets or the
Business.
- COVENANT NOT TO COMPETE
      For  a  period of five (5) years from and after the Closing

Date, the Seller shall not engage, directly or indirectly through

one  or  more subsidiaries or other intermediaries controlled  by

the Seller, in any activities that constitute the Business as  of

the Effective Date or the Closing Date.  If the final judgment of

a  court of competent jurisdiction declares that any provision of

this  Article  11 is invalid or unenforceable, the parties  agree

that  the court making the determination shall reduce the  scope,

duration  or  area of the term or provision to the  least  extent

necessary  so  that  this provision shall be  enforceable  as  so

modified and that the time period shall be extended by any period

of  non-compliance.   Notwithstanding the provisions  of  Section

10.8(a), this provision shall be specifically enforceable.

- MISCELLANEOUS
Expenses
 .   Except as otherwise provided herein, the Seller and the Buyer

will each pay all costs and expenses incurred by each of them, or

on  their  behalf respectively, in connection with this Agreement

and  the  transactions contemplated hereby,  including  fees  and

expenses  of  their  own financial consultants,  accountants  and

counsel.   Any  and  all  personal property  taxes,  assessments,

security deposits, lease rentals, and other charges applicable to

the  Assets or the Business will be pro-rated to the Closing Date

and allocated between the parties by adjustment at Closing, or as

soon thereafter as shall be reasonably practicable.

Entire Agreement
 .   Other  than the Confidentiality Agreement, dated on or  about

June  24,  1999  by  and between the Seller  and  Xomed  Surgical

Products,  Inc., by which the Buyer agrees to be  bound  and  the

terms and provisions of which shall survive the execution of this

Agreement   and  the  Closing,  this  Agreement  (including   the

Schedules and Exhibits) and all other agreements to be signed  or

delivered  at  Closing constitute the full understanding  of  the

parties,  a  complete  allocation of risks  between  them  and  a

complete  and exclusive statement of the terms and conditions  of

their  agreement  relating  to  the  subject  matter  hereof  and

supersede any and all prior agreements, whether written or  oral,

that may exist between the parties with respect thereto; provided

that  this  provision is not intended to abrogate any Transaction

Agreements  executed  with or after this  Agreement.   Except  as

otherwise specifically provided in this Agreement, no conditions,

usage  of  trade, course of dealing or performance, understanding

or  agreement  purporting to modify, vary, explain or  supplement

the  terms or conditions of this Agreement will be binding unless

hereafter  made in writing and signed by the party to  be  bound,

and  no  modification will be effected by the  acknowledgment  or

acceptance  of  documents  containing  terms  or  conditions   at

variance  with  or  in  addition  to  those  set  forth  in  this

Agreement.   The  Exhibits  and  Schedules  identified  in   this

Agreement  are incorporated herein by reference and  are  made  a

part hereof.

Waivers
 .   No waiver by a party with respect to any breach or default or

of  any  right or remedy and no course of dealing or performance,

will  be  deemed to constitute a continuing waiver of  any  other

breach  or  default or of any other right or remedy, unless  such

waiver  is expressed in writing signed by the party to be  bound.

Failure  of  a party to exercise any right will not be  deemed  a

waiver of such right or rights in the future.

Parties Bound by Agreement; Successors and Assigns
 .   The terms, conditions and obligations of this Agreement  will

inure  to  the benefit of and be binding upon the parties  hereto

and  the respective successors and permitted assigns thereof.  No

Party  shall transfer or assign its rights, duties or obligations

hereunder  or  any  part thereof to any other  person  or  entity

without  the prior written consent of the other Party;  provided,

however, that either Party may assign its rights and delegate its

obligations  to  an  Affiliate  within  the  meaning  of  Section

12.11(a)(i),  but no such assignment or delegation shall  relieve

such Party of its obligations hereunder.

Counterparts
 .   This  Agreement may be executed in one or more  counterparts,

each  of  which will for all purposes be deemed to be an original

and all of which will constitute the same instrument.

