MENTOR CORPORATION
5425 Hollister Avenue
Santa Barbara, California 93111
Telephone: (805) 681-6000
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD SEPTEMBER 13, 1995
The Annual Meeting of Shareholders of Mentor Corporation (the "Company")
will be held Wednesday, September 13, 1995 at 10:00 a.m. (Central Daylight Time)
at the Marriott City Center Hotel, 30 South Seventh Street, Minneapolis,
Minnesota, to consider and take action upon the following matters:
1. To fix the number of directors at seven and elect a Board of Directors
for the ensuing year.
2. To consider and vote upon a proposal to ratify the selection of Ernst &
Young as independent public accountants of the Company for the fiscal
year ending March 31, 1996.
3. To consider and vote upon a proposal to amend the Company's
Composite Restated Articles of Incorporation to increase the total
number of authorized shares of Common Stock, par value $.10 per share,
from 20,000,000 shares to 50,000,000 shares.
4. To act upon any other business that may properly come before the meeting
and any adjournment thereof.
The Board of Directors has fixed the close of business on July 17, 1995 as
the record date for the determination of the shareholders entitled to vote at
the meeting or any adjournment thereof.
BY ORDER OF THE BOARD OF DIRECTORS
Anthony R. Gette
Secretary
Dated: August 10, 1995
YOU ARE CORDIALLY INVITED TO ATTEND THE MEETING. HOWEVER, WHETHER OR NOT
YOU PLAN TO BE PERSONALLY PRESENT AT THE MEETING, PLEASE MARK, DATE AND SIGN THE
ENCLOSED PROXY AND RETURN IT PROMPTLY IN THE ENCLOSED ENVELOPE. IF YOU LATER
DESIRE TO REVOKE YOUR PROXY, YOU MAY DO SO AT ANY TIME BEFORE IT IS EXERCISED.
<PAGE>
MENTOR CORPORATION
____
PROXY STATEMENT
FOR ANNUAL MEETING OF SHAREHOLDERS
SEPTEMBER 13, 1995
______
SOLICITATION AND REVOCABILITY OF PROXIES
This Proxy Statement is furnished to the shareholders of Mentor Corporation
(the "Company"), in connection with the solicitation by the Company's Board of
Directors of the enclosed proxy for use at the Annual Meeting of Shareholders to
be held Wednesday, September 13, 1995, at 10:00 a.m. (Central Daylight Time) at
the Marriott City Center Hotel, 30 South Seventh Street, Minneapolis, Minnesota,
or at any adjournment(s) thereof (the "1995 Annual Meeting") for the purposes
set forth in the Notice of Annual Meeting of Shareholders. Common Stock
represented by proxies in the form solicited will be voted, but proxies may be
revoked at any time before being exercised by delivery to the Secretary of the
Company of a written notice of termination of the proxy's authority or a duly
executed proxy bearing a later date. A shareholder who attends the meeting need
not revoke his or her proxy and vote in person unless he or she wishes to do so.
Expenses in connection with the solicitation of proxies will be paid by the
Company. Proxies are being solicited primarily by mail, but, in addition,
directors, officers and regular employees of the Company may solicit proxies
personally, by telephone or by special letter.
So far as the management of the Company is aware, no matters other than
those described in this Proxy Statement will be acted upon at the meeting. In
the event that any other matters calling for a vote of shareholders properly
come before the meeting, the persons named as proxies in the enclosed form of
proxy will vote in accordance with their judgment on such other matters.
The Annual Report of the Company, including financial statements, for the
fiscal year ended March 31, 1995 is being furnished to each shareholder with
this Proxy Statement.
The principal executive offices of the Company are located at 5425
Hollister Avenue, Santa Barbara, California 93111. The approximate mailing date
of this Proxy Statement and the accompanying form of proxy is August 10, 1995.
RECORD DATE AND VOTING OF SECURITIES
The Common Stock of the Company, par value $.10 per share, is the only
authorized voting security of the Company. Only the holders of the Company's
Common Stock whose names appear of record on the Company's books on July 17,
1995 will be entitled to notice of and to vote at the 1995 Annual Meeting. At
the close of business on July 17, 1995, a total of 12,307,606 shares of Common
Stock were outstanding, each entitled to one vote. Holders of Common Stock do
not have cumulative voting rights. Abstentions and broker non-votes are each
included in the number of shares present for quorum purposes. Abstentions, which
may be specified on all proposals other than the election of directors, are
counted in tabulations of the votes cast on proposals presented to shareholders;
whereas broker non-votes are not counted for purposes of determining whether a
proposal has been approved.
