SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
X Filed by the Registrant
Filed by a Party other than the Registrant
Check the appropriate box:
Preliminary Proxy Statement Confidential, for Use of
the Commission Only as
permitted by Rule
14a-6(e)(2)
X Definitive Proxy Statement
Definitive Additional Materials
Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-
12
MENTOR CORPORATION
(Name of Registrant as Specified In Its Charter)
Payment of Filing Fee (check the appropriate box):
No fee required
Fee computed on table below per Exchange Act Rules 14a-
6(i)(4) and 0-11.
1. Title of each class of securities to which transaction
applies:
_________________________________________________________
2. Aggregate number of securities to which transaction
applies:
_________________________________________________________
3. Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (Set forth the
amount on which the filing fee is calculated and state how
it was determined):
____________________________________________________________
4. Proposed maximum aggregate value of transaction:
____________________________________________________________
5. Total fee paid:
____________________________________________________________
Fee paid previously with preliminary materials.
Check box if any part of the fee is offset as provided by
Exchange Act Rule 0-11(a)(2) and identify the filing for which
the offsetting fee was paid previously. Identify the previous
filing by registration statement number, or the Form or
Schedule and the date of its filing.
1. Amount Previously Paid:
____________________________________________________________
2. Form, Schedule or Registration Statement No.:
____________________________________________________________
3. Filing Party:
____________________________________________________________
4. Date Filed:
____________________________________________________________
MENTOR CORPORATION
5425 Hollister Avenue
Santa Barbara, California 93111
Telephone: (805) 681-6000
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD SEPTEMBER 22, 1999
NOTICE IS HEREBY GIVEN THAT the Annual Meeting of
Shareholders of Mentor Corporation, a Minnesota corporation (the
"Company") will be held Wednesday, September 22, 1999 at 10:00
a.m. (Central Daylight Time) at the Minneapolis Hilton and
Towers, 1001 Marquette Avenue, Minneapolis, Minnesota, to
consider and take action upon the following matters:
1. To elect a Board of Directors to serve until the
next Annual Meeting, or until their successors are
elected;
2. To ratify the appointment of Ernst & Young LLP to
act as independent auditors of the Company for the
fiscal year ending March 31, 2000; and
3. To transact such other business that may properly
come before the meeting or any adjournment thereof.
The Board of Directors has fixed the close of business on
July 26, 1999 as the record date for the determination of the
shareholders entitled to vote at the meeting or any adjournments
or postponements thereof. A list of stockholders entitled to
vote at the Annual Meeting will be available for inspection at
the executive offices of the Company.
BY ORDER OF THE BOARD OF
DIRECTORS
Anthony R. Gette
Secretary
Dated: July 30, 1999
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. YOU MAY REVOKE YOUR PROXY AT
ANY TIME PRIOR TO THE ANNUAL MEETING. IF YOU ATTEND THE ANNUAL
MEETING AND VOTE BY BALLOT, YOUR PROXY WILL BE REVOKED
AUTOMATICALLY AND ONLY YOUR VOTE AT THE ANNUAL MEETING WILL BE
COUNTED.
MENTOR CORPORATION
____
PROXY STATEMENT
FOR ANNUAL MEETING OF SHAREHOLDERS
SEPTEMBER 22, 1999
______
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 22, 1999, at 10:00 a.m. (Central Daylight
Time) at the Minneapolis Hilton and Towers, 1001 Marquette
Avenue, Minneapolis, Minnesota, or at any adjournments or
postponements thereof (the "Annual Meeting") for the purposes
set forth in the Notice of Annual Meeting of Shareholders. All
Common Stock represented by proxies in the form solicited will
be voted in accordance with the instructions indicated therein,
but proxies may be revoked at any time before being exercised by
delivery to the Secretary of the Company of a written notice of
revocation of the proxy's authority or a duly executed proxy
bearing a later date. You may also revoke your proxy by
attending the Annual Meeting and voting in person. A
shareholder who attends the Annual 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 Annual 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, 1999 is being
furnished to each shareholder with this Proxy Statement.
The principal executive offices of the Company are located
at 201 Mentor Drive, Santa Barbara, California 93111. The
approximate mailing date of this Proxy Statement and the
accompanying form of proxy is August 15, 1999.