Notices
 .  Any notice, request, instruction or other document to be given

hereunder by any party hereto to any other party hereto  must  be

in  writing  and  delivered personally  (including  by  overnight

courier  or  express  mail  service) or  sent  by  registered  or

certified mail, postage or fees prepaid,

            If to the Buyer:    Xomed, Inc.
                        6743 Southpoint Dr. N.
                        Jacksonville, FL  32216-0980
                        Attention:    Jaime  A.  Frias,   General
                        Counsel
                        Telephone:    (904) 332-2451
                        Facsimile:    (904) 281-2779

            With a copy to: McGuire Woods Battle & Boothe, LLP
                       50 N. Laura Street
                       Suite 3300
                       Jacksonville, FL  32202
                       Attention:  C. Daniel Rice, Esq.
                        Telephone:    (904) 798-2617
                        Facsimile:    (904) 360-6323


            If to the Seller:    Mentor Corporation
                       201 Mentor Drive
                       Santa Barbara, CA  93111
                       Attention: Vice President and General
                                        Counsel
                       Telephone:   (805) 879-6000
                       Facsimile:    (805) 681-6006

            With a copy to:   Arnold & Porter
                       777 South Figueroa Street
                       Los Angeles, CA 90017-2513
                       Attention:  Gregory C. Fant, Esq.
                       Telephone:  (213) 243-4000
                       Facsimile:   (213) 243-4199

or to such other address as may be specified from time to time in

a  notice  given  by such party.  Any notice which  is  delivered

personally in the manner provided herein will be deemed  to  have

been  duly given to the party to whom it is directed upon  actual

receipt  by  such party or the office of such party.  Any  notice

which is addressed and mailed in the manner herein provided  will

be  conclusively presumed to have been duly given to the party to

which it is addressed at the close of business, local time of the

recipient,  on the fourth business day after the  day  it  is  so

placed in the mail or, if earlier, the time of actual receipt.

Brokerage
 .   The  Seller  and  the Buyer do hereby expressly  warrant  and

represent,  each  to  the other, that except U.S.  Bancorp  Piper

Jaffray,  in the case of the Seller, no broker, agent, or  finder

has  rendered  services  to such party  in  connection  with  the

transaction contemplated under this Agreement.  The Seller  shall

be   solely  responsible  for  any  claims  for  compensation  or

otherwise brought by U.S. Bancorp Piper Jaffray relating  to  the

transactions  contemplated  hereby  and  hereby  indemnifies  and

agrees  to hold harmless the Buyer from and against any  and  all

Losses  arising  or resulting, or sustained or  incurred  by  the

Buyer,  by  reason of any claim by any broker, agent, finder,  or

other  person  or entity based upon any arrangement or  agreement

made  or  alleged to have been made by the Seller  in  connection

with  the transaction contemplated by this Agreement.  The  Buyer

hereby  indemnifies and agrees to hold harmless the  Seller  from

and against any and all Losses arising or resulting, or sustained

or  incurred by the Seller, by reason of any claim by any broker,

agent,  finder,  or  other  person  or  entity  based  upon   any

arrangement or agreement made or alleged to have been made by the

Buyer  in  connection with the transaction contemplated  by  this

Agreement.

Governing Law
 .  The validity, interpretation and performance of this agreement

and any dispute connected with this agreement will be governed by

and  determined in accordance with the statutory, regulatory  and

decisional  law  of  the  State of New York  (exclusive  of  such

state's  choice or conflicts of laws rules) and,  to  the  extent

applicable, the federal statutory, regulatory and decisional  law

of the United States (except for the U.N. Convention on Contracts

for  the  International Sale of Goods, April 10, 1980, U.N.  Doc.

A/Conf.  97/18,  19  I.L.M. 668, 671 (1980) reprinted  in  Public

Notice,  52  Fed. Reg. 66280 (1987), which is hereby specifically

disclaimed and excluded).