PROPOSAL 1: ELECTION OF DIRECTORS
Nominees
The Company's By-Laws provide that the Board of Directors must consist of
not less than three directors, with the number to be determined by a resolution
of the shareholders. Each director is elected at the Annual Meeting of
<PAGE>
Shareholders to hold office until the Annual Meeting of Shareholders next held
after his or her election. The Board of Directors has recommended that the
number of directors to be elected for the ensuing year be set at seven.
It is intended that the persons named as proxies in the enclosed form of
proxy will vote the proxies received by them for the election as directors of
the nominees named in the table below except as specifically directed otherwise.
Each nominee has indicated a willingness to serve, but in case any nominee is
not a candidate at the meeting, for reasons not now known to the Company, the
proxies named in the enclosed form of proxy may vote for a substitute nominee in
their discretion. Information regarding these nominees is set forth in the table
below.
<TABLE>
<CAPTION>
Director Principal Occupation and Business
Name (Age) Since Experience for Last Five Years
<S> <C> <C>
Christopher J. Conway (56) 1969 Founder, Chairman of the Board and Chief
Executive Officer since 1969; President from 1969
to April 1987.
Anthony R. Gette (39) 1988 President and Chief Operating Officer since April
1987; Secretary since March 1986; Executive Vice
President from September 1986 to April 1987;
Vice President, Finance from September 1983 to
September 1986; Director of Rehabilicare, Inc.(1)
Eugene G. Glover (52) 1969 Private investor since October 1986; Founder &
Vice President, Engineering of the Company from
1969 to October 1986.
Walter W. Faster (61) 1980 Employed by General Mills, Inc.(2) in various
marketing and finance capacities since 1963,
currently as Vice President, Corporate Growth and
Development.
Michael Nakonechny (67) 1980 President of NAK Associates Corp.(3) since 1981;
Chairman of the Board and Secretary of
Transducer Systems, Inc.(4) from November 1968
to January 1989.
Byron G. Shaffer (62) 1978 Private investor since 1970.
Dr. Richard W. Young (68) 1990 Private investor since April 1992; Consultant to
Mentor O & O, Inc.(5) from April 1990 to 1992;
Chairman and Chief Executive Officer of Mentor
O & O, Inc. from April 1985 to 1990; Employed
as President of Houghton Mifflin Company(6)
from 1982 to 1985; Employed by Polaroid
Corporation(7) in various marketing and research
capacities from 1962 to 1982; Director of Mentor
O & O, Inc. and of Instron Corporation.(8)
</TABLE>
(1) Rehabilicare, Inc. is a manufacturer of electromedical rehabilitation and
pain management products.
(2) General Mills, Inc. is a major manufacturer of packaged foods and other
consumer goods.
(3) NAK Associates Corp. is a closely-held company engaged in consulting
engineering.
(4) Transducer Systems, Inc. is a manufacturer of electro-mechanical
transducers.
(5) Mentor O & O, Inc. was acquired by the Company in April 1990. It is a
manufacturer of ophthalmic surgical and diagnostic equipment.
(6) Houghton Mifflin Company is a major publishing firm.
<PAGE>
(7) Polaroid Corporation is a major manufacturer of photographic equipment and
supplies.
(8) Instron Corporation is a manufacturer of materials testing instruments,
systems, software, and accessories.
The Board of Directors recommends that the shareholders vote FOR the
nominees named above as directors of the Company for the ensuing year.
Board Meetings and Committees
During the fiscal year ended March 31, 1995, the Board of Directors met or
adopted resolutions by unanimous written consent on eight occasions. No director
attended less than 75% of the aggregate number of Board of Directors meetings
and meetings of committees on which he served (including written actions).
The Company has an audit committee, currently consisting of Messrs. Faster,
Shaffer and Glover. The principal functions of the audit committee are to (i)
recommend to the Board of Directors the independent public accountants to act as
the Company's independent auditors; (ii) discuss with the independent auditors
the scope of their audit; (iii) discuss with the independent auditors and the
executive officers the Company's accounting principles, policies and practices;
and (iv) discuss with the independent auditors the adequacy of the Company's
accounting, financial and operating controls.