RECORD DATE, QUORUM 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 26, 1999 will be entitled
to notice of, and to vote at, the 1999 Annual Meeting. At the
close of business on July 26, 1999, a total of 24,352,837 shares
of Common Stock were outstanding, each entitled to one vote.
Holders of Common Stock do not have cumulative voting rights.
The presence in person or by proxy of the holders of a majority
of the outstanding shares of Common Stock will constitute a
quorum for the transaction of business at the Annual Meeting.
Abstentions and broker non-votes are each included in the number
of shares present for quorum purposes. All votes will be
tabulated by the inspector of election appointed for the
meeting, who will separately tabulate affirmative and negative
votes, abstentions and broker non-votes. 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 and will have the same
effect as negative votes; whereas broker non-votes are not
counted for purposes of determining whether a proposal has been
approved. An affirmative vote of a majority of the shares
present and voting at the meeting is required for approval of
all items being submitted to the shareholders for their
consideration.
DEADLINE FOR RECEIPT OF SHAREHOLDER PROPOSALS
Proposals of shareholders of the Company that are intended
to be presented by such stockholders at the Company's 2000
Annual Meeting must be received no later than April 1, 2000, in
order that they may be included in the proxy statement and form
of proxy relating to that meeting.
MATTERS TO BE CONSIDERED AT ANNUAL MEETING
PROPOSAL 1: ELECTION OF DIRECTORS
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. Currently
the Board of Directors consists of six (6) directors, as voted
on by the shareholders at the 1998 Annual Meeting. The number as
set by the Shareholders shall continue in effect unless changed
by the Board of Directors pursuant to the By-Laws or by
subsequent shareholder resolution.
It is the intention of the proxy holders named in the
enclosed proxy to vote such proxies for the six nominees first
named below, all of which are currently directors, to hold
office until the 2000 Annual Meeting of Directors and until
their successors are elected and qualified.
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.
Director Principal Occupation and
Name (Age) Since Business Experience for Last
Five Years
Christopher J. Conway (60) 1969 Founder and Chairman of the
Board since 1969; Chief
Executive Officer from 1969
to July 29, 1999.
Anthony R. Gette (43) 1988 President and Chief
Executive Officer since July
29, 1999; President and
Chief Operating Officer from
April 1987 until July 29,
1999; Secretary since March
1986.
Eugene G. Glover (56) 1969 Private investor since
October 1986; Founder & Vice
President, Engineering of
the Company from 1969 to
October 1986.
Walter W. Faster (66) 1980 Retired February 1997 as
Vice President, Corporate
Growth and Development for
General Mills, Inc.(1); held
various marketing and
finance capacities at
General Mills since 1963.
Michael Nakonechny (71) 1980 President of NAK Associates
Corp.(2) since 1981;
Chairman of the Board and
Secretary of Transducer
Systems, Inc.(3) from
November 1968 to January
1989.
Dr. Richard W. Young (72) 1990 Private investor since April
1992; Consultant to Mentor O
& O, Inc.(4) 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(5) from 1982
to 1985; Director of Mentor
Ophthalmics, Inc. and of
Instron Corporation.(6)
(1) General Mills, Inc. is a major manufacturer of packaged
foods and other consumer goods.
(2) NAK Associates Corp. is a closely-held company engaged in
consulting engineering.
(3) Transducer Systems, Inc. is a manufacturer of electro-
mechanical transducers.
(4) Mentor O & O, Inc. was acquired by the Company in April
1990. It is a manufacturer of ophthalmic surgical and
diagnostic equipment. During fiscal 1997, Mentor O&O's
name was changed to Mentor Ophthalmics.
(5) Houghton Mifflin Company is a major publishing firm.
(6) Instron Corporation is a manufacturer of materials testing
instruments, systems, software and accessories.
The Board of Directors recommends that the shareholders
vote FOR the election of the nominees named above to serve as
directors of the Company until the next annual meeting following
the 1999 Annual Meeting or until their respective successors
have been elected and qualified.
Board Meetings and Committees
During the fiscal year ended March 31, 1999, the Board of
Directors met or adopted resolutions by unanimous written
consent on 12 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 actions taken by
written consent).
The Company has an Audit Committee, currently consisting of
Messrs. Faster, Glover, Nakonechny, and Young. 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 Company's executive
officers the Company's accounting principles, policies and
practices; (iv) discuss with the independent auditors the
adequacy of the Company's accounting, financial and operating
controls, and (v) approve the internal audit department annual
audit schedule and review with the internal audit department the
results and recommendations of those audits.