Public Announcements
 .   No  public announcement may be made by any person with regard

to  the  transactions contemplated by this Agreement without  the

prior  consent of the Seller and the Buyer; provided that  either

party  may make such disclosure to the extent required if advised

by  counsel  that  it is required to do so by applicable  law  or

regulation  of  any  governmental agency or stock  exchange  upon

which  securities of such party are registered.  The  Seller  and

the  Buyer  will discuss any public announcements or  disclosures

concerning  the transactions contemplated by this Agreement  with

the   other  parties  prior  to  making  such  announcements   or

disclosures.

No Third-Party Beneficiaries
 .   With  the exception of the parties to this Agreement and  the

Seller Protected Parties or Buyer Protected Parties, there exists

no  right  of any person to claim a beneficial interest  in  this

Agreement or any rights occurring by virtue of this Agreement.

Certain Definitions.
As used in this Agreement, "Affiliate" of a person or entity
shall mean: (i) any other person or entity directly, or
indirectly through one or more intermediaries, controlling,
controlled by, or under common control with such person or
entity, (ii) any officer, director, partner, employee, or direct
or indirect beneficial owner of any 10% or greater of the equity
or voting interests of such person or entity, or (iii) any other
person or entity for which a person or entity described in
clause (ii) acts in such capacity.
As used in the Agreement, the "knowledge" of the Seller shall
mean the actual knowledge as of the date hereof of the following
officers and managers of the Seller:  (A) the following corporate
officers and managers of Seller: (i) Chief Executive Officer and
President, (ii) Senior Vice President and Chief Financial
Officer, (iii) Corporate Counsel, and (iv) Vice President,
Regulatory Affairs/Quality Assurance, corporate; and (B) the
following officers and managers of the Seller or the Subsidiaries
primarily assigned to Opthalmics: (i) Senior Vice President,
Ophthalmics, (ii) Director of Manufacturing Operations,
Ophthalmics, (iii) Vice President, R&D, Ophthalmics, and (iv)
Quality/Regulatory Assurance and Document Control Supervisor.
As used in this Agreement, "Material Adverse Effect" shall mean a
material adverse effect on the Business taken as a whole.
Interpretation
 .   Words of the masculine gender will be deemed and construed to

include  correlative  words of the feminine and  neuter  genders.

Words  importing  the  singular number will  include  the  plural

number and vice versa unless the context will otherwise indicate.

References to Articles, Sections and other subdivisions  of  this

Agreement are to the Articles, Sections and other subdivisions of

this  Agreement  as originally executed.  The  headings  of  this

Agreement  are  for convenience and do not define  or  limit  the

provisions  hereof.   Words  importing  persons  include   firms,

associations  and corporations.  The terms "herein," "hereunder,"

"hereby," "hereto," "hereof" and any similar terms refer to  this

Agreement;  the  term  "heretofore"  means  before  the  date  of

execution of this Agreement; and the term "hereafter" means after

the  date of execution of this Agreement and the word "including"

shall be deemed to be followed by the words "without limitation."

The  terms  "ordinary  course of business" or  "ordinary  course"

means the ordinary course of business consistent with past custom

and  practice (including with respect to quantity and frequency),

subject  to  the qualifications and other matters  set  forth  in

Section  3.4.   The  term  "days"  means  calendar  days  (unless

otherwise specified).

      IN  WITNESS WHEREOF, the parties have caused this Agreement

to  be  executed by their duly authorized representatives in  the

United States of America as of the date first above written.

                         MENTOR CORPORATION


                         By:/S/ANTHONY R. GETTE
                           Name:           Anthony R. Gette
                           Title:                 President



                         MENTOR OPHTHALMICS, INC.


                         By:/S/GARY E. MISTLIN
                           Name:  Gary E. Mistlin
                           Title:  Secretary/Treasurer



                         MENTOR MEDICAL, INC.


                         By:/S/GARY E. MISTLIN
                           Name:  Gary E. Mistlin
                           Title:  Secretary/Treasurer



                         XOMED, INC.


                         By:/S/THOMAS E. TIMBIE
                           Name:  Thomas E. Timbie
                           Title:  Secretary