The audit committee has adopted procedures providing for its prior review
and consideration of the effect of non-audit services on the independence of
Ernst & Young, and the approval of the types of and estimated fees for
professional services which are expected to be performed by Ernst & Young during
the forthcoming fiscal year.
The audit committee met twice during the fiscal year ended March 31, 1995
with all committee members present.
The Company has a standing compensation committee, currently consisting of
Messrs. Faster, Glover, Nakonechny, Shaffer and Young. The principal functions
of the compensation committee are to review and recommend compensation for
executive personnel and to administer the Company's stock option plans. The
compensation committee met twice during the fiscal year ended March 31, 1995
with all members present.
Nominating Procedures
The Company does not have a separately constituted committee to nominate
candidates for election to the Board of Directors of the Company. Such
candidates are chosen by the existing Board after taking into consideration the
recommendations of the Company's executive officers and shareholders.
Shareholders wishing to submit recommendations for nomination should send them
in writing to the attention of the Company's Chairman at the Company's principal
executive office within sixty days after the end of the Company's fiscal year.
Compensation of Directors
During fiscal 1995 and currently, Board members who are not also employees
of the Company received an annual fee of $20,000. In addition, each person who
is a non-employee director on the date of an annual meeting of shareholders is
entitled to receive an automatic option grant under the Company's 1991 Stock
Option Plan (the "Option Plan") for 3,000 shares of Common Stock at an exercise
price equal to the fair market value per share of the Common Stock on that date.
These options have a term of ten years and become exercisable in four equal
annual installments over the optionee's period of Board service, beginning one
year after the grant date. Under the Option Plan, each person who is newly
elected or appointed as a non-employee director will receive, on the date of
election or appointment, an automatic option grant for 10,000 shares of Common
Stock. The maximum number of shares of Common Stock that a non-employee director
currently may receive under the Option Plan is 45,000, less the number of shares
granted to the director under any prior option plan of the Company.
<PAGE>
MANAGEMENT
Security Ownership of Certain Beneficial Owners and Management
The following table shows the ownership of the Common Stock of the Company
on July 17, 1995, (i) by each person who, to the knowledge of the Company, owned
beneficially more than five percent of such stock, (ii) by each of the Company's
directors, (iii) by each of the executive officers named in the Summary
Compensation Table below and (iv) by all directors and executive officers who
served as directors or executive officers at fiscal year end as a group:
<TABLE>
<CAPTION>
Approximate
Number of Percent of
Directors, Officers and 5% Stockholders Shares (1) Class
5% Stockholders:
None
Directors:
<S> <C> <C>
Christopher J. Conway (2) 487,800 3.7%
Eugene G. Glover 270,000 (3) 2.1%
Byron G. Shaffer 401,000 (4) 3.1%
Walter W. Faster 59,300 *
Michael Nakonechny 157,121 1.2%
Anthony R. Gette (2) 181,500 1.4%
Richard W. Young 35,350 *%
Executive Officers:
Dennis E. Condon 86,290 (5) *%
Gary E. Mistlin 63,750 *%
Spence M. Vawter 10,500 *%
All directors and executive officers
as a group (13 persons) 1,869,211 14.3%
</TABLE>
*Less than 1%
(1) These shares, unless noted below, are subject to the sole voting
and investment power of the indicated person. The figures include
options to purchase common stock exercisable within 60 days and held
by: Mr. Conway, 144,000 shares; Mr. Glover, 35,000 shares; Mr. Shaffer,
35,000 shares; Mr. Faster, 35,000 shares; Mr. Nakonechny, 35,000 shares; Mr.
Gette, 168,000 shares; Dr. Young, 20,250 shares; Mr. Condon, 65,750 shares;
Mr. Mistlin, 60,750 shares; Mr. Vawter, 10,500 shares; and all directors
and executive officers as a group, 725,750 shares.
(2) Also an executive officer named in the Summary Compensation Table.
(3) Includes 225,000 shares held by a trust of which Mr. Glover is the sole
trustee.