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 LLP and the
approval of the types of, and estimated fees for, professional
services which are expected to be performed by Ernst & Young LLP
during the forthcoming fiscal year.
The Audit Committee met three times during the fiscal year
ended March 31, 1999 with all committee members present.
The Company has a standing Compensation Committee,
currently consisting of Messrs. Faster, Glover, Nakonechny, and
Young. The principal functions of the Compensation Committee
are to review and recommend compensation for executive
personnel. The Compensation Committee met twice during the
fiscal year ended March 31, 1999 with all members present.
The Company has a Stock Option Committee, currently
consisting of Messrs. Faster, Glover, Nakonechny, and Young.
The principal functions of the Stock Option Committee is to
administer the Company's stock option plans. The Stock Option
Committee met twice during the fiscal year ended March 31, 1999
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
Board members who are employees of the Company do not
receive compensation for their services as directors. During
the Company's fiscal year ended March 31, 1999 and currently,
individual non-employee Board members 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") of options
to purchase 6,000 shares of Common Stock at an exercise price
equal to the fair market value per share of the Common Stock on
the date of such grant. 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
to purchase 20,000 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 60,000, plus 60,000 to the
extent the non-employee director received options to purchase
30,000 shares on May 17, 1994 and 30,000 shares on May 15, 1997,
less the number of shares granted to the director under any
prior option plan of the Company. Currently, all non-employee
directors have received such maximum number of shares.
PROPOSAL 2: RATIFICATION OF INDEPENDENT AUDITORS
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
auditors for the Company for the fiscal year ending March 31,
2000. 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, 1999, 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
1999 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 to
serve as the Company's independent auditors for the fiscal year
ending March 31, 2000.
OTHER MATTERS
The Company knows of no other matters that will be
presented for consideration at the Annual Meeting. If any other
matters properly come before the Annual Meeting, it is the
intention of the persons named in the enclosed form of Proxy to
vote the shares they represent as the Board of Directors may
recommend. Discretionary authority with respect to such other
matters is granted by the execution of the enclosed Proxy.
MANAGEMENT
Security Ownership of Certain Beneficial Owners and Management
The following table shows the ownership of the Common Stock
of the Company on July 26, 1999, (i) by each person who, to the
knowledge of the Company, owned beneficially more than five
percent (5%) 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
as of March 31, 1999 as a group:
Amount and
Nature of Approximate
Name and Address (if percentage of Beneficial Percent of
Shares applicable) Ownership(1) Class
of Beneficial Owner
5% Stockholders:
T. Rowe Price Associates, Inc. (4) 2,430,100 10.0%
P.O. Box 89000
Baltimore, MD 21289-9999
Directors:
Christopher J. Conway (2) 1,160,734 4.6%
Eugene G. Glover 556,000 (3 2.2%
)
Walter W. Faster 148,000 *
Michael Nakonechny 100,500 *
Anthony R. Gette (2) 397,667 1.6%
Richard W. Young 112,500 *
Named Executive Officers:
Malcolm Boddy 18,750 *
Gary E. Mistlin 122,000 *
Bobby K. Purkait 118,000 *
All directors and executive officers
as a group (11 persons) 2,750,651 10.8%
* 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 sixty days and held by: Mr. Conway,
371,668 shares; Mr. Glover, 70,000 shares; Mr. Faster,
70,000 shares; Mr. Nakonechny, 20,000 shares; Mr. Gette,
286,668 shares; Dr. Young, 69,000 shares; Mr. Boddy, 18,750
shares; Mr. Mistlin, 77,000 shares; Mr. Purkait, 118,000
shares; and all directors and executive officers as a
group, 1,117,586 shares.
(2) Also an executive officer named in the Summary Compensation
Table.
(3) Includes 426,000 shares held by a trust of which Mr. Glover
is the sole trustee.
(4) T. Rowe Price Associates has sole voting power with respect
to 342,800 shares and sole dispositive power with respect
to 2,430,100 shares.