(4) Includes 52,900 shares owned by Mr. Shaffer's spouse and 40,000 shares owned
by Mr. Schaffer as custodian for their children.
(5) Includes 270 shares owned by Mr. Condon's spouse.
<PAGE>
Executive Compensation
Executive compensation is determined by the Board of Directors based on the
recommendations of the Compensation Committee, which is composed of outside
directors. The following information relates to compensation paid by the Company
for services rendered during the three fiscal years ended March 31, 1995 for the
Company's Chief Executive Officer and each of the other four most highly
compensated executive officers.
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
Long Term Compensation
Annual Compensation Awards Payouts
Other Restricted Securities
Annual Stock Underlying LTIP All Other
Name and Principal Fiscal Bonus(1) Compensation Awards Options/ Payouts Compensation
Position Year Salary ($) ($) ($) ($) SARs (#) ($) (2) ($)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Christopher J. Conway 1995 $ 285,700 $ 189,409 - - 24,000 - $ 2,310
Chairman and CEO 1994 $ 258,000 $ 107,820 - - 16,000 - $ 1,965
1993 $ 226,500 $ 147,225 - - 24,000 - $ 1,380
Anthony R. Gette 1995 $ 234,300 $ 155,333 - - 20,000 - $ 2,310
President, Secretary 1994 $ 206,600 $ 86,340 - - 12,000 - $ 2,275
and COO 1993 $ 197,300 $ 125,000 - - 20,000 - $ 1,879
Dennis E. Condon 1995 $ 158,800 $ 124,069 - - 12,000 - $ 2,760
President, Mentor H/S, Inc. 1994 $ 151,800 $ 50,615 - - 6,000 - $ 1,594
1993 $ 145,000 $ 84,933 - - 13,000 - $ 659
Spencer M. Vawter (3) 1995 $ 157,800 $ 42,490 - - 12,000 - $ 2,170
President, Mentor Urology, Inc. 1994 $ 145,000 $ 40,355 $20,588 (4) - 15,000 - $ 70
1993 $ 5,500 $ - - - - - -
Gary E. Mistlin 1995 $ 138,500 $ 38,200 - - 12,000 - $ 2,048
Vice President of Finance/ 1994 $ 130,900 $ 37,500 - - 6,000 - $ 1,616
Treasurer 1993 $ 125,000 $ 15,000 - - 13,000 - $ 1,551
</TABLE>
(1) Annual bonus amounts are earned and accrued during the fiscal years
indicated, and paid subsequent to the end of the fiscal year.
(2) Represents matching amounts contributed by the Company on behlaf of the
named individual under the terms of the Company's 401(k) Plan.
(3) Hired March 15, 1993
(4) Represents relocation expense reimbursement.
<PAGE>
<TABLE>
<CAPTION>
OPTIONS/SAR GRANTS IN LAST FISCAL YEAR
Potential Realizable Value
at Assumed Annual Rates of
No. of Stock Price Appreciation
Securities Individual Grants For Option Term (3)
Underlying % of Total
Options/ Options/SARs
SARs Granted to Exercise or
Granted Employees in Base Price Expiration
Name (#) (1) Fiscal Year ($/Share) (2) Date 5% 10%
<S> <C> <C> <C> <C> <C> <C>
Christopher J. Conway 24,000 10.3% $13.50 04/15/04 $203,762 $516,373
Anthony R. Gette 20,000 8.6% $13.50 04/15/04 $169,802 $430,310
Dennis E. Condon 12,000 5.2% $13.50 04/15/04 $101,881 $258,186
Spencer M. Vawter 12,000 5.2% $13.50 04/15/04 $101,881 $258,186
Gary E. Mistlin 12,000 5.2% $13.50 04/15/04 $101,881 $258,186
</TABLE>
(1) All of these options were granted under the 1991 Plan on April 15, 1994.
Each option will become exercisable for the option shares in four equal and
successive annual installments over the optionee's period of service with
the Company, beginning one year after the grant date. Each option has a
maximum term of ten years, subject to earlier termination the option shares
immediately prior to a Change in Control (as defined in the 1991 Plan);
alternatively, the administrator of the 1991 Plan may provide for
replacement of outstanding options with options to purchase shares of the
surviving corporation, or for a cash payment in exchange for the
cancellation of outstanding options.
(2) The exercise price of each option is equal to the market value of the Common
Stock on the date of grant. The exercise price may be paid in cash, in
Common Stock or pursuant to a cashless exercise procedure under which the
optionee provides irrevocable instructions to a brokerage firm to sell the
purchased shares and to remit to the Company, out of the sale proceeds, an
amount equal to the exercise price plus all applicable withholding taxes.
The administrator of the 1991 Plan may authorize a loan or loan guarantee
from the Company to help the optionee pay the exercise price or the
administrator may permit the optionee to pay the option price in
installments.
(3) Potential realizable value is based on an assumption that the market price
of the stock appreciates at the stated rate, compounded annually, from the
date of grant until the end of the ten year option term. These values are
calculated based on regulations promulgated by the Securities and Exchange
Commission and do not reflect the Company's estimate of future stock price
appreciation. There is no assurance that the actual stock price appreciation
over the ten year option term will be at the assumed 5% or 10% levels, or at
any other defined level.
<PAGE>
<TABLE>
<CAPTION>
AGGREGATED OPTIONS/SAR EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION/SAR VALUES
Shares Number of Value of Unexercised
Acquired Value Securities Underlying Unexercised In-The-Money Options/SARs
on Exercise Realized Options/SARs at Fiscal Year End at Fiscal Year End (2)
Name (#) ($)(1) Exercisable Unexercisable Exercisable Unexercisable
<S> <C> <C> <C> <C> <C> <C>
Christopher J. Conway 0 - 125,000 51,000 $1,750,778 $724,875
Anthony R. Gette 0 - 152,000 42,000 $2,166,778 $593,625
Dennis E. Condon 0 - 56,750 24,250 $819,156 $344,719
Spencer M. Vawter 0 - 3,750 23,250 $58,125 $331,875
Gary E. Mistlin 0 - 51,750 24,250 $715,406 $344,719
</TABLE>
(1) Value realized is based on the fair market value of the Company's Common
Stock on the date of exercise minus the exercise price and does not
necessarily indicate that the optionee sold such stock.
(2) An in-the-money option is an option which has an exercise price for the
Common Stock which is lower than the fair market value of the Common Stock
on a specified date. The fair market value of the Company's Common Stock at
March 31, 1995 was $26.63 per share.
Employment Contracts and Severance Arrangements
The Company has entered into an Employment Agreement with Spencer M.
Vawter, the President of Mentor Urology, Inc. The Agreement provides for Mr.
Vawter to receive in fiscal 1994 (i) base salary of $145,000, (ii) a bonus of up
to 40% of such base salary based on attainment of mutually designated
objectives, (iii) options to purchase 15,000 shares of Common Stock at an
exercise price not to exceed $12.00 per share with a vesting period of five
years, and (iv) a relocation expense allowance of $20,000. Beginning in fiscal
1995, Mr. Vawter's compensation will be fixed annually by the Compensation
Committee. The Agreement also provides that upon termination of Mr. Vawter's
employment by the Company without cause (as defined therein), Mr. Vawter will be
entitled to severance compensation equal to three months of base salary plus one
month of base salary for each complete year of service with the Company.
Compensation Committee Report on Executive Compensation
The Company's Compensation Committee (the "Committee") was established in
1980 and is composed entirely of independent, outside members of the Company's
Board of Directors. The Committee reviews and approves each of the elements of
the executive compensation program and assesses the effectiveness and
competitiveness of the overall program.
Mentor's executive compensation program is designed to accomplish several
goals, including:
1) To attract, retain, and motivate employees of outstanding ability
2) To link changes in employee compensation to individual and corporate
performance
3) To align the interests of management with the interests of the Company's
shareholders
4) To provide levels of compensation that are competitive with those provided in
the markets in which the Company competes for executives.
Key Provisions of the Executive Compensation Program
Mentor's executive compensation plan consists of three components: base
salary, annual incentive bonus, and long-term incentive in the form of stock
options. Mentor has established a strong link between pay and performance by
emphasizing variable components of the plan, that is, annual incentive bonus and
stock options.
<PAGE>
Base Salary
The Committee determines base salaries for executive officers on the basis
of a number of factors, including an assessment of competitive compensation
levels for similar-size manufacturing companies performed by an independent
consulting firm, the Company's financial condition, any changes in job
responsibilities, and the performance of each executive. Executive officer base
salaries generally are set to correspond to the 60th percentile of the
comparable competitive compensation data.