Executive Compensation and Related Information
Executive compensation is determined by the Board of
Directors based on the recommendations of the Compensation
Committee, which is composed entirely of independent, outside
directors. The following information relates to compensation
paid by the Company for services rendered during the three (3)
fiscal years ended March 31, 1999 for the Company's Chief
Executive Officer and each of the other four (4) most highly
compensated executive officers.
<TABLE>
SUMMARY COMPENSATION TABLE
Long Term Compensation
Annual Compensation Awards Payouts
Securities
Other Annual Restricted Underlying LTIP All Other
Name and Principal Fiscal Salary Bonus (1) Compensation Stock Options/SARs Payouts Compensation
Position Year ($) ($) ($) Awards ($) (#) ($) (3) ($)
<S> <C> <C> <C> <C> <S> <C> <S> <C>
Christopher J. Conway 1999 $372,600 $ - - - 32,000 - $5,430
Chairman and CEO (2) 1998 $358,300 $ - - - 60,000 - $9,835
1997 $340,900 $174,230 - - 60,000 - $9,143
Anthony R. Gette 1999 $279,600 $ - - - 24,000 - $4,186
President, Secretary 1998 $268,800 $ - - - 40,000 - $8,049
and COO (2) 1997 $258,200 $165,709 - - 40,000 - $7,531
Malcom Boddy (4) 1999 $220,000 $ - - - 10,000 - $ -
President, 1998 $150,000 $ - - - 40,000 - $ -
Mentor Manufacturing 1997 $ - $ - - - - - $ -
Gary E. Mistlin 1999 $180,000 $ - - - 10,000 - $3,584
Vice President of 1998 $173,100 $ - - - 14,000 - $6,124
Finance/Treasurer 1997 $157,000 $ 43,627 - - 14,000 - $5,410
Bobby K. Purkait 1999 $175,000 $ - - - 10,000 - $3,184
Vice President 1998 $149,100 $ - - - 14,000 - $5,159
Research & Development 1997 $139,500 $ 38,337 - - 14,000 - $3,672
</TABLE>
(1) Annual bonus amounts are earned and accrued during the fiscal years
indicated, and paid subsequent to the end of the fiscal year.
(2) Effective July 29, 1999, the Board of Directors elected Mr. Gette as CEO of
the Company.
(3) Represents matching amounts contributed by the Company on behalf of the
named individual under the terms of the Company's 401(k) Plan.
(4) Hired July 1, 1997.
<TABLE>
OPTIONS/SAR GRANTS IN LAST FISCAL YEAR
Potential Realizable
Value at Assumed
Annual Rates of
Stock Price
Appreciation for
Individual Grants Option Terms (3)
Securities % of Total Exercise
Underlying Options/SARs or Base
Options/SARs Granted to Price
Granted (#) Employees in ($/Share) Expiration
Name (1)(4) Fiscal Year (2) Date 5% 10%
<S> <C> <C> <C> <C> <C> <C>
Christopher J. Conway 32,000 8.9% $29.41 05/20/08 $591,657 $1,499,571
Anthony R. Gette 24,000 6.6% $29.41 05/20/08 $443,742 $1,124,678
Malcom Boddy 10,000 2.8% $20.50 07/28/08 $128,923 $326,717
Gary E. Mistlin 10,000 2.8% $20.50 07/28/08 $128,923 $326,717
Bobby K. Purkait 10,000 2.8% $20.50 07/28/08 $128,923 $326,717
</TABLE>
(1) All of these options were granted under the 1991 Stock Option Plan. Options
for Mr. Conway and Gette were granted on May 20, 1998. All other options
were granted on July 28, 1998. 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 immediately prior to a Change in Control (as defined in
the 1991 Stock Option Plan); alternatively, the administrator of the 1991
Stock Option 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 Stock Option 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.
<TABLE>
AGGREGATED OPTIONS/SAR EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION/SAR VALUES
Shares Number of Securities Underlying Value of Unexercised In-
Acquired on Value Unexercised Options/SARs at The-Money Options/SARs at
Exercise Realized Fiscal Year End Fiscal Year (2)
Name (#) ($) (1) Exercisable Unexercisable Exercisable Unexercisable
<S> <C> <C> <C> <C> <C> <C>
Christopher J. Conway 66,666 $ 621,661 316,168 124,500 $2,007,593 $ 61,250
Anthony R. Gette 93,332 $1,013,845 245,668 89,000 $1,599,843 $ 52,500
Malcom Boddy - $ - 10,000 40,000 $ - $ -
Gary E. Mistlin 20,000 $ 195,004 119,500 31,500 $ 863,625 $ 14,000
Bobby K. Purkait - $ - 104,500 31,500 $ 725,500 $ 14,000
</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, 1999 was $15.00 per share.
Employment Contracts and Severance Arrangements
The Company has entered into an Employment Agreement with
Malcolm Boddy, the President of Mentor Manufacturing Operations
Division. The agreement provided for Mr. Boddy to receive in
fiscal 1998 (i) a base salary of $200,000, prorated from the
date of employment, (ii) a bonus of up to 40% of such base
salary based on attainment of mutually designated objectives,
(iii) options to purchase 25,000 shares of Common Stock, with a
vesting period of five years, and (iv) a relocation package to
defray his costs of moving to Santa Barbara, California.
Beginning in fiscal 1999, Mr. Boddy's compensation is fixed
annually by the Compensation Committee. The agreement also
provides that upon termination of Mr. Boddy's employment by the
Company without cause (as defined therein), Mr. Boddy 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.
The Company has entered into an Employment Agreement with
Trevor Pritchard, the President of Mentor Medical, Inc., the
Company's sales and distribution company. The agreement provided
for Mr. Pritchard to receive in fiscal 1999 (i) a base salary of
$240,000, prorated from the date of employment, (ii) a bonus of
up to 50% of such base salary based on attainment of mutually
designated objectives, with a guaranteed amount of $40,000 for
fiscal 1999 (iii) options to purchase 45,000 shares of Common
Stock, with a vesting period of five years, and (iv) a relocation
package to defray his costs of moving to Santa Barbara,
California. Beginning in fiscal 2000, Mr. Pritchard's
compensation is fixed annually by the Compensation Committee. The
agreement also provides that upon termination of Mr. Pritchard's
employment by the Company without cause (as defined therein), Mr.
Pritchard will be entitled to severance compensation equal to
twelve months of base salary.
Subsequent to the end of the last fiscal year, the Company
entered into an Employment Agreement with Mr. Gette to employ him
as President and Chief Executive Officer of the Company. The
Employment Agreement with Mr. Gette provides for a base salary of
$360,000 and customary benefits. The Company may terminate the
Employment Agreement upon disability, discontinuation of the
business (other than as part of a defined "Change in Control"),
or for "Cause" (as defined), or at any time at the convenience of
the Company. If the Company terminates the Employment Agreement
for convenience or following a Change in Control, and the
termination is not for Cause, Mr. Gette would be entitled to
receive 24 months' base pay. In addition, if the termination
occurs subsequent to a Change in Control, subject to meeting
specified thresholds, the Company would make additional "gross
up" payments to Mr. Gette such that the net amount of payment
made to him would not be reduced by any taxes imposed by Section
280G of the Internal Revenue Code, as amended. For 90 days
following a Change in Control, Mr. Gette has the option, under
certain circumstances, to terminate the Employment Agreement.
The effect of this termination would be to cause the payment of
the severance described above. Finally, the Company may elect,
upon termination of Mr. Gette for any reason other than following
a Change in Control, to exercise an option to impose on Mr. Gette
an agreement not to compete for a period of two years, in which
event Mr. Gette would receive an additional payment of one year's
base salary.
Subsequent to the end of the last fiscal year, the Company
entered into a Transition Agreement with Mr. Conway. The
Transition Agreement with Mr. Conway has a term of two years and
provides for compensation of $390,000 and certain benefits. If
the Company terminates the Transition Agreement, Mr. Conway would
be entitled to receive the remainder of his compensation payable
during the term. If the Transition Agreement is terminated
within 12 months after a Change in Control, and the termination
is not for Cause, Mr. Conway would be entitled to the remainder
of his compensation payable during the term. Finally, the
Company may elect, upon termination of Mr. Conway for any reason,
to exercise an option to impose on Mr. Conway an agreement not to
compete for a period of one year, in which event Mr. Conway would
receive an additional payment of six months' compensation.
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:
To attract, retain, and motivate employees of outstanding
ability
To link changes in employee compensation to individual and
corporate performance
To align the interests of management with the interests of
the Company's shareholders
Facilitate the development of a progressive high performance
culture
Strengthen the relationship between pay and performance
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
The Company's executive compensation plan consists of three
components: base salary, annual incentive bonus, and long-term
incentive in the form of stock options. The Company has
established a strong link between pay and performance by
emphasizing variable components of the plan, that is, annual
incentive bonus and stock options.