Annual Incentive Bonus
Executive officers are eligible to receive annual incentive compensation
equivalent to a specified percentage of their salaries under the Company's bonus
plan. The Company establishes bonus payout targets (ranging from 30% to 60% of
base salary) that are designed to bring the level of total annual cash
compensation (base salary plus annual incentive bonus) to the 75th percentile
for comparable positions at similar-size manufacturing companies when superior
performance is achieved. Performance is measured at the corporate, business
unit, and individual level. The total potential bonus for each executive is
broken down into several factors as appropriate for that executive's area of
responsibility. Each factor is then weighted with emphasis placed on
profitability measures. These factors, and the relative weight given to each
factor, vary with each executive officer in the Committee's sole discretion. For
each factor, the Committee establishes a threshold, target and outstanding goal.
No bonus is paid for performance below threshold levels. Bonuses for threshold
performance are paid at 50% of the targeted levels. Bonuses for outstanding
performance are paid at 200% of targeted levels for the Chief Executive Officer
and President, and 150% of targeted levels for all other executive officers. The
total bonus paid each executive is thus a weighted average of each factor,
adjusted for performance against a predefined target for that factor.
Long-term Incentive (Stock Options)
Generally, Mentor awards stock options to executive officers on an annual
basis. Each grant is designed to align the interests of executive officer with
those of the shareholders and provide each individual with a significant
incentive to manage the Company from the perspective of an owner with an equity
stake in the business. Awards to specific employees, including the Chief
Executive Officer, are made on the basis of each employee's job responsibilities
and recommendations of the executive officers of the Company concerning the
individual's contributions (both historical and potential) to the success of the
Company, without regard to prior awards of stock option grants. These
recommendations also take into consideration competitive practice for stock
option grants as determined by an independent compensation consultant from
survey information. The survey information encompasses data on both competitive
grant levels for individual executives and total options granted as a percentage
of shares outstanding.
Compensation of Chief Executive Officer
Mr. Conway is a founder of the Company and has served as its Chief
Executive Officer and Chairman of the Board since its incorporation in 1969. Mr.
Conway's base salary and annual incentive bonus are set by the Committee using
the same policies and criteria used for other executive officers. In setting Mr.
Conway's salary for fiscal 1995, the Committee considered competitive
information for similar sized manufacturing companies provided by an independent
compensation consultant and the Company's financial performance. Mr. Conway is
currently paid at the targeted competitive position base salary, which has been
set by the Committee at the 60th percentile of the comparable competitive
compensation data.
Mr. Conway's bonus potential is designed to bring his total annual cash
compensation to the 75th percentile for comparable positions at similar sized
manufactuing companies. For Mr. Conway, this targeted bonus equated to 60% of
his base salary in fiscal 1995. Mr. Conway's fiscal 1995 bonus was based on the
achievement of two separate corporate goals: net sales (weighted 30%) and
corporate profitability (weighted 70%). The compensation plan for fiscal 1995
was designed to encourage aggressive operating profit growth over the prior
<PAGE>
year. Based on the Company's performance in fiscal 1995, Mr. Conway received a
bonus slightly above the targeted level of 60%.
Tax Limitation
As a result of federal tax legislation enacted in 1993, a publicly-held
company such as the Company will not be allowed a federal income tax deduction
for compensation paid to certain executive officers, to the extent that
compensation exceeds $1 million per officer in any year. It is not expected that
the compensation to be paid to the Company's executive officers for the 1996
fiscal year will exceed the $1 million limit per officer. The Company believes
that stock options granted to its executives qualify for the performance-based
exception to the deduction limit. However, because final Treasury Regulations
have not been issued, there can be no assurance that the options will so
qualify. In addition, future amendments to the 1991 Stock Option Plan may be
necessary to preserve such qualification in the future.
Until final Treasury Regulations are issued with respect to the new
limitation, the Compensation Committee will defer any decision on whether or not
to limit the dollar amount of all other compensation payable to the Company's
executive officers to the $1 million cap, should the individual compensation of
any executive officer ever approach that level. However, the Compensation
Committee intends to design and administer its compensation plans to support the
achievement of the Company's long-term strategic objectives and to enhance
shareholder value, while at the same time maximize, to the extent possible, the
deductibility of compensation expense for tax purposes.
SUBMITTED BY THE
COMPENSATION COMMITTEE OF THE
BOARD OF DIRECTORS
- Eugene G. Glover
- Walter W. Faster
- Michael Nakonechny
- Byron G. Shaffer
- Dr. Richard W. Young
Stock Performance Graph
The following graph compares the yearly percentage changes in the
cumulative total shareholder return on the Company's Common Stock with the
cumulative total return on the NASDAQ Market Value Index and the Media General
Financial Services Medical Instruments and Supplies Index ("MG Index") during
the five fiscal years ended March 31, 1995. The comparison assumes $100 was
invested on March 31, 1990 in the Company's Common Stock and in each of the
foregoing indices and assumes reinvestment of dividends.
COMPARISON OF 5-YEAR CUMULATIVE RETURN
<TABLE>
<CAPTION>
_______________________________________________________________________________
Legend
<S> <C> <C> <C> <C> <C> <C>
Symbol Index 3/31/90 3/31/91 3/31/92 3/31/93 3/31/94 3/31/95
Company 100.0 180.1 67.7 83.3 92.0 179.6
NASDAQ Index 100.0 110.3 116.2 130.1 150.3 159.5
MG Index 100.0 163.5 191.4 166.6 149.8 204.6
</TABLE>
----------------
Notwithstanding anything to the contrary set forth in any of the Company's
previous filings under the Securities Act of 1933 or the Exchange Act that might
incorporate future filings, including this Proxy Statement, in whole or in part,
the preceding Compensation Committee Report on Executive Compensation and the
preceding Company Stock Performance Graph are not to be incorporated by
reference into any such filings; nor are such Report or Graph to be incorporated
by reference into any future filings.
<PAGE>
Compensation Committee Interlocks and Insider Participation
No member of the Compensation Committee is a former officer or employee of
the Company or any of its subsidiaries, except for Mr. Glover, who was Founder
and Vice President, Engineering of the Company from 1969 to October 1986.
Compliance with Section 16(a) of the Securities Exchange Act of 1934.
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
directors and executive officers, and persons who own more than ten percent of a
registered class of the Company's equity securities, to file with the Securities
and Exchange Commission initial reports of ownership and reports of changes in
ownership of Common Stock and other equity securities of the Company. Officers,
directors and greater than ten-percent stockholders are required by SEC
regulation to furnish the Company with copies of all Section 16(a) forms they
file.
To the Company's knowledge, based solely on review of the copies of such
reports furnished to the Company and written representations that no other
reports were required, during the fiscal year ended March 31, 1995, all Section
16(a) filing requirements applicable to its officers, directors and greater than
ten-percent beneficial owners were complied with, except that Mr. Shaffer, Mr.
Purkait and Ms. Edwards each filed a Form 4 late with respect to one
transaction.
Certain Transactions
In April 1991, the Company entered into a distribution agreement with
Rochester Medical Corporation ("Rochester"). Under the terms of the agreement,
the Company received an exclusive license, subject to annual minimum purchase
commitments, to market and distribute certain external catheter products
developed by Rochester, in exchange for a payment of $500,000. In addition, the
Company has a non-exclusive right to market and distribute certain additional
products currently under development by Rochester. No product was purchased
under the agreement in fiscal year 1995.
Certain directors and executive officers of Rochester, a public company, are
siblings of Christopher J. Conway, the Chairman of Mentor Corporation.
PROPOSAL 2: RATIFICATION OF INDEPENDENT PUBLIC ACCOUNTANTS
Pursuant to authority delegated to the audit committee by the Board of
Directors, the audit committee has appointed the firm of Ernst & Young LLP to
act as principal independent accountants for the Company for the fiscal year
ending March 31, 1996. This appointment will be submitted to the Company's
shareholders for ratification. This firm has audited the financial statements of
the Company for the fiscal year ended March 31, 1995, and for prior years, and
has advised the Company that neither the firm nor any of its partners has any
direct or indirect material financial interests in the Company or its
subsidiaries, nor have they had any connection during the past three years with
the Company or its subsidiaries, in any capacity other than that of independent
accountants and auditors. Ernst & Young LLP will have representatives at the
1995 Annual Meeting who will have an opportunity to make a statement and will be
available to respond to appropriate questions.