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 be within a
competitve range of comparable 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 40% to 60% of
base salary) that are designed to bring the level of total
annual cash compensation (base salary plus annual incentive
bonus) within the range for comparable positions at similar-size
manufacturing companies when superior performance is achieved.
Performance is measured at the corporate, functional 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, the Company 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 1999, 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 to be within the range of the
comparable competitive compensation data.
Mr. Conway's annual bonus potential is designed to provide
a level of "at risk" pay which is tied directly to the Company's
performance. For Mr. Conway, this targeted bonus equated to 60%
of his base salary in fiscal 1999. Mr. Conway's fiscal 1999
bonus was based on the achievement of two separate corporate
goals: net sales (weighted 50%) and corporate profitability
(weighted 50%). The corporate goals for fiscal 1999 were
designed to encourage aggressive operating profit growth over
the prior year. The Company performed below its threshold
performance level in fiscal 1999. As a result, Mr. Conway
received no bonus in fiscal 1999.
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 1999 fiscal year will exceed the $1 million limit per
officer. Compensation which qualifies as performance-based
compensation will not have to be taken into account for purposes
of this limitation. At the 1994 Annual Meeting, the Company
obtained shareholder approval for certain amendments to the
Company's Option Plan which were designed to assure that any
compensation deemed paid in connection with the exercise of
stock options granted under that plan will qualify as
performance-based compensation. As a result, the Company
believes that stock options granted to its executives qualify
for the performance-based exception to the deduction limit.
However, there can be no assurance that the options will so
qualify. In addition, future amendments to the Company's Option
Plan may be necessary to preserve such qualification in the
future.
The cash compensation paid to the Company's executive
officers for the fiscal 1999 year did not exceed the $1 million
limit per officer, nor is the cash compensation to be paid to
the Company's executive officers for the 2000 fiscal year
expected to reach that level. Because it is very unlikely that
the cash compensation payable to any of the Company's executive
officers in the foreseeable future will approach the $1 million
limitation, the Compensation Committee has decided not to take
action at this time to limit or restructure the elements of cash
compensation payable to the Company's executive officers. The
Compensation Committee will reconsider this decision should the
individual compensation of any executive officer ever approach
the $1 million level.
SUBMITTED BY THE
COMPENSATION COMMITTEE OF THE
BOARD OF DIRECTORS
- Eugene G. Glover
- Walter W. Faster
- Michael Nakonechny
- 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
Appliances and Equipment Index ("MG Index") during the five
fiscal years ended March 31, 1999. The comparison assumes $100
was invested on March 31, 1994 in the Company's Common Stock and
in each of the foregoing indices and assumes reinvestment of
dividends.
<TABLE>
COMPARISON OF 5-YEAR CUMULATIVE RETURN
Legend
<S> <C> <C> <C> <C> <C> <C>
Symbol Index 3/31/94 3/31/95 3/31/96 3/31/97 3/31/98 3/31/99
Company 100.0 195.2 344.0 319.8 409.5 219.2
NASDAQ Index 100.0 106.1 142.7 159.6 241.3 315.3
MG Index 100.0 135.5 205.5 188.4 269.0 307.8
</TABLE>
Notwithstanding anything to the contrary set forth in any of the
Company's previous filings under the Securities Act of 1933 or
the Securities Exchange Act of 1934 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.
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.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
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 (10%) 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 shareholders 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, 1999, all Section 16(a) filing
requirements applicable to its officers, directors and greater
than ten-percent beneficial owners were complied with.
CERTAIN TRANSACTIONS
In 1991 the Company entered into an exclusive license
agreement with Rochester Medical Corporation ("Rochester") to
market and distribute certain external catheter products
developed by Rochester. The Company purchased $1,900,000 in
products under the agreement in fiscal year 1999. Certain
directors and executive officers of Rochester, a public company,
are siblings of Christopher J. Conway, the Chairman of Mentor
Corporation.
ADDITIONAL INFORMATION
A copy of the Company's Annual Report on Form 10-K for the
fiscal year ended March 31, 1999 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: July 30, 1999