In the event the shareholders do not ratify the appointment of Ernst &
Young LLP, the selection of other independent auditors will be considered by the
Board of Directors.
The Board of Directors recommends that shareholders vote FOR ratification
of the appointment of Ernst & Young LLP.
PROPOSAL 3: AMENDMENT TO THE COMPANY'S COMPOSITE RESTATED ARTICLES OF
INCORPORATION TO INCREASE THE NUMBER OF AUTHORIZED SHARES OF COMMON
STOCK
The Board of Directors has approved an amendment to Article VI of the
Company's Composite Restated Articles of Incorporation which would increase the
number of authorized shares of Common Stock from 20,000,000 shares to 50,000,000
shares. The Board believes that the adoption of this amendment is in the best
interests of the shareholders and recommends that the shareholders vote in favor
of this proposal.
<PAGE>
At July 17, 1995, 12,307,606 shares of Common Stock were issued and
outstanding. In addition, approximately 910,300 shares of Common Stock are
reserved for future issuance under the Company's 1991 Stock Option Plan and
approximately 529,048 shares of Common Stock are reserved for future issuance
under the Company's Restated 1987 Stock Option Plan, as amended. Accordingly,
there are approximately 6,253,046 shares of Common Stock currently available for
future issuance by the Company, other than those issuable as described above.
The Company has no present plans, understandings or agreements for the
issuance or use of the proposed additional shares of Common Stock, except as
permitted by the Company's 1991 Stock Option Plan and Restated 1987 Stock Option
Plan, as amended. However, the Board of Directors believes that the Company
needs additional authorized shares to provide the Company with the flexibility,
as the need arises, to issue Common Stock, or securities convertible into Common
Stock, without the expense and delay of a special meeting of shareholders, in
the event of any future public offerings, private placements, significant
acquisitions, stock dividends, and for other purposes. Such activities could
require more shares of Common Stock than are currently available to the Company.
The newly authorized shares of Common Stock would be identical to the
existing authorized shares of Common Stock in all respects. Holders of Common
Stock have no preemptive or other rights to subscribe for additional securities.
Thus, should the Board of Directors elect to issue additional shares of Common
Stock, existing shareholders would not have any preferential rights to purchase
such shares. In addition, if the Board of Directors elects to issue additional
shares of Common Stock, such issuance could have a dilutive effect on the
earnings per share and book value per share of existing shares of Common Stock.
The proposed amendment to increase the authorized number of shares of
Common Stock could, under certain circumstances, have an anti-takeover effect.
As previously stated, however, the only intended purpose of the proposed
amendment is to increase the number of available shares of Common Stock in order
to give the Board of Directors more flexibility in conducting normal business
operations, and the proposal is not being presented as, nor is it part of, a
plan to adopt a series of anti-takeover measures.
The resolution to be considered and voted upon by the shareholders at the
1995 Annual Meeting is as follows:
RESOLVED, that paragraph A of Article VI of the Composite
Restated Articles of Incorporation of the Company be amended to
read as follows:
"ARTICLE VI
Capital Stock
A. Authorized Shares. The total authorized number of shares
in this corporation shall be 50,000,000 all of which shall be common
shares of the par value of $.10 per share."
The Board of Directors recommends that the shareholders vote FOR the approval of
this amendment to the Company's Composite Restated Articles of Incorporation.
<PAGE>
ADDITIONAL INFORMATION
All shareholder proposals intended to be included in the proxy materials
for consideration at the 1996 Annual Meeting of Shareholders must be received by
the Company no later than March 22, 1996. The Company suggests that all such
proposals be sent to the Company by certified mail--return receipt requested.
A copy of the Company's Annual Report on Form 10-K for the fiscal year
ended March 31, 1995 as filed with the Securities and Exchange Commission is
available without charge by writing to the Company's principal executive office.
Please mark, sign, date and return promptly the enclosed proxy provided.
The signing of a proxy will not prevent you from attending the meeting in
person.
BY ORDER OF THE BOARD OF DIRECTORS
Anthony R. Gette
Secretary
Dated: August 10, 1995
